National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Defining Family Resources

« Previous: Adjusting the Thresholds - Geographic Variations
Suggested Citation:"Defining Family Resources." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 65

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INTRODUCTION AND OVERVIEW 65 Finally, further research and perhaps additional data collection are needed on adjustments to the poverty thresholds for geographic cost-of-living differences. We encourage research that could lead to more sophisticated adjustments for differences in housing costs and, ultimately, to adjustments that reflect cost differences for other goods and services. RECOMMENDATION 3.4. Appropriate agencies should conduct research to improve the estimation of geographic cost-of-living differences in housing as well as other components of the poverty budget. Agencies should consider improvements to data series, such as the BLS area price indexes, that have the potential to support improved estimates of cost-of-living differences. Defining Family Resources Under the official U.S. poverty measure, a family's poverty status is determined by comparing its gross money income to the appropriate threshold. A number of researchers have argued that a preferable comparison is between a family's consumption (or expenditures) and the appropriate poverty threshold. One can make arguments for either approach, depending in part on one's view as to whether poverty is more appropriately assessed as the actual or the potential attainment of a minimally adequate standard of living. Whatever one's view, the United States does not have adequate data sources with which to develop a consumption or expenditure-based poverty measure: the sample size of the CEX is too small to provide reliable poverty measures for population groups or by geographic area. To make the CEX adequate for purposes of poverty measurement would require an expensive expansion of the sample size and a redesign of the survey, which is focused on providing information needed to revise the market basket for the CPI. In contrast, the United States has large, well-developed surveys for measuring income. Thus, we conclude that the measurement of poverty in the United States must continue, at least for some years, to be based on an income- based definition of family resources. However, we believe that the current concept of gross money income is inadequate in many respects and needs to be modified in order to be consistent with the proposed threshold concept. We stressed earlier the importance of consistency between the concept underlying the poverty thresholds and the definition of resources. The current measure violates this principle, as has some recent work to investigate alternatives. For example, estimates by the Census Bureau (see, e.g., Bureau of the Census, 1993a) and others in which the value of public and private health insurance benefits is added to families' resources are inconsistent with the thresholds. The reason is that, since the official thresholds were first

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Each year's poverty figures are anxiously awaited by policymakers, analysts, and the media. Yet questions are increasing about the 30-year-old measure as social and economic conditions change.

In Measuring Poverty a distinguished panel provides policymakers with an up-to-date evaluation of:

  • Concepts and procedures for deriving the poverty threshold, including adjustments for different family circumstances.
  • Definitions of family resources.
  • Procedures for annual updates of poverty measures.

The volume explores specific issues underlying the poverty measure, analyzes the likely effects of any changes on poverty rates, and discusses the impact on eligibility for public benefits. In supporting its recommendations the panel provides insightful recognition of the political and social dimensions of this key economic indicator.

Measuring Poverty will be important to government officials, policy analysts, statisticians, economists, researchers, and others involved in virtually all poverty and social welfare issues.

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