National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Time Trends

« Previous: Effects on the Poverty Rate
Suggested Citation:"Time Trends." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 80

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INTRODUCTION AND OVERVIEW 80 using both CPS and SIPP data.26 The reason for the lower rates with SIPP data is that SIPP achieves more complete income reporting for lower income people.27 A higher reference family threshold explains part of the increase in the poverty rate, but the proposed changes to the resource definition (including the interaction of such changes as subtracting taxes and work expenses) account for the larger portion of the increase. Although the use of a $14,800 reference family threshold and the proposed changes to the resource definition increase the number of poor, not all of the movement is in the same direction. For example, with a 0.75 scale economy factor, 4.2 million people are moved out of poverty, and 13.3 million people are moved into poverty. Time Trends It is clear that the proposed poverty measure has important distributional and cross-sectional effects on estimates of poverty. What is less clear is the effect on time trends. We attempted to conduct the same kinds of analyses summarized above for 1992 with the March 1990, 1984, and 1980 CPS files, using the official thresholds for 1989, 1983, and 1979 and thresholds developed under the proposed concept for earlier years. However, we were not able to develop adequate imputations for 1979 or 1983 for such important components of the proposed resource definition as out-of-pocket medical care expenditures. Hence, the time-series results we obtained are not strictly comparable with our cross-sectional analyses for 1992. The results do show, however, the effects with the proposed poverty measure of changes in tax laws and changes in the provision of in-kind benefits, such as the curtailment of eligibility and benefits in the early 1980s—effects that are not evident with the current measure. (Both measures show the effects of changes in the business cycle over the 1980s.) In looking to the future, it is likely that trends under the proposed measure will diverge from trends under the current measure. Certainly, the proposed measure will provide a more accurate picture of the effects of important government policy initiatives. For example, changes in the health care financing system that affect out-of-pocket medical care costs or changes in tax provisions that affect disposable income would be reflected in the proposed measure; they cannot affect the poverty rate under the current measure. We estimated the effects of the expansion of the Earned Income 26 The estimate for SIPP is based on the average difference of 3.2 percentage points between the overall poverty rates from SIPP and the March CPS for the period 1984-1991 (see Chapter 5). We could not use SIPP for our analysis because the Census Bureau had not yet completed work on procedures to estimate taxes and value in-kind benefits for this survey; however, we did use SIPP for some of our imputations to the March CPS. 27 See Chapter 5 on the reason for higher poverty rates with a 0.65 scale economy factor.

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Measuring Poverty: A New Approach Get This Book
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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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