National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Needed Data

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Suggested Citation:"Needed Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 81
Suggested Citation:"Needed Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 82
Suggested Citation:"Needed Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 83
Suggested Citation:"Needed Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 84

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INTRODUCTION AND OVERVIEW 81 Tax Credit that is scheduled to take full effect in 1996: adjusted to 1992, the result would be to reduce the poverty rate under the proposed measure from 18.1 to 17.2 percent (using a $14,800 reference family threshold and 0.75 scale economy factor). The proposed measure will also more accurately reflect the effects of any welfare reform that puts a time limit on the receipt of benefits and thereafter requires recipients to work. If the jobs obtained by former welfare recipients include child care and health insurance benefits, the proposed measure would likely show a different poverty rate than if the jobs do not provide such benefits; the current measure would not distinguish between those situations. Needed Data Clearly, the availability of relevant, high-quality, and timely data is critical for determining the poverty rate, in order to estimate resources for a representative sample of families and individuals to compare with the appropriate poverty thresholds. The survey that has supplied the United States with its income and poverty statistics is the March income supplement to the CPS. The March CPS has served the nation well, but it is inherently limited in the extent and quality of data that it can provide because it is a supplement to a continuing survey of the labor force that is the basis of the official monthly unemployment rate. Its major focus is on unemployment, not poverty. The March CPS currently obtains information on a family's previous year's income from a large number of sources, and it also asks about receipt of benefits from the major in-kind programs. However, it does not ask about taxes, medical care costs, child support, work expenses, or assets. It also does not provide information for constructing poverty measures for periods other than a calendar year. To remedy these deficiencies in the March CPS and to improve the quality of income reporting, SIPP was begun in 1983. Although SIPP had start-up problems, including cuts in sample size, it has largely achieved the goal of providing a richer set of higher quality data on income and related topics than the March CPS. One of the criticisms of using income rather than actual expenditures as the measure of resources is that income reporting errors in surveys lead to an overestimate of the poverty rate. However, poverty estimates calculated from SIPP, with more complete income reporting for lower income families than in the March CPS, are comparable to estimates developed from the CEX that use a consumption or expenditure concept of resources (see Chapter 5). Also, a number of improvements will be made to SIPP, beginning in 1996—including an expansion of the overall sample to about that of the March CPS—that will further strengthen it. The proposed changes to the family resource definition, and continued research on various aspects of the resource definition (e.g., valuation of home

INTRODUCTION AND OVERVIEW 82 ownership services), will increase the data needed for measuring poverty. SIPP, with its focus on income data, is in a position to respond to these needs; the March CPS, which must always be geared primarily to the requirements of the nation's main labor force survey, is not. Hence, we recommend that SIPP become the basis of the nation's official income and poverty statistics in place of the March CPS. This change should take effect when the slated improvements to SIPP are introduced in 1996. A decision to use SIPP to produce the official poverty rates means that the SIPP design and questionnaire must be reviewed to determine if modifications are needed to enhance the survey's ability to provide accurate statistics under the proposed measure. (A panel that recently evaluated SIPP made a similar recommendation about using SIPP for income and poverty statistics [Citro and Kalton, 1993:85-87], and many of its recommendations on the SIPP design and questionnaire are relevant.) In regard to the overall SIPP design, we are concerned that the Census Bureau's decision for 1996 to have new samples (''panels") introduced every 4 years, each of which is followed for a 4-year period, may be problematic for providing a reliable time series of annual poverty statistics because of biases that result from attrition from the samples over time. Every 4 years there may be a break in the time series because of the introduction of a new sample; in addition, because there is no overlap between the samples, it will be difficult to evaluate whether the changes in the poverty rate are real or not. Such a nonoverlapping design also limits the usefulness of SIPP to analyze important policy changes, such as changes in welfare programs or health care financing: if policy changes take effect near the beginning or end of a 4-year sample, there is limited information available either before or after the change to adequately evaluate its effects. The SIPP evaluation panel recommended that SIPP samples be followed for 4 years but that a new sample be introduced every 2 years. Poverty rates under this design may also be affected by attrition and other biases, but, with the sample overlap, it will be possible to evaluate and, one hopes, adjust for the effects. Also, under this design, a new sample is in the field every 2 years, which should facilitate analysis of policy changes.28 It is important to carry out methodological research that can lead to yet further improvements in SIPP data quality for purposes of poverty measurement. A high priority is research to improve the population coverage in SIPP (and other household surveys), especially among lower income minority groups, particularly young black men (the Census Bureau has such research 28 The disadvantage for longitudinal analysis of the overlap design recommended by the SIPP panel is that the sample size is half that of the design of 4-year samples with no overlap; however, for the estimation of annual poverty statistics, the total sample size of the overlap design, added across the two samples in the field each year, is the same as that of the nonoverlap design.

INTRODUCTION AND OVERVIEW 83 under way). These groups are missed at high rates in surveys relative to estimates derived from the decennial census because they are not reported as household residents. We note, however, that SIPP (and other household surveys) will necessarily overlook some population groups who may be particularly at risk of poverty, including the homeless and people in institutions. The decennial population census (see below) includes these groups, although coverage is far from complete. RECOMMENDATION 5.1. The Survey of Income and Program Participation should become the basis of official U.S. income and poverty statistics in place of the March income supplement to the Current Population Survey. Decisions about the SIPP design and questionnaire should take account of the data requirements for producing reliable time series of poverty statistics using the proposed definition of family resources (money and near-money income minus certain expenditures). Priority should be accorded to methodological research for SIPP that is relevant for improved poverty measurement. A particularly important problem to address is population undercoverage, particularly of low-income minority groups. To aid in making the transition to a SIPP-based series of official poverty statistics and to help evaluate that new series, it would be helpful for the Census Bureau to produce a concurrent time series of poverty rates from the March CPS on the basis of the proposed measure. Both the SIPP and the March CPS series should be extended backward to 1984, when SIPP was first introduced. Also for the foreseeable future, the Census Bureau should issue public-use files from both SIPP and the March CPS that include values for the thresholds under the new concept and estimates of disposable income (and its components) under the new resource definition. The availability of such files will enable researchers to conduct poverty analyses with either survey. RECOMMENDATION 5.2. To facilitate the transition to SIPP, the Census Bureau should produce concurrent time series of poverty rates from both SIPP and the March CPS by using the proposed revised threshold concept and updating procedure and the proposed definition of family resources as disposable income. The concurrent series should be developed starting with 1984, when SIPP was first introduced. RECOMMENDATION 5.3. The Census Bureau should routinely issue public- use files from both SIPP and the March CPS that include the Bureau's best estimate of disposable income and its components (taxes, in-kind benefits, child care expenses, etc.) so that researchers can obtain poverty rates consistent with the new threshold concept from either survey.

INTRODUCTION AND OVERVIEW 84 Many other federally sponsored surveys besides SIPP and the March CPS provide income and poverty variables for analysis purposes: examples include the American Housing Survey, Consumer Expenditure Survey, National Health Interview Survey, National Medical Expenditure Survey. However, these surveys, which are focused on other topics, cannot usually afford the questionnaire space needed to collect all of the information needed for an accurate estimate of disposable money and near-money income. Research on the most appropriate set of income questions to include in such surveys would be useful. With limited space, it may be preferable to ask questions about expenses that need to be deducted from gross income, rather than to ask detailed questions about the sources of that income. Even more important is research on methods to develop poverty estimates from limited income information that approximate the estimates that would be obtained under a disposable income definition from a detailed survey like SIPP. RECOMMENDATION 5.4. Appropriate agencies should conduct research on methods to develop poverty estimates from household surveys with limited income information that are comparable to the estimates that would be obtained from a fully implemented disposable income definition of family resources. Another source of income and poverty statistics is the U.S. decennial census. It provides data every 10 years for small geographic areas for which reliable estimates cannot be obtained in household surveys. Small-area poverty estimates serve many important purposes, for example, to allocate federal funds to local school districts. Questionnaire space in the decennial census is even more limited than in most surveys: the 1990 census asked about 8 types of income, compared with more than 30 in the March CPS and more than 50 in SIPP. No information was obtained about taxes, in-kind benefits, medical costs, child support, work expenses, or assets. We encourage research on methods to adjust census small-area poverty estimates to more closely approximate the estimates that would result from using our proposed family resource definition. Also, while recognizing the constraints on the census questionnaire, we urge serious consideration of adding perhaps one or two simple yes-no questions— for example, whether a family received food stamps or paid for child care in the past year—that would facilitate such adjustments. RECOMMENDATION 5.5. Appropriate agencies should conduct research on methods to construct small-area poverty estimates from the limited information in the decennial census that are comparable with the estimates that would be obtained under a fully implemented disposable income concept. In addition, serious consideration should be given to adding one or two questions to the decennial census to assist in the development of comparable estimates.

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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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