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Measuring Poverty: A New Approach (1995)

Chapter: Other Measures

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Suggested Citation:"Other Measures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 87
Suggested Citation:"Other Measures." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
×
Page 88

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INTRODUCTION AND OVERVIEW 87 related to them.29 In other words, the assumption is made that family members pool their resources to support consumption and thereby achieve economies of scale. Unrelated individuals, in contrast, are assumed not to share resources with others, even if they live with one or more roommates. Although some researchers have criticized the assumption that all family members have access to their "fair share" of the family's resources, data limitations make it infeasible at this time to consider defining the unit of analysis for poverty measurement as an individual, so we recommend continuing to use the family as the unit of analysis. We also recommend that the definition of "family" be broadened to include cohabiting couples, as they maintain longer lasting relationships than other roommates and are likely to pool resources. In the case of roommates as such, there are no data on the extent of resource sharing among them. We encourage research on this topic, and more generally on resource sharing among household and family members. RECOMMENDATION 6.2. The official measure of poverty should continue to use families and unrelated individuals as the units of analysis for which thresholds are defined and resources aggregated. The definition of "family" should be broadened for purposes of poverty measurement to include cohabiting couples. RECOMMENDATION 6.3. Appropriate agencies should conduct research on the extent of resource sharing among roommates and other household and family members to determine if the definition of the unit of analysis for the poverty measure should be modified in the future. Other Measures Considerable thought has been given in the research literature to the development of poverty statistics that provide more information than the simple head-count ratio (the poverty rate or proportion of people who are poor). Thus, it would be useful to have a statistic that reflects the depth of poverty, by measuring, for example, the average income of the poor. It would also be useful to have a poverty statistic that increases when resources are less equally distributed among the poor. The simple head-count ratio—although readily understandable—has some drawbacks. For example, if income were taken from some very poor people to move a few less-poor persons out of poverty, the effect would be to reduce the head count, even though the depth of poverty had become worse. Yet statistics that attempt to capture several dimensions of poverty in a single index 29 Poverty is not defined for unrelated individuals under age 15, as no information is obtained about their income in surveys.

INTRODUCTION AND OVERVIEW 88 very quickly become impenetrable, with the result that it is hard to interpret what changes in them mean to policy makers and the public (and even to researchers). We see the need for additional information besides the head-count ratio, but we believe it is best to provide such information in simpler, more disaggregated form, as is already done to a large extent in Census Bureau reports. These reports show the poverty gap, or the aggregate amount of income by which poor people fall below the poverty line, and it would be easy to provide the obverse, namely, the average income of the poor compared with an average weighted poverty threshold. (Because there are different thresholds for different types of families, statistics on the average income of the poor need to be calculated for each type separately or by comparing the average income for all poor people to an average weighted threshold that reflects the composition of the poor by family type.) Census Bureau reports also provide information on the proportions of people with income below varying ratios of the poverty line (e.g., below 50%, 75%, 100%, 125%), thereby indicating the distribution of poverty among the poor and, in the case of ratios of income that exceed the poverty line, the extent of near poverty. These indicators must be interpreted carefully: for example, the poverty gap is not an actual measure of the amount of money that the government would have to spend to eliminate poverty (see below). Also, the number of people who are very far below the poverty line may be overestimated because of underreporting of income or the reporting of business losses by self-employed people. Nonetheless, such indicators can enrich understanding of the nature and scope of economic poverty in the United States and how it changes over time. We also believe it would be useful to publish poverty statistics on the basis of measures in which family resources are defined net of government taxes and transfers. Several such measures could be useful: one in which resources are defined in before-tax terms, one in which resources are net of taxes but exclude benefits from means-tested government programs (whether cash or in-kind), and one in which resources exclude benefits from all government programs, whether means tested or not. Again, the statistics from such measures must be interpreted with care: the poverty rate in a world without government taxes or government assistance programs would likely differ from the rate under these measures. Nonetheless, when compared with the new official measure, such before-tax and transfer measures would be helpful for evaluating the effects of government policies and programs on poverty. RECOMMENDATION 6.4. In addition to the basic poverty counts and ratios for the total population and groups—the number and proportion of poor people—the official poverty series should provide statistics on the average income and distribution of income for the poor. The count and other statistics should also be published for poverty

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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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