National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: 2 Poverty Thresholds

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Suggested Citation:"2 Poverty Thresholds." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 97

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POVERTY THRESHOLDS 97 2 Poverty Thresholds As we describe in Chapter 1, we conclude that the current measure of poverty should be revised for several reasons. First, the measure is flawed in the definition of family resources. The resource definition counts taxes as income, although taxes are not available for consumption. A before-tax income definition is also inconsistent with the original threshold concept, which was derived on an after-tax basis. In addition, the resource definition does not count in-kind benefits as income, although such programs as food stamps are designed to provide for consumption. Second, the measure is flawed in the adjustments to the thresholds for different family circumstances. There are anomalies in the adjustments for family type and size (i.e., in the implicit equivalence scale), and there are no adjustments of any kind for geographic cost-of-living differences. Third, the measure does not distinguish between parents who work outside their homes and workers generally versus nonworkers, or between people with higher versus lower health care needs and costs—either by adjusting the thresholds or (as we propose) by deducting nondiscretionary expenses from income. Changes over the past three decades, including socioeconomic changes (such as the increase in the proportion of working mothers), demographic changes (such as the growth in elderly households), and government policy changes (such as changes in tax laws and the growth of in-kind benefit programs), have made all of these aspects of the current measure increasingly problematic for its primary purpose of informing policy makers and the public of differences in poverty rates across time and among population groups and areas. Fourth, the concept for the official poverty thresholds is problematic. That concept originally was the cost of a minimum diet times a multiplier to

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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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