National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: EXPERT BUDGETS

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Suggested Citation:"EXPERT BUDGETS." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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POVERTY THRESHOLDS 107 of regularly adjusting the poverty thresholds for real changes in consumption of basic goods and services. EXPERT BUDGETS Expert-based poverty thresholds, as they have been developed in recent decades, generally derive from one of several approaches that fall along a continuum: expert-defined budget allotments for one or a few categories of expenditures with a large multiplier to allow for other needed expenditures (i.e., the Orshansky multiplier method); expert allotments for a larger number of categories with perhaps a small "other" or miscellaneous category; and expert allotments for a comprehensive, detailed list of budget items (e.g., specific types of clothing instead of clothing as a broad category).3 Thresholds developed in this manner have the appeal of being based on the notion of minimum standards of physical needs. Food is almost always specified in expert budgets since it is biologically required for survival. Emphasis is also typically placed on other goods necessary for survival, such as shelter and clothing. Although expert budgets are generally intended to be derived in an objective manner, with a strong grounding in human physiological requirements, large elements of relativity and subjective judgement invariably enter the process. Thus, for every category for which an explicit budget figure is developed, judgements must be made about the composition of the category and the dollar value that is appropriate for a poverty standard. In a developed country such as the United States, there is usually a wide variety of specific items at varying quality and price levels for any category, almost any of which are adequate for sheer survival. To decide, for example, that a minimally adequate diet must include meat as well as rice and beans and how much of each foodstuff, or that a minimally adequate house or apartment must include at least one bedroom for every two children, is to make a set of judgements that are inevitably influenced by the mores and experiences of the expert's own society. Similarly, to decide what quality of meat (hamburger or ground sirloin) or clothing (polyester or cotton) to price as the poverty standard is to make another set of judgements. Moreover, the people who are defined to be in poverty according to the standards developed by the experts may or may not agree with the experts' choices. Experts can decide to eschew the valuation of a specific item, such as a haircut, in favor of a broader category, "personal care." This approach will reduce the number of specific judgements required, but it will also inevitably 3 The term for expert budgets in earlier literature is "standard budget" (see, e.g., de Neufville, 1975; Orshansky, 1959). The approach of applying a large multiplier to a budget for one or a few categories was originated by Orshansky in her work on the U.S. poverty measure.

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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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