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Measuring Poverty: A New Approach (1995)

Chapter: BLS Family Budgets Program

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Suggested Citation:"BLS Family Budgets Program." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 120
Suggested Citation:"BLS Family Budgets Program." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 121

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POVERTY THRESHOLDS 120 for housing, which include shelter costs, fuel (with slightly higher allowances in the modest budget), interior decoration, and maintenance (the latter only in the modest budget); food at home, food away from home, and alcohol (the latter two categories in the modest budget only); clothing; household goods and services (including such things as furniture, kitchenware, stationery, postage, telephone services, and dry cleaning); personal care; medical care; transportation; leisure goods and services (including such goods as a television, sporting equipment, toys, Christmas decorations, and such services as home- based activities, sport and physical exercise, and social and cultural activities). Standards were drawn from a combination of government standards (e.g., for housing) and expenditure patterns. BLS Family Budgets Program The modern BLS Family Budgets Program had its origins in a 1945 directive from the Committee on Appropriations of the U.S. House of Representatives for BLS to determine how much it cost workers' families in large U.S. cities to live. Since the turn of the century, private groups and some local and state agencies had developed detailed budgets for various types of families and geographic locations (generally individual cities), for such purposes as determining relief payments and government pay scales. A few such budgets were also developed by BLS and later the Works Progress Administration (WPA) (see Expert Committee on Family Budget Revisions, 1980; Fisher, 1993). After World War II, Congress wanted BLS to revamp the old WPA budgets, and this resulted in a series of budgets. In 1948 BLS published a "modest but adequate" budget for 1946 for urban working families, priced separately for 34 cities. In 1960 BLS published a revision of this budget for 1959, which was derived using data from the 1950 CEX. In 1967 BLS published a further revision of the budget for 1966, which it termed a "moderate living standard" and derived using data from the 1960-1961 CEX. Finally, in 1969, BLS published a revision of the moderate budget for 1967 (also derived using 1960-1961 CEX data), together with higher and lower budgets developed by scaling the moderate budget up and down.17 Between revisions, the budgets were repriced by using augmented price data collected for the CPI, or, after 1966, by using changes in the appropriate components of the CPI (see Bureau of Labor Statistics, 1969; Sherwood, 1977). In 1981 BLS discontinued the Family Budgets Program for lack of funds to improve it. BLS initially developed the higher, moderate (or intermediate), and lower budget levels for two family types: a four-person family with a husband aged 38 and employed full-time, a homemaker wife (with no age specified), a girl of 8, and a boy of 13; and a retired couple aged 65 or over in reasonably good 17 The moderate budget was later termed the intermediate budget level.

POVERTY THRESHOLDS 121 health. Budget levels for other family types were set by the use of an equivalence scale (see Chapter 3). BLS also varied the budgets by region of the country and size of area, publishing budgets over the years for 25-40 specific urban areas, together with regional averages. Examples of geographic differences included an assumption of use of public transportation in larger cities, different foodstuffs reflecting regional variations in food-buying patterns, and adjustments in utility costs for climate differences. The detailed family budgets included food, transportation, clothing, personal care, medical care, and specific other consumption items, gifts and contributions, and occupational expenses. The budgets also allowed for income and payroll taxes. The food at home allowance for the intermediate budget was based on USDA's Moderate-Cost Food Plan. The housing component was based on recommendations on number of rooms, essential household equipment, adequate utilities, and neighborhood location, originally made by the American Public Health Association and the U.S. Public Housing Administration. The intermediate budget used the average for the middle third of the distribution of housing prices for houses and apartments meeting the designated requirements. For additional components of the budget for which no expert standards had been developed—such as food away from home, furniture, transportation, clothing, personal care items, medical care, reading and recreational materials, education, tobacco, alcohol, gifts and contributions, life insurance, and miscellaneous consumption items—BLS used a statistical procedure known as the quantity-income-elasticity (q-i-e) technique. This method attempted to determine at what point an increase in income resulted in a decrease in the rate at which expenditures rose for each category of goods. This technique "sought to determine the income level at which elasticity, defined as the percentage change in the quantity purchased divided by the percentage change in income, reached a maximum. The associated quantities were then used to form the budget list" (Expert Committee on Family Budget Revisions, 1980:21). The results of applying the q-i-e method, however, were often uninterpretable, and the BLS analysts ultimately had to use their judgement to set budget levels. Generally, each time that the moderate or intermediate budget was revised, the budget level equated closely to median family income. To develop the lower budget, BLS adapted the intermediate budget in several ways. For food at home, BLS used the USDA Low-Cost Food Plan (the second lowest cost of the four USDA plans). For housing, it used the mean contract rent for the bottom third of rental units that met specified requirements (excluding all owned units). For the items for which no standard existed and the q-i-e approach was used, BLS generally derived the lower budget from the income interval below the interval in which maximum elasticity was estimated to have occurred. As a whole, the lower budget amounted to about two-thirds of the intermediate budget.

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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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