National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Analysis of 1989-1991 CEX Data

Suggested Citation:"Analysis of 1989-1991 CEX Data." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 146

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POVERTY THRESHOLDS 146 illustration because, in order to increase the sample size and also to smooth out year-to-year changes in the threshold and lag them behind changes in real consumption, we recommend that the calculations for each year be performed with the average of CEX data for the previous 3 years. Also, to express each year's reference family threshold in current dollars, it will be necessary to make an appropriate price adjustment to the CEX data. One way to do this is to convert the dollar amounts on each of the 3 years of CEX data files into current dollars by means of the CPI before calculating the threshold. Finally, after each year's reference family threshold is determined, the thresholds for other family types and areas of the country should be calculated by using the recommended equivalence scale and cost-of-housing index (see Chapter 3). Setting the Initial Threshold We do not recommend a value for the initial reference family threshold on which to base a new official poverty statistics series with the recommended poverty measure. However, we do reach a conclusion about a range for the initial reference family threshold that we believe is reasonable. Our conclusion is informed by analysis of consumer expenditure data, consideration of the values of other thresholds developed in recent years on the basis of alternative concepts, and our judgement. Analysis of 1989-1991 CEX Data We analyzed data from the interview survey component of the 1989-1991 CEX to help us form a judgement about a reasonable level for the initial reference family threshold under the proposed concept. Importantly, as part of this process, we gained experience with the data and how best to use them for calculating each year's reference family threshold. The CEX, under its current design, is a continuing survey with two components—the Interview Survey and the Diary Survey. The Interview Survey includes a sample of about 5,000 consumer units, who are interviewed at 3-month intervals for a year.41 Data are collected on most but not all categories of expenditures. The Diary Survey, which obtains 2-week diaries of all expenses incurred during the period from about 6,000 consumer units, is used to supplement the Interview Survey data for expenditures that are not collected or not adequately reported in that survey. Because the two components 41 Each quarter the Interview Survey includes an added number of consumer units (about 1,800), who are given an initial interview to bound their later responses. BLS defines consumer units in a manner that is similar to but not quite the same as the Census Bureau definition of families and unrelated individuals (see Appendix B for a description of the CEX).

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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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