National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: The Multiplier

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Suggested Citation:"The Multiplier." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 151

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POVERTY THRESHOLDS 151 a two-bedroom apartment; and $90 per month or $1,080 per year for clothing —for a total of $11,988 per year on these categories. The total amounts for both Renwick (1993a) and Schwarz and Volgy (1992) —$11,436 and $11,988—are similar to the value of $11,950 for the 30th percentile of food, clothing, and shelter expenditures from the CEX. The sum of the larger food and clothing allowances in Renwick and the larger housing allowance in Schwarz and Volgy is $12,948, which is higher than the value of $12,719 for the 35th percentile of food, clothing, and shelter expenditures from the CEX. The Multiplier We then considered the multiplier to be applied to the food, clothing, and shelter component of the poverty threshold so as to allow a small fraction for other needed expenditures. BLS developed tabulations for us, from the 1989-1991 CEX Interview Survey, of the ratio of a broader bundle of expenditures to expenditures on the basic bundle. (The multipliers were calculated for families spending around each 5th percentile level on food, clothing, and shelter, from the lowest 5th to the highest 5th.) For our purpose, the definition of the broader bundle always excluded costs that we propose be deducted from family resources instead of included in the thresholds (e.g., child care and out-of-pocket medical care expenditures; see Chapter 4). We also excluded some other costs in order to implement our recommendation for a small fixed multiple applied to a larger basic budget. The Interview Survey may seem ill-suited for constructing a multiplier because it excludes such items as household cleaning supplies and some types of personal care items that one might think should be included in a poverty budget (e.g., shampoo and soap). (These items are picked up in the Diary Survey of the CEX, which we could not analyze.) But our purpose was not to mimic the type of detailed budget-building exercise followed by BLS in the Family Budgets Program or more recently by Renwick and Bergmann (1993) and Schwarz and Volgy (1992). Rather, we wanted to get a rough idea of what could constitute a fairly lean multiplier applied to a larger budget for food, clothing, and shelter. With the available Interview Survey data, we looked at several alternative definitions of a broader bundle, including a definition (1) that included the basic bundle plus personal care items and one-half of total transportation costs, and a definition (2) that included the basic bundle plus personal care items, education expenses, reading materials, and one-half of total transportation costs. We arbitrarily chose to exclude one-half of transportation costs because the Interview Survey does not distinguish between work expenses, which we propose to deduct from resources, and personal transportation for errands, vacations, etc.45 Our calculations showed that multipliers for two-adult/two- 45 In fact, it appears that the federal statistical system does not anywhere provide information on the allocation by families of transportation costs for work and nonwork uses. One estimate

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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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