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Measuring Poverty: A New Approach (1995)

Chapter: The Basic Bundle and Multiplier Together

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Suggested Citation:"The Basic Bundle and Multiplier Together." 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 152 child families at or below the median level of expenditures on the basic bundle varied from 1.14 to 1.22 for the first definition and from 1.17 to 1.26 for the second definition (see Table 2-6). We concluded that a reasonable range for the multiplier to apply to the food, clothing, and shelter component of the reference family poverty threshold is 1.15 to 1.25. If the amount for food, clothing, and shelter is $11,950-$12,720 per year (in 1992 dollars), then a multiplier in the range of 1.15-1.25 will provide an added $1,790-$3,180 per year, or about $150- $265 per month, for all other consumption.46 For comparison, the implicit multipliers on food, clothing, and shelter in some expert poverty budgets for two-adult/two-child families (after excluding those expenditures that we propose to deduct from resources) range from 1.14 to 1.30: • 1.14, covering personal care, household supplies, and non-work-related transportation (Renwick, 1993a); • 1.29, covering personal care, household furnishings and operations, non- work-related transportation, reading, recreation, alcohol, tobacco, education, and miscellaneous (Bureau of Labor Statistics, 1982: Table 1);47 and • 1.30, covering personal care, household supplies, non-work-related transportation, and such incidentals as newspapers, stamps, stationery (Schwarz and Volgy, 1992). The Basic Bundle and Multiplier Together On the basis of our review of CEX data, we concluded that a reasonable range for the initial poverty threshold for a two-adult/two-child family is $13,700 to $15,900 (in 1992 dollars). The lower end of this range is the value of the 30th percentile of expenditures on food, clothing, and shelter (or 78% of the median) times 1.15; the upper end of the range is the value of the 35th percentile of expenditures on food, clothing, and shelter (or 83% of the median) times 1.25 (both rounded to the nearest $100). Of course, it would be possible to obtain an initial reference family threshold within the same range with a higher (lower) value for food, clothing, and shelter and a lower (higher) value of the multiplier. We cannot claim scientific backing for the ranges of values that we conclude are reasonable for these two parameters, or for the range for the initial poverty threshold itself. We can point to the reasonableness of the ranges we suggest both in terms of prepared for us by the Energy Information Administration, based on automobile and truck usage only, suggests that the allocation might be one-third work and two-thirds nonwork uses (letter from Lynda T. Carlson to the panel, 1994). 46 The amount for the 1.15 multiplier in Chapter 1 is shown as $1,750 instead of $1,790 per year because that is the amount when the lower end of the suggested range is rounded down to the nearest $100. 47 This estimate of the multiplier is for the BLS lower level budget, which was about two- thirds of the intermediate budget and not intended to represent a poverty level.

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Measuring Poverty: A New Approach Get This Book
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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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