National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: The Concept of an Equivalence Scale

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Suggested Citation:"The Concept of an Equivalence Scale." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
Page 159

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ADJUSTING POVERTY THRESHOLDS 159 3 Adjusting Poverty Thresholds he previous chapter focused on the derivation of a poverty threshold for a reference family of two adults and two children. A poverty threshold that is appropriate for this type of family, however, may not be appropriate for another type of family: a single person obviously needs less money than a family of four, and a family of eight needs more money. These differences are recognized in the current poverty measure, which uses different thresholds for different family types. And even for a given family type, the amount of money needed to stay above the poverty threshold will likely be different in a large city than in a small town, and it may also differ by region of the country. There is therefore an argument for adjusting the thresholds, not only for family size, but also for place of residence. This kind of adjustment is not made in the official poverty thresholds. In this chapter, we consider these adjustments and present our recommended procedures for adjusting the reference family threshold. We first discuss adjustments by family type and then by geographic area of residence. ADJUSTMENTS BY FAMILY TYPE The Concept of an Equivalence Scale Equivalence scales are measures of the relative costs of living of families of different sizes and compositions that are otherwise similar. For example, if a family of two adults can live as well as a family of two adults and two children while spending only two-thirds as much, then relative to the reference family of two adults and two children, the equivalence scale value for a two-adult family is two-thirds. For the purpose of poverty measurement, the use of an

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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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