National Academies Press: OpenBook

Measuring Poverty: A New Approach (1995)

Chapter: Behavioral Scales

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Suggested Citation:"Behavioral Scales." National Research Council. 1995. Measuring Poverty: A New Approach. Washington, DC: The National Academies Press. doi: 10.17226/4759.
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Page 169

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ADJUSTING POVERTY THRESHOLDS 169 An even simpler scale underlies the poverty guidelines, which were originally developed by the Office of Economic Opportunity and are issued annually by the U.S. Department of Health and Human Services (see Burke, 1993: Table 12) and used to determine eligibility for many government assistance programs (see Chapter 7). They are constructed by smoothing the official thresholds for different size families: the resulting implicit equivalence scale counts the first adult as 1.0 and each additional adult or child as 0.35. Behavioral Scales Simple weighting schemes, like the OECD or our own recommendation, have the obvious merit of transparency, but they take no account of actual behavior except insofar as their plausibility is anchored in everyday experience. For at least a century, economists and others have tried to provide a more solid foundation for equivalence scales, analyzing patterns of household behavior in an attempt to measure the differential needs of adults and children, as well as economies of scale. At its simplest, one might attempt to measure the costs of children by looking at family budgets and identifying how much a poor family spends on such child-related expenditure items as food, clothing, and education. There are many such attempts in the literature: see, for example, Dublin and Lotka (1946), who wanted to calculate the "money value of a man" and needed to deduct the cost of bringing him to maturity; more recently, Lindert (1978) wanted to use child costs to predict fertility. The fundamental problem with such attempts is that adding children to a family without adding additional resources can only cause the family to rear- range its purchases. If a family spends more on child goods, it must spend less on something else. Consequently, a complete accounting of the "additional" expenditures associated with children would lead to the inevitable conclusion that children cost nothing. Although the children come with needs, which cause additional expenditures on some goods, those needs are paid for out of the same resources, which makes the family as a whole worse off, causing a reduction in expenditures in other goods. If one is going to calculate the cost of the children from the data, one must compare families of different types but at the same level of living. That is, in order to calculate measures of the cost of the children, or, indeed, of the extent of household economies of scale, one must have some procedure for knowing when two families of different types are equally well off; only in that way will a comparison of their expenditure patterns reveal what is the cost of the children or the extent of economies of scale. These arguments suggest that in order to calculate the equivalence scale by comparing expenditure patterns, one needs to know the equivalence scale to start with, so that one can be sure of comparing two households at the same level of well-being. If so, there is essentially no hope of using behavior to

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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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