November 2012P60-244
The Research SUPPLEMENTAL POVERTYMEASURE: 2011
By Kathleen Short
Current Population Reports
U.S. Department o Commerce
Economics and Statistics Administration
U.S. CENSUS BUREAU
census.gov
INTRODUCTION
Last year the U.S. Census Bureau,with support rom the Bureau o Labor Statistics (BLS), released theirst report describing research onthe Supplemental Poverty Measure(SPM).
1
The SPM extends the inor-mation provided by the oicial pov-erty measure by including many o the government programs designedto assist low-income amilies andindividuals that are not included inthe current oicial poverty measure.The current oicial poverty measurewas developed in the early 1960s,and only a ew minor changes havebeen implemented since it was irstadopted in 1969 (Orshansky, 1963,1965a, 1965b; Fisher, 1992). Theoicial measure consists o a seto thresholds or amilies o dier-ent sizes and compositions that arecompared to beore-tax cash incometo determine a amily’s povertystatus. At the time they were devel-oped, the oicial poverty thresholdsrepresented the cost o a minimumdiet multiplied by three (to allow orexpenditures on other goods andservices).
1
Short (2011), <www.census.gov/hhes/povmeas/methodology/supplemental/research/Short_ResearchSPM2010.pd.> Alsosee, Short (2012) <www.census.gov/hhes/povmeas/methodology/supplemental/research/sea2011.pd>, accessed September2012.
Concerns about the adequacy o the oicial measure have increasedduring the past decades (Ruggles,1990), culminating in a Congres-sional appropriation in 1990 oran independent scientiic study o the concepts, measurement meth-ods, and inormation needed or apoverty measure. In response, theNational Academy o Sciences (NAS)established the Panel on Povertyand Family Assistance, whichreleased its report, titled
Measuring Poverty: A New Approach,
in thespring o 1995 (Citro and Michael,1995). Based on its assessmento the weaknesses o the currentpoverty measure, this NAS panelo experts recommended having ameasure that better relects contem-porary social and economic reali-ties and government policy. In theirreport, the NAS panel identiiedseveral major weaknesses o thecurrent poverty measure.
•
The current income measuredoes not reflect the effects of key government policies that alter theresources available to families and, hence, their poverty status
.Examples include payroll taxes,which reduce disposable income,and in-kind public beneit pro-grams, such as the SupplementalNutrition Assistance Program(SNAP), that ree up resources tospend on nonood items.
•
The current measure does not take into account expenses that are necessary to hold a job and to earn income—expenses that reduce disposable income
. Theseexpenses include transportationcosts or getting to work and thecosts o child care or workingamilies which have increased asthe labor orce participation o mothers has increased.
•
The current measure does not take into account variation inmedical costs.
These expensesvary across population groupsthat relect dierences in healthstatus and insurance coverageand does not account or risinghealth care costs as a share o amily budgets.
•
The current poverty thresholds use family size adjustments that are anomalous and do not takeinto account important changes in family situations.
Somechanges
include payments madeor child support and increasingcohabitation among unmarriedcouples.
2
U.S. Census Bureau
•
The current poverty thresholds do not adjust for geographic differences in the cost-of-living across the nation.
The panelnoted that there are signiicantvariations across geographicareas in the cost o basic goodsand services and, in particular,or housing.To address these weaknesses, theNAS panel recommended changingthe deinition o both the povertythresholds and amily resourcesthat are compared with thosethresholds to determine povertystatus. One o the goals o the NASpanel was to produce a measure o poverty that explicitly accountedor government spending aimed atalleviating the hardship o low-income amilies. Thus, by takingaccount o tax and transer policies,such as the ood stamp program/SNAP and the earned income taxcredit (EITC), the measure wouldshow the eects o these policieson various targeted subgroups, orexample, amilies with children.The current oicial measure, whichdoes not include these beneits,yields poverty statistics that do notrelect the eects o changes inthese policies.In 1999 and 2001, the CensusBureau released reports thatpresented a set o experimentalpoverty measures based on therecommendations o the 1995 NASpanel report (Short et al., 1999;Short, 2001). Some additionalvariations on that measure wereincluded in order to shed light andgenerate discussion on the variousdimensions included in the pro-posed revision. Comparisons weremade across various demographicsubgroups in order to illustrate howtheir poverty rates were aectedby the dierent measures. Thatwork suggested that these newmeasures would identiy as poor asomewhat dierent population thanis typically described by the oicialpoverty measure. This new povertypopulation would consist o a largerproportion o elderly people, work-ing amilies, and married-coupleamilies than are identiied by theoicial poverty measure.
2
In March o 2010, the InteragencyTechnical Working Group onDeveloping a Supplemental PovertyMeasure (ITWG) listed suggestionsor research on the SPM. The ITWGwas charged with developing a seto initial starting points to permitthe Census Bureau, in cooperationwith the Bureau o Labor Statistics(BLS), to produce a report on theSPM that would be released alongwith the oicial measure each year.Their suggestions included:
•
The
SPM thresholds
shouldrepresent a dollar amount spenton a basic set o goods thatincludes ood, clothing, shelter,and utilities (FCSU) and a smalladditional amount to allow orother needs (e.g., householdsupplies, personal care, non-work-related transportation).This threshold should be calcu-lated with ive years o expen-diture data or amilies withtwo children using ConsumerExpenditure Survey (CE) data,and it should be adjusted (usinga speciied equivalence scale)to relect the needs o dierentamily types and geographicdierences in housing costs.Adjustments to thresholdsshould be made over time torelect real change in expendi-tures on this basic bundle o goods at the 33rd percentile o the expenditure distribution.
•
SPM family resources
shouldbe deined as the value o cashincome rom all sources, plus
2
These experimental poverty measureshave been updated regularly and are availableat <www.census.gov/hhes/povmeas/methodology/nas/index.html>, accessedSeptember 2012.
the value o in-kind beneitsthat are available to buy thebasic bundle o goods (FCSU)minus necessary expenses orcritical goods and services notincluded in the thresholds. In-kind beneits include nutritionassistance, subsidized housing,and home energy assistance.Necessary expenses that mustbe subtracted include incometaxes, Social Security payrolltaxes, childcare and other work-related expenses, child supportpayments to another household,and contributions toward thecost o medical care and healthinsurance premiums, or medicalout-o-pocket costs (MOOP).
3
This report presents a povertymeasure that is based largely onthe NAS Panel’s recommendations,with deviations relecting morerecent research and suggestionsrom the ITWG. Particular emphasisis on internal consistency betweenthe thresholds and resources. TheNAS Panel noted: “It is importantthat amily resources are deinedconsistently with the thresholdconcept in any poverty measure.”
4
The SPM, as deined by the ITWG,is an internally consistent povertymeasure that is based on spending“outlows” and money “inlows.”Spending outlows, or outlays
5
arethose or basic needs only: ood,clothing, shelter, utilities, andother basic necessary goods andservices. Resources include moneyincome rom all sources plus thevalue o near-money beneits thathelp the amily meet spendingneeds, less necessary expenses,like work-related expenses and
3
For inormation, see ITWG,
Observa- tions from the Interagency Technical Working Group on Developing a Supplemental Poverty Measure (Interagency)
, March 2010, availableat <www.census.gov/hhes/www/poverty/SPM_TWGObservations.pd>, accessedSeptember 2012.
4
Citro and Michael, 1995, p. 9.
5
For the BLS denition o expenditureoutlays, see Rogers and Gray, 1994.
U.S. Census Bureau
3taxes that must be paid. A amilyis designated as poor i its annualmoney inlow, net o necessaryexpenses, alls below the thresholdlevel o money outlow.
6
The SPM does not take account o assets that may be used to meetnecessary expenses. Assets canadd to the resources that are usedto meet basic needs, so someanalysts advocate counting themin measuring poverty. Others mayargue that many assets are not veryliquid or suggest that poor amilieshave so ew assets that includingthem would not change povertymeasures much. I our purpose isto target amilies who are in need,then it is clear that amilies withno assets are worse o than thosewho have some. On the other hand,amilies who have incurred largedebts are more vulnerable to inan-cial trouble than those who havenot. The NAS panel discussed a“crisis deinition o resources.” Thisdeinition included those assetsamilies have on hand that could
6
See Garner and Short, 2010, or urtherdiscussion o measurement consistency.
be converted to cash to supportcurrent consumption. They sug-gested that this “crisis deinition”is only relevant or a very short-term measure o poverty, because,in their words, “…assets can onlyameliorate poverty temporarily.”
7
They suggested that it is important,however, to develop measures o the distribution o wealth and toexamine the relationship betweenasset ownership and poverty sta-tus. While spending down assetscan enhance income to make endsmeet, servicing debt can be a drainon amily income that would other-wise be suicient to purchase basicnecessities.
8
The ITWG stated that the oicialpoverty measure, as deined inOice o Management and Budget(OMB) Statistical Policy DirectiveNo. 14, will not be replaced by theSPM. They noted that the oicial
7
Citro and Michael, pp. 214–218.
8
Interest payments on mortgages areincluded in SPM thresholds as a part o shel-ter costs, while income rom assets, such asinterest and dividends, are included in cashincome. Short and Ruggles (2005), examinedmethods o taking account o net worth inexperimental poverty measures using theSurvey o Income and Program Participation.
measure is sometimes identiiedin legislation regarding programeligibility and unding distribution,while the SPM will not be usedin this way. The SPM is designedto provide inormation on aggre-gate levels o economic need ata national level or within largesubpopulations or areas and, assuch, the SPM will be an additionalmacroeconomic statistic providingurther understanding o economicconditions and trends.This report presents updated esti-mates o the prevalence o povertyin the United States, overall andor selected demographic groups,using the oicial measure and theSPM. The irst section presents di-erences between the oicial pov-erty measure and the SPM. Compar-ing the two measures sheds lighton the eects o in-kind beneits,taxes, and other nondiscretionaryexpenses on measured economicwell-being. The composition o the poverty populations using thetwo measures is examined acrosssubgroups to better understand theincidence and receipt o beneits
Poverty Measure Concepts: Oicial and Supplemental
Oicial Poverty MeasureSupplemental Poverty MeasureMeasurementUnitsFamilies and unrelatedindividualsAll related individuals who live at the same address, includingany coresident unrelated children who are cared or by the amily(such as oster children) and any cohabitors and their relativesPovertyThresholdThree times the cost o aminimum ood diet in 1963The 33rd percentile o expenditures on ood, clothing, shelter,and utilities (FCSU) o consumer units with exactly two childrenmultiplied by 1.2ThresholdAdjustmentsVary by amily size,composition, and age o householderGeographic adjustments or dierences in housing costs bytenure and a three parameter equivalence scale or amily sizeand compositionUpdatingThresholdsConsumer Price Index:all itemsFive year moving average o expenditures on FCSUResourceMeasureGross beore-taxcash incomeSum o cash income, plus in-kind beneits that amilies can useto meet their FCSU needs, minus taxes (or plus tax credits),minus work expenses, minus out-o-pocket medical expensesand child support paid to another household
Search History:
Result 00 of 00
00 results for result for
p.
U.S. Census Bureau Supplemental Poverty Measure
Report on Poverty in the United States by the U.S. Census Bureau.
1.4K
Reads
4
Readcasts
7.2K
Embed Views
More From This User
Notes
Load more
