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Social Security: apnc

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Appendix C: Poverty Data
342Social Security Bulletin Annual Statistical Supplement 2002
Appendix C: Poverty Data
Table 3.E1 presents weighted average povertythresholds for families in the United States for 1959–2001.Table 3.E2 presents data on the number and percent of people in poverty in the United States for 1959–2000.Tables 3.E3, 3.E4, and 3.E6 present more detailed data onpeople and families in poverty in the United States during2000. (Both poverty thresholds and poverty population dataare issued by the U.S. Census Bureau.) Table 3.E8presents poverty guidelines by family size for thecontiguous United States, Alaska, and Hawaii for 1965–2002. (Poverty guidelines are issued by the U.S.Department of Health and Human Services.)Poverty thresholds are used primarily for statisticalpurposes—producing statistics on the number of Americans in poverty. Poverty guidelines are used for administrative purposes—for example, to determinewhether a person or family is financially eligible for assistance or services under certain federal governmentprograms (not including cash public assistance). Boththresholds and guidelines are sets of dollar figures whichvary by family size and (in the case of the thresholds)family composition.The poverty thresholds were developed in 1963–1964by Mollie Orshansky of the Social Security Administrationas a measure of income inadequacy. The poverty definitionwas modified in 1969 and 1981 by federal interagencycommittees. The thresholds were based on foodexpenditure/income patterns (from the Department of Agriculture's 1955 Household Food Consumption Survey)and the costs of the Department of Agriculture's economyfood plan for families of different sizes and compositions.(See Joseph Dalaker, U.S. Census Bureau, "Poverty in theUnited States: 1998,"
Current Population Reports:Consumer Income
, Series P60-207, September 1999,Appendix A, for an explanation of the poverty definition.)While the poverty thresholds in some sense representfamilies’ needs, the official poverty measure should beinterpreted as a statistical yardstick rather than as acomplete description of what people and families need tolive.The poverty thresholds have become the basis for theofficial statistics on the extent of poverty in the UnitedStates which are issued annually by the Census Bureau inthe Current Population Reports series. The thresholds areadjusted annually for price changes using the annualaverage consumer price index (CPI-U). (See U.S. Bureauof the Census, "Revision in Poverty Statistics, 1959 to1968,"
Current Population Reports: Special Studies
, SeriesP-23, No. 28, August 1969; and Directive No. 14,"Definition of Poverty for Statistical Purposes,"
Statistical Policy Handbook 
, U.S. Department of Commerce, Office of Federal Statistical Policy and Standards, 1978.)The poverty guidelines are a simplified version of thepoverty thresholds; there are separate sets of guidelines for the two noncontiguous states (Hawaii and Alaska). Theguidelines are used for determining whether a person or family is financially eligible for assistance or services under certain federal programs. Authorizing legislation or regulations for specific programs indicate whether aprogram uses the poverty guidelines as one of severaleligibility criteria, uses a modification of the guidelines (for example, 125 percent or 185 percent of the guidelines), or uses them for the purpose of setting priorities in providingassistance or services.Since 1973, the guidelines have been computed fromthe poverty thresholds by increasing the most recentlypublished weighted average poverty thresholds by thepercentage change in the CPI-U over the past year (moreprecisely, from the next most recent calendar year to themost recent calendar year) and rounding the figure for afamily of four up to the next highest multiple of $50. Figuresfor all family sizes over and under four persons arecomputed by adding or subtracting equal dollar amountsderived from the average difference between poverty lines(rounded to the nearest multiple of $20).The poverty thresholds were calculated using data (the1955 Household Food Consumption Survey) that definedincome as after-tax money income; accordingly, thethresholds were intended to be applied to data on moneyincome. The National Research Council's Panel on Povertyand Family Assistance put great emphasis on the principleof consistency in poverty measurement—that the definitionof family resources (income) used should be consistentwith the concept underlying the poverty thresholds. (For adiscussion of this principle, see
Measuring Poverty: A New  Approach
, Constance F. Citro and Robert T. Michael (eds.),Washington, D.C., National Academy Press, 1995, pp. 4, 9-10, 37-40, 65-66, 98, 203-206, and 227-231. This importantreport proposed a new approach for developing an officialpoverty measure for the United States.) According to thePanel's principle of consistency, it would be inappropriateto apply the current poverty thresholds (calculated using anincome definition of after-tax money income) to an incomedistribution that used an income definition of money incomeplus selected noncash benefits.As noted above, the poverty thresholds weredeveloped in 1963–1964 by Mollie Orshansky of the SocialSecurity Administration. In May 1965—just over a year after the Johnson Administration had initiated the War onPoverty—the Office of Economic Opportunity adoptedOrshansky's thresholds as a working or quasi-officialdefinition of poverty. At that time, the thresholds compriseda matrix of 124 detailed poverty thresholds based on thetotal number of family members, the number of familymembers who were related children under age 18, the sex
Appendix C: Poverty Data
Social Security Bulletin Annual Statistical Supplement 2002343
of the family householder, the age of the individual or familyhouseholder (for one- and two-person units only), andwhether the family lived on a farm.In 1969, a federal interagency committee made twochanges in the poverty definition: the thresholds would beannually updated by the consumer price index instead of bythe per capita cost of the economy food plan, and farmpoverty thresholds would be set at 85 percent rather than70 percent of corresponding nonfarm thresholds. (Povertythreshold and poverty population figures for prior yearswere retabulated retrospectively on this basis.) In August1969, the Bureau of the Budget designated the povertythresholds with these revisions as the federal government'sofficial statistical definition of poverty.In 1981, several other changes recommended byanother interagency committee were made in the povertydefinition: (1) elimination of separate thresholds for farmfamilies, (2) elimination (through appropriate averaging) of separate thresholds for female-householder and "all other"families, and (3) extension of the poverty matrix to makethe largest family size category "nine persons or more"rather than "seven or more persons." (See U.S. Bureau of the Census, "Characteristics of the Population Below thePoverty Level: 1980,"
Current Population Reports:Consumer Income
, Series P-60, No. 133, July 1982, pp. 2-5, 9, and 186.) As a result of these changes, the currentmatrix of poverty thresholds used by the Census Bureau todetermine the poverty status of families and unrelatedindividuals consists of a set of 48 detailed thresholdsarranged in a two-dimensional matrix by family size(number of family members, ranging from one person, thatis, an unrelated individual, to nine or more persons) cross-classified by the presence and number of family memberswho are related children under age 18 (from no children toeight or more children present). Unrelated individuals andtwo-person families are further differentiated by the age of the individual or family householder (under age 65 andaged 65 or older).The current official definition of poverty is over 30 yearsold. In 1990, Congress requested a study of the official U.S.poverty measure by the National Research Council (NRC)to provide a basis for a possible revision of the povertymeasure. In 1992, the NRC's Committee on NationalStatistics appointed a Panel on Poverty and FamilyAssistance to conduct this study. In 1995, the Panelpublished its report of the study,
Measuring Poverty: A New  Approach
, Constance F. Citro and Robert T. Michael (eds.),Washington, D.C., National Academy Press, 1995. In thereport, the Panel proposed a new approach for developingan official poverty measure for the United States—althoughit did not propose a specific set of dollar figures. ThePanel's proposed approach focused on three major areas:new poverty thresholds, a new and consistent definition of family resources (income), and data sources.In July 1999, the Census Bureau, in collaboration withthe Bureau of Labor Statistics, released a report,Experimental Poverty Measures: 1990 to 1997 (P60-205)that examined the effects of different resource definitionsand thresholds on poverty and which estimated severalexperimental poverty rates based on the NRC panel'srecommendations. That report and subsequent updatesare available on the Census Bureau poverty measurementWeb page at: www.census.gov/hhes/www/povmeas.html.Data on the poverty population and on family andpersonal income are collected in the March CurrentPopulation Survey (CPS). Data from the March survey arealso known as the Annual Demographic File. Following thestandard Census Bureau definition, the family is defined astwo or more persons related by birth, marriage, or adoptionand residing together. "Income" refers to money incomefrom all sources, including public income transfers, butbefore federal, state, or local personal income taxes.Money income does not reflect that many families receivenoncash benefits such as employee use of businesstransportation and facilities, employer-paid healthinsurance and other employer-supported fringe benefits,Medicare, Medicaid, food stamps, and housing assistance.Many farm families receive benefits in the form of rent-freehousing or goods produced and consumed by the family.Every year between February and April, the sample of U.S. households interviewed in the monthly CPS is askedto provide information on household members' incomesduring the preceding calendar year. Survey experienceindicates that respondents tend to underreport their incomein household surveys. Underreporting is most pronouncedfor dividends, interest and workers' compensation; lesspronounced for veterans' payments, public assistance, andprivate pensions; and modest for Social Security and other federal retirement programs. The proportion of nonresponses to CPS income questions is greater amongmiddle income and higher income families than amonglower income families.Because the CPS sample size, content, andprocedures changed several times, some differences in thedata over time may in part reflect these methodologicalchanges, not just changes in the population. Importantchanges to the CPS methodology took place for data years1976, 1979, 1980, 1987, 1988, 1992, 1994, 1995, and2000. A summary of these changes and references for more information about them appear below. The reportnumbers, "P60-##" refer to the Current Population Reports,Consumer Income series.For details about how questionnaire changes and fileprocessing changes affected the data, see Welniak,Edward, "Effects of the March Current Population Survey'sNew Processing System on Estimates of Income andPoverty," Proceedings of the American StatisticalAssociation, 1990.

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