Measuring Poverty: A New Approach

Measuring Poverty
Copyright
Acknowledgments
Contents
Preface
Summary and Recommendations
THE CURRENT POVERTY MEASURE: EVALUATION
RECOMMENDATION: A NEW POVERTY MEASURE
SETTING AND UPDATING THE POVERTY THRESHOLD
ADJUSTING THE THRESHOLD
DEFINING FAMILY RESOURCES
EFFECTS
NEEDED DATA
OTHER ISSUES IN POVERTY MEASUREMENT
RELATING THE POVERTY MEASURE TO ASSISTANCE PROGRAMS
1 Introduction and Overview
WHAT IS POVERTY?
THE OFFICIAL U.S. POVERTY MEASURE
Development of the Measure
Adequacy of the Current Measure
Work Patterns of Families with Children
Composition of Families and Households
Geographic Differences in Prices
Increases in Medical Care Costs and Benefits
Taxes
Provision of In-Kind Benefits
Increase in the Standard of Living
ALTERNATIVE POVERTY MEASURES AND CRITERIA FOR A MEASURE
Types of Poverty Thresholds
Absolute and Relative Thresholds
Expert Budgets: The U.S. Experience
Other Approaches
Definitions of Family Resources
Criteria for a Poverty Measure
Public Acceptability
Statistical Defensibility
Operational Feasibility
A NEW APPROACH TO POVERTY MEASUREMENT: RECOMMENDATIONS
A New Poverty Measure
Periodic Reviews
The Poverty Threshold
Updating the Thresholds
Threshold Concepts: Assessment
Recommended Threshold Concept and Updating
Setting the Initial Threshold
Adjusting the Thresholds—Equivalence Scale
Adjusting the Thresholds—Geographic Variations
Defining Family Resources
In-Kind Benefits—Nonmedical
Medical Care Costs
Taxes
Work-Related Expenses
Child Support Payments
Services from Home Ownership
Assets
Effects
Distributional Effects
Effects of Selected Components
Effects on the Poverty Rate
Time Trends
Needed Data
Other Issues in Poverty Measurement
Time Period
Unit of Analysis
Other Measures
USE OF THE POVERTY MEASURE IN GOVERNMENT PROGRAMS
The Poverty Measure and Program Eligibility
Need Standards for Programs That Use the Official Measure
Need Standards for AFDC
The Poverty Measure and AFDC Benefit Standards
2 Poverty Thresholds
THRESHOLD CONCEPTS
RECOMMENDATIONS
The Two-Adult/Two-Child Reference Family
Nondiscretionary Expenses
Updating the Thresholds
Setting the Initial Threshold
EXPERT BUDGETS
Multiplier Approaches
The Original U.S. Poverty Thresholds
The Orshansky Multiplier over Time
Other Multiplier Approaches
Categorical Approaches
Detailed Budget Approaches
York Family Budget Unit
BLS Family Budgets Program
Schwarz and Volgy Budget
Conclusions
Updating for Price Changes
RELATIVE THRESHOLDS
International Examples
U.S. Expert Committee on Family Budget Revisions
Issues in Deriving Relative Thresholds
Behavior of Relative Thresholds Over Time
SUBJECTIVE THRESHOLDS
Research Findings
Behavior of Subjective Thresholds Over Time
CONCLUSIONS
IMPLEMENTING THE PROPOSED APPROACH
Setting the Initial Threshold
Analysis of 1989-1991 CEX Data
The Basic Bundle
The Multiplier
The Basic Bundle and Multiplier Together
Comparison with Other Thresholds
Analysis Over Time
Further Evaluation
3 Adjusting Poverty Thresholds
ADJUSTMENTS BY FAMILY TYPE
The Concept of an Equivalence Scale
Overview and Recommendation
The Current Equivalence Scale
Alternative Equivalence Scales
Programmatic Equivalence Scales
Behavioral Scales
The Engel and Iso-Prop Methods
The Rothbarth and Other Methods
Subjective Scales
Recommended Procedure
ADJUSTMENTS BY GEOGRAPHIC AREA
Overview and Recommendations
Feasibility and Desirability
Research Findings on Price Differences
Estimating Geographic Variations in Housing Costs
HUD Fair Market Rents
BLS Family Budgets Program
Hedonic Models
Discussion
Recommended Approach
Updating the Housing Cost Index
Further Research
4 Defining Resources
OVERVIEW AND RECOMMENDATION
ALTERNATIVES FOR DEFINING RESOURCES
Resources as Disposable Income
Adjusting Income, Not Thresholds
Recommendation
Resources as Consumption or Expenditures
Rationale
Implications
Assessment
A Crisis Definition of Resources
Methodological and Measurement Issues
Implications
Assessment
PROPOSED RESOURCE DEFINITION
Money Income
Nonmedical In-Kind Benefits
Census Bureau Valuation Procedures
Assessment of Valuation Approaches
Needed Research and Development
Medical Care Needs and Resources
Proposed Approach: Recommendation
Alternative Approaches
Current Poverty Measure
Adding Health Insurance Benefits to Income
A Comprehensive Single Index
A Two-Index Poverty Measure
Separate Measures of Medical Care Risk and Economic Poverty
Taxes
Census Bureau Tax Estimation Procedures
Assessment
Work-Related Expenses
Child Care
Other Work-Related Expenses
Child Support Payments
Home Ownership Services
5 Effects of the Proposed Poverty Measure
DATA AND PROCEDURES
Poverty Measure Alternatives
Threshold Adjustments
Imputation Procedures for Proposed Resource Definition
In-Kind Benefit Values and Taxes
Out-of-Pocket Medical Care Expenditures
Child Care Expenses
Other Work-Related Expenses
Distribution of Imputed Values
RESULTS
Effects with a Constant Poverty Rate
Effects with a New Threshold
The Overall Rate
Groups
Marginal Effects
Equivalence Scale Effects
Accuracy of Medical Care Expense Imputations
Prior Income Years
Data and Procedures
Results
Poverty Rates Using SIPP
DATA SOURCES
Recommendations
Data Sources for Income
The March CPS
The Alternative of SIPP
Orienting SIPP to Poverty Measurement
Transition
Research Recommendations
Income Data in Other Surveys
Income Data in the Decennial Census
Expenditure Data
6 Other Issues in Measuring Poverty
TIME PERIOD
Recommendation
Short-Term Measures
Long-Term Measures
UNIT OF ANALYSIS AND PRESENTATION
Unit of Analysis
Recommendations
Discussion
Unit of Presentation
INDEXES OF POVERTY
Recommendation
Alternative Indexes
Indexes with Alternative Resource Definitions
THE LIMITED SCOPE OF MEASURING ECONOMIC POVERTY
7 Use of the Poverty Measure in Government Assistance Programs
RECOMMENDATION
GOVERNMENT ASSISTANCE PROGRAMS
Overview
Determining Income Eligibility: Selected Programs
Head Start
School Nutrition Programs
WIC
Food Stamps
USING THE PROPOSED POVERTY MEASURE
The Thresholds
The Family Resource Definition
Simplified Determination of Disposable Income
Full Determination of Disposable Income
Other Issues
8 The Poverty Measure and AFDC
DETERMINING PROGRAM BENEFIT LEVELS
Proposals for AFDC Minimum Benefits: A Brief History
The Matching Formula
A Supplementary Program with a National Benefit Standard—Food Stamps
A National Minimum Benefit Standard for AFDC
Issues in Program Benefit Design
Budget Constraints
Targeting Strategies and Preferences
Program Interactions
Program Incentives
Work Effects
Family Structure Decisions
Migration Effects
Summary
Federal-State Cost Sharing
Summary
DETERMINING STATE AFDC STANDARDS OF NEED
Recommendation
Program Regulations
Standard Setting in the 1970s
Standard Setting in the 1980s
Differences Among States
Differences in Need Standards and Benefits
Differences in Equivalence Scales
Trends in Need Standards and Benefits
Conclusions
Comparative Advantage of the Proposed Poverty Measure
Problematic Aspects of the Proposed Poverty Measure
Program Interactions
Implications of Updating for Costs and Caseloads
Effects of Updating on Program Incentives
Summary
APPENDICES
APPENDIX A Dissent
MEASURING THE POVERTY LINE
UPDATING THE POVERTY LINE
CHOOSING A RANGE FOR THE POVERTY LINE
MEASURING FAMILY RESOURCES: THE ISSUE OF MEDICAL CARE
CONCLUSION
REFERENCES
APPENDIX B Data Sources for Measuring Poverty
MAJOR FEATURES OF THE CEX, MARCH CPS, PSID, AND SIPP
Consumer Expenditure Survey
Design and Use
Content of the Interview Survey
CPS March Income Supplement
Design
Content
Panel Study of Income Dynamics
Design
Content
Survey of Income and Program Participation
Design
Content
Summary Comparisons
Quality of Income Data
THE MARCH CPS AND SIPP COMPARED
Categories of Information
Taxes
Nonmedical In-Kind Benefits
Medical Benefits/Costs
Child Care and Other Work Expenses
Child Support Payments
Asset Holdings
Ability to Support Other Estimates
Shorter or Longer Term Measures
State Estimates
Related Measures
Quality of Income Data
Population Undercoverage
Household and Person Nonresponse
Item Nonresponse
Other Sources of Error
Aggregate Comparisons
APPENDIX C The Interdependence of Time and Money
''TIME IS MONEY"
Illustration
Expenditure Data
Discussion
RESEARCH APPROACHES
Time Poor: A Measurement
Calculating Earnings Capacity
CONCLUSION
APPENDIX D Assistance Programs for People with Low-Incomes
PROGRAMS THAT TIE ELIGIBILITY TO THE POVERTY GUIDELINES
Medical Programs
Community Health Centers
Maternal and Child Health Services Block Grant (Title V)
Medicaid
Migrant Health Centers
Food Programs
Child and Adult Care Food Program
Commodity Supplemental Food Program
Food Stamps
Special Milk Program
Special Supplemental Nutrition Program for Women, Infants, and Children (WIC)
Summer Food Service Program for Children
Education Programs
Follow Through
Head Start
Special Programs for Students from Disadvantaged Backgrounds
Vocational Education Opportunities, Disadvantaged Activities (Perkins Act)
Other Service Programs
Community Services Block Grant
Legal Services
Jobs and Training Programs
Foster Grandparents
Job Corps
Senior Community Service Employment Program
Senior Companions
Summer Youth Employment and Training Program
Training for Disadvantaged Adults and Youth
Energy Programs
Low-Income Home Energy Assistance Program (LIHEAP)
Weatherization Assistance
SELECTED PROGRAMS WITH THEIR OWN INCOME ELIGIBILITY STANDARDS
Aid to Families with Dependent Children
Earned Income Tax Credit
Section 8 Low-Income Housing Assistance and Low-Rent Public Housing
Supplemental Security Income
Pensions for Needy Veterans, Their Dependents, and Survivors
References and Bibliography
Biographical Sketches of Panel Members and Staff
Index