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measurement of poverty used in this report is the official poverty measure
used by the U.S.Census Bureau. A person is living below poverty if the
person lives in a family with before-tax cash income below a defined level
of need, called the poverty line. The official poverty line in use today
was devised in the early 1960s based on the minimum cost of what was
considered to be a nutritionally adequate diet. As originally defined, the
poverty index signified the inability of families to afford the basic
necessities of living, based on the budget and spending patterns of those
Americans with an average standard of living. Since then the poverty line
has been updated annually for inflation using the consumer price index for
all urban consumers. The poverty line depends on the size of the family
and the number of children in the family.
A 1995 report by the National Research Council recommended changing the
definition of both the poverty thresholds and the resources that are used
to measure poverty. Its recommendations included the following:
Defining income. On the one hand, the definition of family
income should be expanded to include other important resources of
purchasing power, such as the earned income credit, food stamps, and
housing subsidies. On the other hand, some necessary expenditures that
reduce a family’s resources available for basic consumption needs should
be subtracted from income, such as taxes, necessary child care and other
work-related expenditures, child support payments, and out-of-pocket
medical expenditures.
Setting a threshold. Poverty thresholds should be adjusted to
provide a more accurate measure of family income requirements. First, the
consumption bundle used to derive thresholds should be based on food,
clothing, and shelter, not food consumption alone. Second, thresholds
should reflect regional variations in housing costs. Third, thresholds
should be adjusted for family size in a more consistent way than is
currently done. Finally, thresholds should be updated to reflect changes
in expenditure patterns over time.
A recent Census Bureau report used key elements of the National Research
Council proposal to estimate alternative poverty rates from 1990 to 1997.
The new measure accounts for medical out-of-pocket expenditures and uses
an alternative type of threshold definition from that under the official
measure. The new measure tends to decrease the relative poverty rate of
persons living alone and those with few medical out-of-pocket
expenditures, and to increase the relative poverty rate for persons living
with a relative or spouse and those with high medical out-of-pocket
expenditures. The Social Security Administration has done an analysis of
the experimental measure specifically for the older population.
Sources:
Fisher, G. (1992). The development and history of the
poverty thresholds. Social Security Bulletin 55 (4)
Citro, C.F. and Michael, R.T. (Eds.). (1995). Measuring poverty: A new approach. Washington, DC: National Academy Press
Short, K., Garner, T., Johnson,D. and Doyle, P. (June 1999). Experimental Poverty Measures: 1990-1997.
U.S. Census Bureau, Current Population Reports P60-205. Washington, DC: U.S. Government Printing Office
Olsen, K.A. (1999). Application of experimental poverty measures to the aged. Social Security Bulletin 62(3).
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