alternative poverty measurement for the u.s.: .alternative poverty measurement for the u.s.: focus

Alternative Poverty Measurement for the U.S.: Focus on Supplemental

Poverty Thresholds

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Thesia I. Garner(co-authored with Marisa Gudrais)

Presented atWestern Economic Association 13th International Conference

3-6 January 2017Pontifical Catholic University of Chile, Santiago

Session 84: Contemporary Economic Policy: Public Policy and Inequality SeriesPoverty and Social Policy: Poverty and Inequality Measurement Empirical Approach II

(edited 27 January 2017)

Not to be quoted without authors permission Discussant: James H Spencer, Clemson University

Disclaimer

2 U.S. BUREAU OF LABOR STATISTICS bls.gov

This presentation reports the results of researchand analysis undertaken by researchers withinthe Bureau of Labor Statistics (BLS).

Any views expressed are those of the authors andnot necessarily those of the BLS.

Results are preliminary and not to be quotedwithout authors permission.

All Poverty Measures

Not Poor

Resources

Threshold

Resources

Poor

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May 1995 report, Measuring Poverty: A New Approach

The official measure does not account for

Higher standards and levels of living since 1965

Provision of noncash benefits (food benefits,housing subsidies, energy assistance)

Necessary expenses (taxes, work-related, healthcare)

Recommended Changes to Improve the Measure ofPoverty in the U.S.

Thresholds: Bureau of Labor Statistics (BLS)

Resources and poverty statistics: Census Bureau

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National Academy of Sciences Panel on Poverty and Familiy Assistance

Interagency Technical Working Group - March 2, 2010

Will not replace the official poverty measure

Will not be used for resource allocation or program eligibility

Justification: Evaluate impact of benefit programs on poverty

Based on National Academy of Sciences expert panel recommendations Measuring Poverty: A New Approach (Citro and Michael, 1995)

Supplemental Poverty Meaures (SPM)

BLS: Research Experimental SPM Thresholds

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Census Bureau: Resources and Poverty Statistics

SPM and Concepts

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Poverty Concept, based on NAS recommendations proposed thresholds, although developed in somewhat different ways, reflect

concept of budget for consumption needs (NAS Report, 1995, pp. 66-67)

Hence, resources should add to money income the value of near-money in-kindbenefits that are intended to support consumption (pp. 67)

Measurement concept for thresholds assumed Expenditures are a good proxy for consumption (with the exception of owner shelter)

Interagency Technical Working Group (ITWG) placed value on: Consistency between threshold and resource definitions in terms of poverty concept

Data availability, simplicity in estimation, stability of the measure over time, and ease in explaining the methodology

Food, clothing, shelter, and utilities (FCSU) expenditures

Consumer Expenditure Interview Survey data: 5 years of data

FCSU expenditures in constant year dollars

Estimation sample: Consumer Units (CUs) with 2 children

Reference sample: 2 adults with 2 children (3-parameter equivalence scale applied to +2 children FCSU expenditures)

Rank CUs by their FCSU expenditures

Identify 33rd percentile represented by 30th to 36th percentile range

Produce means of FCSU and SU by housing status

Estimate thresholds by housing tenure

Send to Census Bureau to derive other CU thresholds and make geographic adjustment

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Threshold Estimation thus far

Housing Status Thresholds

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Housing Status Groups, j

Owners with mortgages

Owners without mortgages

Renters

SPM Thresholdj

= (1.2*FCSUA) SUA + SU j

FCSUA , SUA , SU j are means within 30th to 36th percentile

range of FCSUA for reference CUs

In addition to owner-occupied housing

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Expenditures Consumption

when in-kind benefits notaccounted forin spending

This Research

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Purpose Highlight poverty concept underlying SPM and issue of consistency

Examine options to value consumption needs when data are missing

Produce 2014 SPM thresholds that reflect the consumption of FCSU, with expection of owner-occupied housing

Contribution Improved SPM thresholds that more nearly reflect consumption value of

FCSU basic needs

Improve overall SPM to better evaluate impact of in-kind benefitprograms considered in resources

Poverty Concept: Economic Deprivation

Thresholds represent needs

Resources meetneeds

Consumption Needs defined as Food Clothing Shelter Utilities + a little bit more for personal

care, non-work related transportation, etc.

Poverty Concept: deprivation based on comparison of resources and consumption needs

Consumption needs proxied by spending (or expenditures)

NAS Panel assumption: CE expenditures include housing assistance subsidies (rent and utilities) and benefits from food stamps and other meals provided free (paraphrase of NAS Report, 1995, pp. 393-394)

BUT: CE expenditures only account for food stamps or SNAP

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SPM Thresholds and Housing Tenure Shares(2005 2015)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

$21,064 $22,010 $22,772 $24,259 $24,450 $25,018 $25,703 $25,784 $25,639 $25,844 $25,930

S.E. $200 $194 $171 $259 $242 $323 $347 $368 $289 $345 $297

% Sample 0.483 0.472 0.5 0.493 0.489 0.486 0.459 0.439 0.438 0.415 0.371

$17,643 $18,301 $19,206 $20,386 $20,298 $20,590 $21,175 $21,400 $21,397 $21,380 $21,806

S.E. $230 $279 $299 $340 $335 $341 $298 $233 $337 $470 $417

% Sample 0.118 0.102 0.086 0.082 0.084 0.093 0.11 0.12 0.115 0.108 0.119

$20,641 $21,278 $22,418 $23,472 $23,874 $24,391 $25,222 $25,105 $25,144 $25,460 $25,583

S.E. $224 $241 $249 $257 $345 $379 $378 $398 $400 $363 $282

% Sample 0.399 0.426 0.414 0.425 0.426 0.421 0.431 0.442 0.447 0.476 0.51

* Based on out-of-pocket expenditures for food, clothing, shelter, and utilities. Shelter expenditures include those for mortgage principal payments.

Two-Adult-Two-Child BLS-DPINR Research Experimental Supplemental Poverty Measure (SPM) Thresholds *

OWNERS WITH MORTGAGES

OWNERS WITHOUT MORTGAGES

RENTERS

SPM (and Official) Thresholds for Two Adults with Two Children: 2015

$24,036

$25,930

$21,806

$25,583

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

Official SPM Owners withmortgages

SPM Owners withoutmortgages

SPM Renters

Source: http://stats.bls.gov/pir/spmhome.htm

Thresholds Distribution Shares by Component: 2015

Food29%

ClothinShelter+Utilities51%

Other16%

Owners with Mortgages

Food35%

Clothing5%

Shelter+Utilities41%

Other19%

Owners without Mortgages

Food30%

Clothing4%Shelter+Utilities

50%

Other16%

Renters

Send SPM thresholds and housing (shelter+utilities) shares to Census Bureau to derive other CU thresholds and make geographic

adjustments

Consistency in Poverty Concept: Resources to Meet FCSU and Evaluate In-Kind

Resources

Other Food Subsidies

Expenditures

(includng

Expe for FCSU

S SNAP)

nditures forFCSU (includng

NAP)

Other Food Subsidies

With SNAP

In-Kind Benefits

Cashincome

Housing &

Energy Subsidies

Thresholds

Consumption Value ofFCSU+little bit more

Consistent

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Missing Data Problem in Thresholds Leads to Inconsistency in Poverty Measure

Expenditures forFCSU (includingSNAP)+little bit

more Cashincome

(current measure)

Thresholds Resources

Housing &

Energy Subsidies

Other Food Subsidies

With SNAP

In-Kind BenefitsConsistent

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Example of Subsidized Renter: the Case of Rent Spending in Thresholds

Thresholds

1/3 of market rent paid OOP Spending

????

Renter Resources

Money income used to pay contract rent = 1/3 of

market rent

rental voucher covers 2/3 of market rent (not

fungible)

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Example of Subsidized Renter: Consumption Rent Value in Thresholds

Thresholds

1/3 of market rent paid OOP Spending

2/3 of market rent paid with voucher (in-kind

benefit)

Renter Resources

Money income used to pay contract rent = 1/3 of

market rent

rental voucher covers 2/3 of market rent (not

fungible)

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Challenges in UsingU.S. Consumer Expenditure Interview Survey for SPM

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Expenditures collected: out-of-pocket

Limited data on Rental Assistance Programs

Indicator variables for rented living quarters Is this house a public housing project, that is, it is owned by