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Alternative Poverty Measurement for the U.S.: Focus on Supplemental
Poverty Thresholds
1 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
3 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
4 U.S. BUREAU OF LABOR STATISTICS 4bls.gov
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
5 U.S. BUREAU OF LABOR STATISTICS bls.gov 5
Census Bureau: Resources and Poverty Statistics
SPM and Concepts
6 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
7 U.S. BUREAU OF LABOR STATISTICS bls.gov
Threshold Estimation thus far
Housing Status Thresholds
8 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
9 U.S. BUREAU OF LABOR STATISTICS bls.gov
Expenditures Consumption
when in-kind benefits notaccounted forin spending
This Research
10 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
11 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
15 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
16 U.S. BUREAU OF LABOR STATISTICS bls.gov
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
19 U.S. BUREAU OF LABOR STATISTICS bls.gov
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