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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)

    17 U.S. BUREAU OF LABOR STATISTICS bls.gov 14

  • 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)

    18 U.S. BUREAU OF LABOR STATISTICS bls.gov 15

  • 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

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