November 30, 2011

Re-Counting Poverty

The November 2011 issuance by the U.S. Census Bureau of a new Supplemental Poverty Measure has rekindled interest in questions that have been raised at various times over the nearly half century since the first official measures were published. Are the poverty measures used for so many years really so flawed they need a total overhaul? If so, why weren’t they fixed sooner? How and why did the new alternative recently unveiled by Census emerge from the pack?  What are the politics? What’s the social science? What core values are put in play by the choices we as a society make about how to measure poverty?

The Current Count

Debate over how best to gauge the depth and extent of poverty in the U.S. was well underway when, in 1964, the first government-produced poverty measures were published. The launching of the Kennedy/Johnson War on Poverty had already stoked the interest of academic researchers, government officials and policymakers in the subject, and critics were quick to highlight shortcomings in the methodology employed by Social Security analyst Mollie Orshansky in devising income levels below which families of differing types should be classified as “poor.”

To be sure, Orshansky’s methodology might now seem rather simplistic, given today’s sophisticated computers and the elegant models they deploy. Orshansky’s starting point was the U.S. Department of Agriculture’s 1955 Household Food Consumption Survey (the most recent then available), which revealed that, on average, households that included three or more people spent about a third of their after-tax income on food, with households of one or two people spending a slightly larger share. Orshansky applied these multipliers to the costs of the economy food plan–the most frugal of USDA’s “four nutritionally adequate” food plans–for families of each size. (A second set of thresholds was derived from the somewhat more generous “Low-Cost” food plan, but these drew little attention at the time.)

Other adjustments took account of farm/nonfarm status, number of family members who were children, families headed by females (a male spouse, if present, was assumed to head the family) and, for one and two-person units, aged/non-aged status. These adjustments produced a matrix of 124 poverty thresholds, although only the weighted average thresholds for each family size were typically cited. A detailed description by Gordon M. Fisher of the derivation of Orshansky’s poverty thresholds, including shortcomings and later modifications, can be found at the Census Bureau’s website.

With the help of the Census Bureau’s Demographic Survey division, Orshansky was then able to produce estimates of the extent of poverty nationally and among various subgroups, using data from the annual March supplement to the Current Population Survey, conducted by the Census Bureau in collaboration with the Bureau of Labor Statistics, in which households are asked about their money income in the previous year.1  That survey, with some modifications and now dubbed the Current Population Survey Annual Social and Economic Supplement (CPS ASEC), remains the basic data source from which the official poverty estimates are derived.2 In 1969, the Orshansky thresholds were formally adopted by the U.S. Bureau of the Budget (now the Office of Management and Budget) as the official delineators between the American poor and non-poor.3

The poverty thresholds, updated annually by the Census Bureau to reflect price changes, are still used to prepare estimates of the number of Americans in poverty each year. The Department of Health and Human Services also publishes a somewhat simplified version of these measures, the poverty guidelines, which are used to determine financial eligibility for various income-tested federal programs and for other administration purposes.

The Continuing Debate

Orshansky’s guidelines–with relatively modest modifications—remain the official word on who is and who isn’t poor in America.  This is despite recurring criticism from both the left and right and the periodic convening, beginning in 1968, of numerous poverty-measure review committees, interagency task forces and expert bipartisan panels, along with the issuance of extensive technical reports on their findings and differences.4 And, on the basis of some of these deliberations, the Census Bureau has, in more recent years, published several alternative measures on its website, although these generally draw little attention.

The most straightforward explanation for the durability of the Orshansky measure is that, while it is not difficult to point to its deficiencies, devising widely acceptable remedies is far from simple. The sources of controversy range from basic philosophical differences to practical difficulties in concept, measurement and data collection. Here are a few of the most prominent:

The Proposed Improvement

Conscious of the political as well as theoretical controversy  surrounding poverty measurement, the Census Bureau has stressed that the recently unveiled “Supplemental Poverty Measure” is just that–supplemental. It will neither replace the official count nor be used in determining eligibility for government programs. Moreover, the Census Bureau, together with the Bureau of Labor Statistics, plans to continue research into better methods to determine the thresholds that define poverty for families and individuals of varying demographic characteristics, as well as the consistency and accuracy of procedures used to determine how many of these families and persons have resources insufficient to raise them above those thresholds.

The Supplemental Measure, the product of an Interagency Technical Working Group (ITWG),8 draws heavily upon the recommendations of a 1995 National Academy of Science report9 as well as further  research on poverty measurement conducted over the past 15 years. The ITWG in its own report issued in March 2010, endorsed many of the improvements in poverty definition and measurement recommended by the NAS, but suggested additional enhancements. The final supplemental measure, as applied to 2010 CPS ASEC data, is described in detail in the Census Bureau report issued in November 2011. In summary, the new construct would:

The Bottom Line

In the aggregate, these many alterations have only modest effect on the overall measurement of poverty as applied to data from 2009 and 2010. However, some important differences with the official counts are observed:

Number and Percent of People in Poverty by Different Poverty Measures: 2010The Future

Despite the likely employment of the alternative poverty measure by researchers, any significant impact on government programs in the near future is probably unlikely. Conservative critics, as well as academics generally, will likely welcome the inclusion of a more complete measure of income among the needy. However, many may oppose the inclusion of even a modestly relativistic element in determining poverty thresholds. And across the political spectrum, arguments will continue about whether benefits are properly valued on an annual basis and other factors affecting imputations.

Absent federal action–and congressional reaction–the poverty guidelines, as derived from the official poverty thresholds (see above), will remain the standards used by federal agencies in determining eligibility for various cash and in-kind benefit assistance programs. Eligibility for these programs is generally determined on an individual not geographic basis (though states may set different standards for welfare and Medicaid assistance). However, should agencies propose to adopt the revised measure in computing program guidelines, Congress would no doubt pay attention to the possible impact of any shift in benefit distributions among states. Congress will also have to decide if it will provide the funds needed to continue some of the survey upgrades used in computing the current version of the Supplemental Measure as well as further recommended improvements.

  1. Starting in 1959, Current Population Survey data were recorded on magnetic tapes in a format compatible with the (giant, if cumbersome and slow by current standards) Univac computers used by the Census Bureau throughout the 1960s.  Because of the relative difficulty in programming these computers, and the demands of producing its regular reports and analyses, the Census bureau required well over a year to produce the poverty tabulations. Nor was it feasible for Orshansky to experiment with alternative techniques. When, in 1969, the CPS tapes, converted to more generally usable format, became available to a limited number of researchers outside of the Census, the development of microsimulation models accelerated analysis of possible improvements to the poverty measures. Today the survey microdata can be accessed online so that any computer user can produce their own tabulations and analyses.
  2. The Annual Social and Economic Supplement (ASEC) to the CPS (the expanded and retitled March supplement) remains the source of official national poverty estimates. The American Community Survey (ACS) provides single- and multi-year estimates for smaller areas. The Survey of Income and Program Participation (SIPP) provides longitudinal estimates. The Small Area Income and Poverty Estimates (SAIPE) program provides model-based poverty estimates for counties and school districts. Additional information on these surveys can be found on the Census Bureau website.
  3. See Gordon M. Fisher, The Development of the Orshansky Poverty Thresholds and Their Subsequent History as the Official U.S. Poverty Measure.” On the official designation, Fisher references “Bureau of the Budget Circular No. A-46, Transmittal Memorandum No. 9, August 29, 1969, transmitting Exhibit L, "Definition of Poverty for Statistical Purposes.”
  4. Find a complete rundown of the various poverty measure review efforts on the Census Bureau website.
  5. See Gordon A. Fisher, "Relative or Absolute — New Light on the Behavior of Poverty Lines Over Time"
  6. Kathleen Short, “The Research Supplemental Poverty Measure: 2010,” Current Population Reports, U.S. Census Bureau, November 2011.
  7. The Short report includes estimates showing the impact of including each type of government program aid in the poverty counts for various groups along with the impact of deducting certain types of expenses from available household income.
  8. The Interagency Group included representatives from the Bureau of Labor Statistics (BLS), the Census Bureau, the Economics and Statistics Administration, the Council of Economic Advisers, the U.S. Department of Health and Human Services, and OMB).
  9. Measuring Poverty: A New Approach,” Constance F. Citro and Robert T. Michael, Eds., National Academy Press, Washington, D.C. 1995.
  10. The Short Report provides tables detailing the impacts on various demographic groups.
  11. Trudi Renwick, “Geographic Adjustments of Supplemental Poverty Measure Thresholds: Using the American Community Survey Five-Year Data on Housing Costs” U.S. Census Bureau, July 2011.