The Research Supplemental Poverty Measure

David S JohnsonUS Census Bureau

And Visiting Scholar, Russell Sage Foundation

April 2012

What is Poverty?

National Academy of Science Panel on Poverty and Family Assistance

“We define poverty as economic deprivation. A way of expressing this concept is that it pertains to people’s lack of economic resources (e.g., money or near money income) for consumption of economic goods and services (e.g., food, housing, clothing, transportation). Thus, a poverty standard is based on a level of family resources (or, alternatively, of families’ actual consumption) deemed necessary to obtain a minimally adequate standard of living, defined appropriately for the United States today.”

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Supplemental Poverty Measure (SPM)Observations from the Interagency Technical Working Group - March 2, 2010

•Based on NAS panel 1995 recommendations•“is necessarily a more complex measure than the official poverty measure, requiring more complex estimates of both poverty thresholds and household resources.”•Will not replace the official poverty measure•Will not be used for resource allocation or program eligibility•Census Bureau and BLS responsible for improving and updating the measure, and continuing research

Census Report by Kathleen Short released November 7, 2011

http://www.census.gov/hhes/povmeas/methodology/supplemental/research/Short_ResearchSPM2010.pdf

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Poverty Threshold and Resources

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Economic Unit of Analysis

Official• All related individuals who

live at the same address

Supplemental• All related individuals who

live at the same address• Cohabitors and their

relatives• Coresident unrelated

children who are cared for by the family (such as foster children)

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Thresholds

Official Measure• Cost of a minimum food basket• Food expenditures as a

percentage of after-tax money income: 1/3rd

• Families of three or more persons• Separate thresholds developed for

different family types• 1955 Food Consumption Survey• 1963 as base• Updated each year with the CPI

• 33rd percentile of sum of expenditures for food, clothing, and shelter, and utilities (FCSU)

• Consumer units with 2 children and any number of adults

• Adjust for differences in number of adults and children using “three-parameter” equivalence scale

• Consumer Expenditure Interview Survey (CE)

• Most recent 5 years of CE data• Updated each year with most

recent 5 years of data

Supplemental Measure

Threshold Adjustments: by tenure and geography

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OfficialNo adjustments

SupplementalTenure

– Renters – Owners with a mortgage– Owners without a mortgage

Housing cost differences – Make adjustments by MSA and

non-MSAs in each state– Five years of ACS data on rental

costs for 2 bedroom units

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Official Overall Owners with mortgages

Owners without mortgages

Renters$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

21756

2385424450.46

20298.1499999999

23873.7922113

24343 25018.26

20590.22

24390.5

20092010

Supplemental Poverty Thresholds

Official and Research SPM Thresholds for 2 Adults and 2 Children Economic Units

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Official and Research SPM Thresholds for Two Adult, Two Child Units with Geographic Adjustments: 2010

Official SPM - overall Nonmetro North Dakota - No

mortgage

DC Metro Area - Renter

San Jose, CA - Homeowner with

mortgage

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

$22,113 $24,343

$17,060

$30,733

$34,152

Supplemental Poverty Thresholds

Income/Resource Definition

Official

• Gross (before-tax) cash income from all sources

Supplemental• Gross money income: • PLUS value of near-money

federal in-kind benefits for FCSU – SNAP, school lunch, WIC– Housing subsidies– LIHEAP– Tax credits (EITC).

• MINUS income and payroll taxes and other nondiscretionary expenses

– child care, work-related expenses; – child support payments;– out-of-pocket medical care expenses,

including health insurance premiums

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Comparison of benefits included in the SPM vs. the official poverty measure

• Cash benefits in the official measure and SPM– Temporary Assistance to Needy Families (TANF)– Social Security– Supplemental Security Income– Unemployment Insurance

• In-kind benefits only in the SPM– Supplemental Nutritional Assistance Program (SNAP)– National School Lunch Program– Special Supplemental Nutrition Program for Women Infants and

Children (WIC)– Low Income Energy Assistance Program (LIHEAP)– Housing subsidies

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SNAP

Sch

ool lunch

WIC

Housin

g subsid

y/cap

LIHEAP

EITC +/-

Tax

es befo

re cre

dits

FICA

Work

expen

ses

Child

care

MOOP

Child

support p

aid0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

Aggregate Additions and Subtractions for Poor SPM Groups: 2009 and 2010

20092010

billi

ons$

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All People Under 18 years 18 to 64 years 65 years and older0.0

5.0

10.0

15.0

20.0

25.0

Poverty rates for all people and by age group: 2010

Perc

ent

**Includes unrelated individuals under age 15.Source: Current Population Survey, 2011 Annual Social and Economic Supplement.

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All People Under 18 years 18 to 64 years 65 years and older0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

SPM rates for all people and by age group: 2009 and 2010

perc

ent p

oor

**Includes unrelated individuals under age 15.Source: Current Population Survey, 2011 Annual Social and Economic Supplement.

Next steps

• Just released public use micro-data– IPUMS will provide documentation

• Continue research on SPM– Measurement of the poverty thresholds – Geographic adjustments– Collection and valuation of necessary expenses, such as

medical and commuting expenses – Adjustments for under-reporting of benefits, expenses, and the

sources of cash income • Release 2011 research SPM in November• Continue research on producing SPM on ACS and SIPP

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For More Information: