Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure
We discuss poverty measurement, focusing on two alternatives to the current official measure: consumption poverty, and the Census Bureau's new Supplemental Poverty Measure (SPM) that was released for the first time last year. The SPM has advantages over the official poverty measure, including a more defensible adjustment for family size and composition, an expanded definition of the family unit that includes cohabitors, and a definition of income that is conceptually closer to resources available for consumption. The SPM's definition of income, though conceptually broader than pre-tax money income, is difficult to implement given available data and their accuracy. Furthermore, income data do not capture consumption out of savings and tangible assets such as houses and cars. A consumption-based measure has similar advantages but fewer disadvantages. We compare those added to and dropped from the poverty rolls by the alternative measures relative to the current official measure. We find that the SPM adds to poverty individuals who are more likely to be college graduates, own a home and a car, live in a larger housing unit, have air conditioning, health insurance, and substantial assets, and have other more favorable characteristics than those who are dropped from poverty. Meanwhile, we find that a consumption measure compared to the official measure or the SPM adds to the poverty rolls individuals who are more disadvantaged than those who are dropped. We decompose the differences between the SPM and official poverty and find that the most problematic aspect of the SPM is the subtraction of medical out-of-pocket expenses from SPM income. Also, because the SPM poverty thresholds change in an odd way over time, it will be hard to determine if changes in poverty are due to changes in income or changes in thresholds. Our results present strong evidence that a consumption-based poverty measure is preferable to both the official income-based poverty measure and to the Supplemental Poverty Measure for determining who are the most disadvantaged.
Volume (Year): 26 (2012)
Issue (Month): 3 (Summer)
|Contact details of provider:|| Web page: https://www.aeaweb.org/jep/|
More information through EDIRC
|Order Information:||Web: https://www.aeaweb.org/subscribe.html|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mark Aguiar & Erik Hurst, 2005. "Consumption versus Expenditure," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 919-948, October.
- Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009.
"The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences,"
0903, Harris School of Public Policy Studies, University of Chicago.
- Bruce D. Meyer & Wallace K. C. Mok & James X. Sullivan, 2009. "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences," NBER Working Papers 15181, National Bureau of Economic Research, Inc.
- Bruce D. Meyer & James X. Sullivan, 2009. "Five Decades of Consumption and Income Poverty," Working Papers 0907, Harris School of Public Policy Studies, University of Chicago.
- Bruce D. Meyer & James X. Sullivan, 2009. "Five Decades of Consumption and Income Poverty," NBER Working Papers 14827, National Bureau of Economic Research, Inc.
- Bruce Meyer & James X. Sullivan, 2010. "Five Decades of Consumption and Income Proverty," Working Papers 2010-003, Becker Friedman Institute for Research In Economics.
- David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
- Rebecca M. Blank, 2008. "Presidential address: How to improve poverty measurement in the United States," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 27(2), pages 233-254.
- Bruce D. Meyer & James X. Sullivan, 2011. "Viewpoint: Further results on measuring the well-being of the poor using income and consumption," Canadian Journal of Economics, Canadian Economics Association, vol. 44(1), pages 52-87, February.
- Jonathan D. Fisher & David S. Johnson & Joseph T. Marchand & Timothy M. Smeeding & Barbara B. Torrey, 2009. "Identifying the Poorest Older Americans," Journals of Gerontology: Series B, Gerontological Society of America, vol. 64(6), pages 758-766.
- Fisher, Johathan & Johnson, David & Marchand, Joseph & Smeeding, Timothy & Boyle Torrey, B., 2009. "Identifying the Poorest Older Americans," Working Papers 2009-3, University of Alberta, Department of Economics.
- Slesnick, Daniel T, 1993. "Gaining Ground: Poverty in the Postwar United States," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 1-38, February. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:26:y:2012:i:3:p:111-36. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)or (Michael P. Albert)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.