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Defining Income in an Absolute Poverty Measure

Defining Income in an Absolute Poverty Measure. By Charles Nelson U.S. Census Bureau For Presentation at Rio Group Meeting August 24-25, 2006. Common Goals for Absolute Poverty Measures. Needs and Resources Should be Conceptually Consistent

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Defining Income in an Absolute Poverty Measure

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  1. Defining Income in an Absolute Poverty Measure By Charles Nelson U.S. Census Bureau For Presentation at Rio Group Meeting August 24-25, 2006

  2. Common Goals for Absolute Poverty Measures • Needs and Resources Should be Conceptually Consistent • To the Extent Possible, Different Types of Families/Individuals Should be on an Equal Footing with Regard to Defining Who is Poor—A Challenging Proposition in Any Diverse Country

  3. How Are Different Families/Individuals Placed on an Equal Footing? • Through Equivalence Scales • Through Defining Poverty Thresholds • Through Defining Resources: Focus of Today’s Presentation

  4. Census Bureau Attempts to Broaden the Definition of Income • Research and Development Series: began in the1980’s 2. NAS Series: followed the publication of the National Academy of Sciences report on measuring poverty in 1995 3. 2006 Report of effects of taxes and transfers on income/poverty

  5. Research and Development Series Most comprehensive definition of income: • Included money income, value of govt. noncash food, housing, and medical benefits, capital gains/losses, employer contributions to health insurance, net return on home equity • Excluded Federal and State income taxes, payroll taxes, property taxes

  6. NAS Series • Included money income, value of govt. food and housing noncash benefits, capital gains/losses • Excluded Federal/State income taxes, payroll taxes, out-of-pocket medical expenses, work-related expenses (including child care expenses), and child support paid

  7. 2006 Report on Effects of Benefits and Taxes • Included money income, value of food and housing noncash benefits, net return on home equity • Excluded Federal/State income taxes, payroll taxes, property taxes, and work-related expenses

  8. Effect of Using a Broader Income Definition • Reduction in income inequality • Government transfers play a larger role in reducing income inequality than taxes • Year-to-year trends are often quite similar, and overall poverty rates may or may not be different

  9. Effects of Using a Broader Income Definition (Cont.) Then Why Do it? • Can have an impact on trends • Most importantly, has a definite impact on our understanding of who is most in need • A better understanding of the composition of the poverty population helps inform policymakers and improve the potential to target programs to those in need

  10. Future Research • Improve methods of assessing the economic benefits of homeownership • Improve methods of assigning dollar values to those on government housing assistance programs • Assessing the impact of health needs and/or benefits • Simulate other taxes, including sales taxes

  11. For More Information: See: http://www.census.gov/hhes/www/povmeas/povmeas.html http://www.census.gov/hhes/www/povmeas/nas.html http://www.census.gov/hhes/www/povmeas/papers/define.pdf Questions/Comments:charles.t.nelson@census.gov

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