David M. Betson

1. David M. Betson • Research Associate of the Institute for Research on Poverty (Wisconsin) and Joint Center for Poverty Research (U of Chicago and Northwestern) • National Academy of Science Panels on : • The Use of Microsimulation Models for Analysis of Social Welfare Policy, • Poverty Measurement and Family Assistance, • The Use of Small Area Estimates for Allocation of Title I Education Grants • The Estimates of WIC Eligibility and Participation (Chair) • Elected as a National Associate of NAS • Parental Spending on Children and Child Support • Research is used to construct State Child Support Guidelines • Appointed to Washington State’s Commission on Child Support • Former Director of the Hesburgh Program in Public Service 404 Decio Hall dbetson@nd.edu

2. Measuring Poverty Lecture for Poverty Studies Course January 22, 2008

3. Topics • What is Poverty? • A Brief History of Poverty Measurement in US • Problems of Current Official Measure • NAS Recommendations • Politics of Poverty Measurement

4. Poor (adjective) Dictionary: • lacking sufficient money to live at a standard considered comfortable or normal in a society • worse than is usual, expected, or desirable; of a low or inferior standard or quality • [ attrib. ] (of a person) considered to be deserving of pity or sympathy • Alienated or Isolated • Social or Relative Deprivation • Economic or Material Deprivation

5. Economic Poverty Your available income (Resources) is insufficient to meet your family’s needs (Poverty Threshold) If Resources ≤ Poverty Threshold then you are ‘poor’ If Resources > Poverty Threshold then you are not ‘poor’

6. Smith and Townsend The necessities of life include ‘not only the commodities which are indispensably necessary for the support of life, but whatever the custom of the country renders it indecent for creditable people, even of the lowest order, to be without.’ Adam Smith (1776) The necessities of life are those goods that allow individuals to ‘play the roles, participate in the relationships, and follow the customary behavior which is expected of them by virtue of their membership in society.’ Peter Townsend (1979)

7. Alternative Thresholds

8. Measuring Poverty in US • Manly Report (1916) -- $13,315 (All Dollars are in 2006 dollars) • Depression Era -- Margaret Stecker (WPA) • Post WWII -- JEC set line at $17,206 per household • Robert Lampman (1962 CEA) -- $21,310 per household • LBJ’s War on Poverty (1964 to 1970) • Harrington (1962 Journalist) $21,310 to $24,516 • Molly Orshansky (1965 SSA) -- Food Needs times 3 -- $20,444 • OEO choose to adopt Orshansky measure to evaluate programs • 1969 OMB adopts the Orshansky Measure as official poverty measure for statistical purposes • Only minor changes since 1969 -- eliminated farm/non-farm differences, poverty thresholds have remained unchanged in real terms

9. What do we want from the Poverty Measure? • Has poverty increased, decreased or remained the same? • Have our efforts to reduce poverty worked? • Who are the poor? Are some groups more likely to be poor than other groups?

10. Problems with Current Measure • How many persons have been lifted out of poverty due to • Food Stamps and other Food Programs? • Public Housing and other Housing Subsidies? • Earned Income Tax Credit? • Child Care Subsidies? • How many persons have been pushed in poverty because they have paid taxes? • Should it matter whether you have worked or received your income from a transfer? • Is it reasonable to claim that the needs of an individual living in NYC are the same as those living in South Bend? • Are a family’s needs today, the same as they were in the 60s?

11. While the Poverty Measure may have been appropriate in the 60s It isn’t today!

12. Differences on Threshold Side Official Measure NAS Measure Initial Setting Food Needs x 3 30 to 35 percentile of FCSU + ‘a little more’ Family Adjustment Based on Food Needs Equivalence Scales (Age, #Adults, #Children) (#Adults, #Children) Geographic Adjustment None Based on Housing Costs Annual Adjustment CPI Annual % Change in Median FCSU

13. Differences on Resource Side Official Measure NAS Measure ADD: Cash Market Income and Insurance Yes Yes Personal Cash Transfers (Child Support) Yes Yes Cash Welfare Benefits (TANF,SSI) Yes Yes In-Kind Welfare Benefits (Food Stamps) NO Yes Refundable Tax Credits (EITC) NO Yes SUBTRACT: Income and Payroll Taxes NO Yes Child Care and Work Related Expenses NO Yes Medical Out-of-Pocket Expenses NO Yes Child Support Paid NO Yes

14. Poverty Rates in 2006 Official NAS (CPI) NAS (CPI) Geography-Adj No Geography-Adj All Person 12.3% 12.2% 12.4% Children under 18 17.4% 13.9% 14.0% Adults 19 to 64 10.8% 11.1% 11.2% Adults 65+ 9.4% 14.7% 15.2% Northeast 11.5% 12.7% 10.8% Midwest 11.2% 9.7% 11.3% South 13.8% 12.3% 14.4% West 11.6% 14.4% 11.7%

16. Why hasn’t the NAS Measure been adopted? • Reluctance to adopt the measure because no consensus has been reached on the appropriate treatment of medical needs • Reluctance of any administration to adopt an new measure that would raise poverty • Reluctance to accept a new poverty measure that might make the Welfare to Work policy look unsuccessful • Reluctance to accept a new poverty measure that would shift the geographic distribution of federal grants based upon poverty • Reluctance to adopt a new poverty measure that might extend ‘entitlements’ to a new class of families