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Defining Income in an Absolute Poverty Measure

This presentation by Charles Nelson from the U.S. Census Bureau explores the importance of broadening the definition of income in absolute poverty measures. It discusses different approaches to placing families and individuals on an equal footing and the effects of using a broader income definition. The presentation also highlights the potential impact on income inequality and the need for future research to improve poverty assessment methods. For more information, visit the provided links.

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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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