Improving the Measurement of Poverty

Area of Science:

• Socioeconomics
• Public Policy

Background:

• Official poverty measures may not fully capture economic hardship.
• A 1995 National Academy of Sciences panel proposed a more comprehensive approach.
• The U.S. Census Bureau is developing a similar supplemental poverty measure.

Purpose of the Study:

• To estimate 2007 national poverty rates using an updated, comprehensive methodology.
• To compare poverty rates derived from the new measure versus the traditional official measure.
• To analyze the impact of the new measure on child and elderly poverty rates.

Main Methods:

• Utilized poverty thresholds based on expenditures for shelter, food, clothing, and utilities.
• Incorporated family income including earnings, cash and near-cash benefits, tax credits, and payments.
• Adjusted for child care, work, medical expenses, regional cost of living, and homeownership.

Main Results:

• The new poverty measure estimated a national poverty rate of 16 percent, compared to 12.4 percent in the official measure.
• Child poverty rates were over 3 percentage points higher under the new measure.
• Elderly poverty rates were nearly 7 percentage points higher with the enhanced methodology.

Conclusions:

• The comprehensive poverty measure provides a more accurate reflection of economic vulnerability.
• Current official poverty statistics may underestimate the true extent of poverty, particularly for children and the elderly.
• Policy implications may necessitate adjustments to social safety nets and poverty reduction strategies.