01 Dec Poverty thresholds in America

Today i was asked to look over a blog post on our departmental website, and in typical fashion, got completely distracted following the data down the rabbit hole. The blog, itself, is an overview of an article, What We Don’t Know Can Hurt Us, in The American Prospect . The article, itself, is about the lack of information in policy formation, particularly in six areas:

• how many jobs have gone offshore
• what kinds of jobs are created by public investments
• the actual number of foreclosures and evictions
• which early-education programs work
• who is funding outside spending on political campaigns
• how much students actually learn in college.

(thank you Rick Roth for pulling out those six points!)

But it is a comment in the introduction that really grabbed my attention:

This debate isn’t just about how to collect new data but also how to interpret the data we already have. A perennial question is how to define poverty; the current measure is pegged to the economy of the 1960s and doesn’t reflect today’s family finances. A new measure developed by the Commerce Department will paint a more accurate picture of poverty, but it is opposed by conservatives who fear that the results will portray more penury in the United States — “propaganda,” scoffs the Heritage Foundation. Sometimes, people just don’t want to know.

The Commerce Department is re-doing the poverty measures?! How did i miss this? So i went traipsing after the data. I found it – not on the Commerce Department website, but on the Census Bureau’s site.

The first bit i found was the Povery Measurement Studies and Alternative Measures (PMSAM). While it’s been pretty well documented that the poverty measure is archaic The Insititute for Povery Research at the University of Wisconsin at Madison has a great history of the development of the measurement of poverty. An interesting bit from the website:

Orshansky developed her poverty thresholds by taking the cost of a minimum adequate diet for families of different sizes and multiplying the cost by three to allow for other expenses. (The minimum diet she used was the Economy Food Plan, the cheapest of four food plans issued by the U.S. Department of Agriculture. The factor of three was derived from a 1955 Agriculture Department survey.) Poor families were those whose yearly income was below the threshold for a family of a given size. She intended that the method be used for research, not to determine eligibility for antipoverty programs. (emphasis mine)

The entire U.S. economy has changed dramatically since the 60’s – philosophically as well as instrumentally, and yet, the same parameters are still in play to set policy. But back to the PMSAM.

Some key points about the need to change the poverty measure; the current measure:

• does not distinguish between the needs of workers and nonworkers (case in point, childcare for dual earner households)
• does not take into account different medical expenses / needs
• does not take into account variations by geography (think: cost of living in Norman, OK, versus NYC)
• does not really reflect anomolies in family size
• has not evolved with evolving consumption trends
• is a measure of gross income, thus, does not take into account taxation or additional resources (food stamps, e.g.)

Because of these things that have not been adjusted for since the 1960’s, the PMSAM has made recommendations about changes:

1. The official U.S. measure of poverty should be revised to reflect more nearly the circumstances of the nation’s families and changes in them over time 
2. poverty thresholds should represent a budget for food, clothing, shelter (including utilities), and a small additional amount to allow for other needs (e.g., household supplies, personal care, non-work-related transportation).
3. threshold for a reference family type should be developed using actual consumer expenditure data and updated annually to reflect changes in expenditures on food, clothing, and shelter over the previous 3 years
4. The reference family threshold should be adjusted to reflect the needs of different family types and to reflect geographic differences in housing costs
5. Family resources should be defined as the sum of money income from all sources togeterh with the value of near-money benefits that are available to buy goods and services, minus expenses tha tcannot be used to buy these goods and services
6. the OMB needs to revise and revamp through collaboration of appropriate agencies (Census and Labor)
7. institute regular reviews

(Borrowed rather hastily from: Summary and Recommendations)
 
But that is not the most interesting bit from the website. The interesting bit comes from the comparison spreadsheets.
 
And my final point (i’m running out of time and have been delightfully interrupted several times today, so am also running out of steam as i’ve been at this for nearly 3 hours): there is in this report an Appendix A: Dissent, written by John F. Cogan. his biggest concerns, it seems to me, are with the scientific validity of the recommneded changes (as opposed to their seeming-value-judgment base). He makes some great points about the vast amount of research and work that has already been done within the social sciences regarding concerns with the current poverty measures and he makes a pointed call to bring them in. But his other points seem to come from around the same vein as those i discussed earlier with reference to The Spirit Level Delusion. My difficulty, however, is not in his request for a more rigorous scientific method for determining what goods and services whould be included in the poverty determinations. Despite his strong concerns, he does not actuall offer a different way to measure poverty. And while he complains that the authors of the study do not use the literature available to them, he also uses zero literature to support his claims – only his own value-based “evidence” about how the measures shouldn’t be revamped.

It’s not much of an argument on my part, i realize. But i think it’s just a moment of frustration that there is a categorical denouncement of the revamping even as he recognizes the need for a new measure – that the current one is wholly unrealistic. Regardless – the tables actually break own poverty level adjustments in so many different ways and shapes that even without complete acceptance of the proposed changes, there is stll something very much to be said for the kind of work that is being done…

One last point (that i’ll get back to later) – Mr. Cogan’s references included Pauly’s The economics of moral hazard: Comment. (American Economic Review 58: 535) – a piece i’ve struggled with (thanks to Stephen Young and his work on Microfinance) in the past…