Disclaimer: Not all the authors of the research papers and conference presentations are affiliated with BLS. This information is provided for your convenience and does not necessarily reflect the views or policies of BLS.
Since 1995, the Bureau of Labor Statistics (BLS) has been conducting research on the development of experimental expenditure-based poverty thresholds. The early work was based on recommendations of the 1995 National Academy of Sciences (NAS) report Measuring Poverty: A New Approach, (Citro and Michael 1995). More recently, the Interagency Technical Working Group (ITWG) provided a framework for a second set of poverty thresholds as part of the Supplemental Poverty Measure (SPM). The ITWGs recommendations are outlined in the document "Observations from the Interagency Technical Working Group on Developing a Supplemental Poverty Measure" (PDF). A guiding principle for the development of the SPM is that resources and thresholds be consistently defined.
Both the NAS and ITWG documents refer to the U.S. Consumer Expenditure Survey (CE) as the basis for these expenditure-based poverty thresholds. The documents also note that BLS is responsible for conducting research on expenditure-based poverty thresholds, and for providing these thresholds to the U.S. Census Bureau for use in producing research experimental poverty statistics. The ITWG acknowledged that the BLS had produced the NAS thresholds in the past and expected that the BLS would continue to play this role for the SPM.
Within the BLS, the Division of Price and Index Number Research (DPINR) conducts all expenditure-based poverty threshold research. Support regarding the CE data is provided, as needed, by staff within the Division of Consumer Expenditure Surveys. DPINR research is conducted in consultation and cooperation with U.S. Census Bureau researchers.
The BLS-DPINR research experimental poverty thresholds are presented with a caveat: what appears on this BLS web page does not reflect the rigors of production quality thresholds or related statistics. For such thresholds to be produced, a broader BLS endeavor would need to be created that coordinates the development of improvements in, and the production and dissemination of, expenditure-based SPM thresholds. This effort would include support for: research economists to devise and test suggested improvements in the thresholds and share this research with the economics and statistics profession at large, as well as the general public; IT staff to design, code, test, and provide diagnostic statistics; statistical methods staff to develop measures of data and statistical quality; and economists to analyze the data, produce the thresholds and related statistics, and disseminate the thresholds to the public. As part of this effort, improvements in the CE Survey would need to be introduced to better capture information to meet the needs of the SPM such as those related to the receipt of in-kind benefits, and to accelerate to early August the delivery of the thresholds to the Census Bureau to support the September release data of the Census Bureau income and poverty report. The FY 2016 Presidents Budget includes funds to create such a program at BLS and to produce production quality SPM thresholds.
On this web page, recently produced research experimental expenditure-based poverty thresholds are presented along with papers and presentations related to these. Much of the research was conducted by BLS in cooperation with U.S. Census Bureau staff and other academic researchers. Again, as noted above, the thresholds developed and described in the research papers and conference presentations are not produced using standard BLS production procedures.
The BLS website hosts the research experimental SPM poverty thresholds (see below), while the U.S. Census Bureau website hosts the research experimental NAS poverty thresholds http://www.census.gov/hhes/povmeas/data/nas/index.html.
The official poverty measure of the United States was first developed in the early 1960s and adopted as "official" in 1969. The official poverty threshold was determined to be the dollar value of a minimally adequate diet times three. The multiplier of three was used because 1955 Food Consumption Survey data showed that food expenditures accounted for one-third of after-tax income for the average family with children. An annual threshold of about $3,100 for a family with two adults and two children was set as the standard of needs for 1963, and has been fixed in inflation-adjusted terms since then. The U.S. Census Bureau is responsible for publishing official annual poverty thresholds, rates, and other statistics. The release date of most recent official poverty statistics by the U.S. Census Bureau is September 16, 2015.
The NAS recommendations provide the framework for a definition of the SPM. However, research over the years has suggested modifications to the NAS recommendations; the modifications are discussed in detail in the ITWG document. The SPM is not intended to replace the official poverty measure but is to be considered a work in progress, with the expectation that there will be improvements to it over time. Changes in the SPM are to be decided upon in a process led by research economists, survey methodologists, and statisticians within the U.S. Census Bureau in consultation with BLS and with other appropriate data agencies and outside experts, and will be based on solid analytical evidence.
Research Experimental SPM thresholds are based on consumer unit out-of-pocket expenditures for food, clothing, shelter and utilities (FCSU), and a multiplier to account for other basic goods and services, like those for household supplies, personal care, and non-work related transportation. The Census Bureau compares resources to thresholds to assess whether consumer units can meet their needs as defined by the SPM thresholds. If a consumer unit is unable to meet these needs, it is considered poor. Currently the SPM resource measure counts not only money income that can be used to meet out-of-0ocket FCSU expenditures, but also the value of in-kind benefits to meet FCSU needs through the use of these benefits. In-kind benefits added to net income by the Census Bureau include benefits from: Low Income Housing Energy Assistance Program (LIHEAP), National School Lunch Program (NSLP), Supplemental Nutrition Assistance Program (SNAP), Women, Infants, and Children Program (SIC), and rental assistance from government sources. SNAP benefit values are implicitly included in food expenditures in calculating the SPM thresholds; however, in-kind benefits from the other programs are not considered. This is because the Consumer Expenditure Interview Survey collects limited to no information on the receipt of these additional benefits. Current research is ongoing to develop approaches to account for these in-kind benefits in the SPM thresholds. Once these benefits are accounted for in the SPM thresholds, consistency in the thresholds and resources will be achieved.
For each threshold year, five years of quarterly U.S. Consumer Expenditure Interview Survey data are used. Expenditures are updated to annual threshold year dollars using the Consumer Price Index for All Urban Consumers (CPI-U).
Research Experimental SPM thresholds are based on a range of FCSU expenditures centered on the 33rd percentile for the estimation sample of consumer units (CUs). The NAS-based thresholds were based on percentages of the median of FCSU expenditures. Also, unlike the earlier NAS-based thresholds that were based on spending by families with two adults and two children, the SPM estimation sample is composed of CUs with two children and any number of adults. Equivalence scales are used to convert the estimation sample FCSU expenditures to those of reference consumer units composed of two adults and two children.
A three-parameter equivalence scale, proposed by Betson (1996), is used to adjust FCSU expenditure for each consumer unit in the estimation sample. The parameters allow for differing needs of adults and children and for economies of scale for consumption within the consumer unit. A distinguishing feature of the three-parameter equivalence scale is the adjustment for single parents; no adjustment for single parents was included in the two-parameter scale proposed by the NAS Panel. The three-parameter equivalence scale has been used in the productions of the NAS and SPM thresholds in the past (e.g., Garner 2010). Directly below, we present the three-parameter equivalence scale that we apply to the estimation sample for the production of the research experimental SPM thresholds:
Single adults with children scale = (1 + a + ß(K-1))f
Multiple adults with children scale = (A + ßK)f
a = parameter to account for the needs of the first child,
ß = parameter to account for the needs of additional children,
f = parameter to account for economies of scale within the consumer unit,
A = number of adults within the consumer unit, and
K = number of children within the consumer unit
The parameters a, ß, and f were estimated by Betson to fit the cost of children literature, and when rounded, were selected to be 0.8, 0.5, and 0.7, respectively.
Separate research experimental SPM thresholds are produced for owners with mortgages, owners without mortgages, and renters. The research experimental SPM housing tenure thresholds are produced using the equation below.
SPM Thresholdh = 1.2 * FCSU E - (S + U) E + (S + U) h
1.2 = multiplier used to account for expenditures for other basic goods and services, like those for household supplies, personal care, and non-work related transportation.
FCSU, S, and U refer to the means of the sum of expenditures for food, clothing, shelter and utilities, and the shelter and utilities portions of FCSU, respectively, for the estimation of sample CUs within the 30th to 36th percentile range of FCSU expenditures.
E refers to the entire estimation sample, within the 30th to 36th percentile range of FCSU expenditures, with FCSU expenditures converted to those for consumer units with two adults and two children without distinction by housing tenure.
h refers to one of three housing tenure groups:Owners with mortgages
Owners without mortgages, or
To test for a significant change in the threshold from the previous year, or to make a comparison between thresholds within a year, one would conduct a Z-test. The test statistics are specified below, for each type of comparison. First, to test for the statistical difference in a threshold from year to year (e.g., SPM renter thresholds), simply divide the change in the threshold from the previous year by the standard error of the year-to-year difference.
Z Renters , 2014-2013 = (SPM Renters , 2014 - SPM Renters , 2013 ) / Standard error Renters , 2014-2013
For a statistical comparison of thresholds within a year (e.g., renter thresholds compared to owner without mortgage thresholds), simply divide the difference in the two thresholds within the year by the standard error of the difference between the two housing tenure groups that is listed for the current threshold year.
Z Renters compared to Owners without mortgages , 2014 =
(SPM Renters , 2014 - SPM Owner without mortgages , 2014 ) / Standard error Renters compared to Owners without mortgages , 2014
Research Experimental SPM thresholds for 2009-2010 were first posted to the BLS website in table format in November 2011. Thresholds for 2005-2008 were added shortly thereafter. Ever since, the time series has been supplemented by an additional year's threshold each September. SPM thresholds generally are released by the BLS after the CE data are released to the public.
These research experimental SPM thresholds and associated standard errors can be found through the links below. Also available are the expenditure shares of each of the components of the thresholds.
As of November 2015, the weighted share distribution of consumer units by housing tenure for the SPM thresholds for each year is included in the "Research Experimental SPM Poverty Thresholds with Housing Tenure Shares" file. This is included to facilitate the calculation of a weighted average of the three SPM thresholds for users who are interested in a base FCSU threshold. Likewise, a weighted average of a particular component of the SPM thresholds (i.e., Food, Clothing, Shelter, Utilities) can be computed using the housing tenure distributional weights along with the housing tenure specific component from the "Expenditure Shares" file below. For example, a weighted average of Shelter across the three housing tenure groups would be calculated as follows:
S W = (P Owners with mortgages * S Owners with mortgages * SPM Owners with mortgages)
+(P Owners without mortgages * S Owners without mortgages * SPM Owners without mortgages)
+(P Renters * S Renters * SPM Renters)
S W = weighted average of shelter share in SPM threshold
P = weighted share distribution of consumer units by housing tenure
S = shelter component share of SPM threshold for housing group
SPM = SPM threshold for housing group
Please note that use of all of the significant digits presented in the spreadsheets are necessary for inclusion in calculations; precision will affect the resulting dollar value.
Last Modified Date: November 16, 2015