Price and Index Number Research


Experimental Poverty Measures

Since 1995, the Bureau of Labor Statistics (BLS) has conducted research on the development of new expenditure-based poverty thresholds. This research has been conducted within the Division of Price and Index Number Research at the BLS as part of a joint BLS-U.S. Census Bureau research project.

A first set of expenditure-based poverty thresholds is based on a 1995 National Academy of Sciences (NAS) report Measuring Poverty: A New Approach, (Citro and Michael 1995) and a second set is based on "Observations from the Interagency Technical Working Group on Developing a Supplemental Poverty Measure" (PDF). The Working Group is referred to as the ITWG and its measure as the SPM. Both the NAS and ITWG documents refer to the U.S. Consumer Expenditure Survey (CE) as the basis for new expenditure-based poverty thresholds. The documents also note that BLS is to conduct research on poverty thresholds, and is to provide expenditure-based thresholds to the U.S. Census Bureau for use in its poverty measurement research and for the production of experimental poverty statistics. The ITWG, in addition, acknowledged that the BLS had produced the NAS thresholds in the past and expected the BLS would continue to play this role for the SPM.

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 noted 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.

Both the SPM and NAS poverty measure thresholds are experimental and are made available to the public for use in research. The purpose of this web page is to provide access to recently produced expenditure-based poverty thresholds and to papers and presentations related to these. Much of the research represented was conducted by BLS in cooperation with U.S. Census Bureau staff and other academic researchers. The thresholds developed and described in the research articles, papers, and presentations are not produced using standard BLS production procedures. The BLS website currently hosts the SPM poverty thresholds on this website (see below), while the U.S. Census Bureau website hosts the NAS experimental poverty thresholds (XLS)

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Disclaimer: Not all the authors of these studies and presentations are affiliated with BLS. This information is provided for your convenience and does not necessarily reflect the views or policies of BLS.

Supplemental Poverty Measure (SPM) Thresholds

SPM thresholds are based on consumer unit spending 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. 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). SPM thresholds are based on a range around the 33rd percentile of FCSU expenditures for the estimation sample. 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 consumer units (CUs) with two children and any number of adults. A consumer unit is similar to what the ITWG refers to as a "family unit", all related individuals who live at the same address, any co-resident unrelated children who are cared for by the family (such as foster children), and any co-habitors. Equivalence scales are used to convert the estimation sample FCSU expenditures to those of reference consumer units composed of two adults and two children. Separate thresholds are produced for owners with mortgages, owners without mortgages, and renters.

SPM thresholds appeared on this BLS website, in table format, for the first time in November 2011 with thresholds for 2009 and 2010. A time series, starting with 2005, was added shortly thereafter. On September 25, 2012, the 2011 SPM thresholds were published.

The 2012 SPM thresholds (XLS) were published and added to the time series table on September 10, 2013. Also included with the thresholds are the inputs for their derivation.

The SPM housing tenure thresholds are produced using the equation below.

SPM i = 1.2 * FCSU A - (S + U) A + (S + U) i

i refers to one of three housing tenure groups:

Owners with mortgages
Owners without mortgages

A 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

FCSU, S, and U refer to the means of these expenditures among estimation sample CUs within the 30th to 36th percentile range of FCSU expenditures.

The standard errors of year-to-year differences in the thresholds and the differences between housing tenure group thresholds within year are available in a separate table (XLS). 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., for the SPM for renters), simply divide the change in the threshold from the previous year by the standard error of the year-to-year difference that is listed for the current threshold year.

Z Renters , 2012-2011 = (SPM Renters , 2012 - SPM Renters , 2011 ) / Standard error Renters , 2012-2011

For a statistical comparison of thresholds within a year (e.g., for renters compared to owners without mortgages), 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 , 2012 =

(SPM Renters , 2012 - SPM Owner without mortgages , 2012 ) / Standard error Renters compared to Owners without mortgages , 2012

The expenditure shares of each of the components of the SPM thresholds (food, clothing, shelter, utilities, and other) are available in another table (XLSX). The shares listed are the average expenditures on a particular threshold component, divided by the dollar value of the SPM threshold for a housing tenure group. The numerator expenditures for shares of food, clothing, and "other" do not change across housing tenure groups, but, as previously noted, the shelter plus utilities component has been estimated separately for each housing tenure group. In this table, the shares for shelter and utilities are presented separately.

Research papers

Conference presentations