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Experimental Poverty Measures

Since 1995, the Bureau of Labor Statistics (BLS) has been conducting 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.

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 papers and conference presentations are not produced using standard BLS production procedures.

Background

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 minimum 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 most recent official poverty statistics will be released by the U.S. Census Bureau on September 16, 2014.

The 1995 National Academy of Sciences (NAS) report Measuring Poverty: A New Approach, (Citro and Michael 1995) prompted a first set of experimental expenditure-based poverty thresholds. Later, the Interagency Technical Working Group (ITWG) provided the framework for a second set called the Supplemental Poverty Measure (SPM). The ITWG’s recommendations are outlined in the document "Observations from the Interagency Technical Working Group on Developing a Supplemental Poverty Measure" (PDF). Both the NAS and ITWG documents refer to the U.S. Consumer Expenditure Survey (CE) as the basis for these new expenditure-based poverty thresholds. The documents also note that BLS is responsible for conducting research on poverty thresholds, and providing expenditure-based thresholds to the U.S. Census Bureau for use in its poverty measurement research and in the production of 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.

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.

Both the SPM and NAS poverty measure thresholds are experimental and are made available to the public for use in research. 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)

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.

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
Renters

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.

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 , 2013-2012 = (SPM Renters , 2013 - SPM Renters , 2012 ) / Standard error Renters , 2013-2012

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 , 2013 =

(SPM Renters , 2013 - SPM Owner without mortgages , 2013 ) / Standard error Renters compared to Owners without mortgages , 2013

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. These 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.

Research papers

Conference presentations