Comparing Poverty Rates using Alternative Measures

The assignment content discusses the challenges of measuring poverty and proposes alternative measures to improve the accuracy and effectiveness of poverty measurement. The current poverty measures are criticized for being outdated and not capturing the true extent of poverty. Researchers have proposed various alternative measures, such as using before-tax income or adjusting thresholds based on the consumer price index. The Measuring American Poverty (MAP) Act aims to establish a new poverty measure that recognizes a decent living standard is required to exceed the existing poverty line. The assignment references various studies and publications, highlighting the need for continued learning and experience to develop better poverty measures.

Literature Review
Around one in five children living in the U.S. are living in poverty and this percentage is
comparatively higher for selected population sub groups. As per the reports of UNICEF
Innocenti Research Centre (2012), among the world’s 35 richest countries, the United States has
been ranked as the second highest regarding the poverty and is surpasses only in Romania. The
challenges related to poverty have increased by the lingering effects of the Great Recession of
2007 leading to challenges in numeracy, literacy, and educational attainment.
The poverty status is determined by the U.S. Census Bureau by comparing the pre-tax cash
income with the threshold being customized at thrice of the total cost of the 1963’s minimum
food diet. This is updated annually using the Consumer Price Index for the inflation and is
accordingly adjusted according to the composition, family size, and age of householder. When
the people living together are related to each other by marriage, birth and adoption, they are
termed as the family by the official poverty measure, a statistical tool for gauging the progress
against the poverty. While setting the poverty line, the poverty rate must be based on the family
resources’ full accounting. According to the official measure, a family is considered to be poor
when the income coming from all the family members fall below the poverty line.
However, the poverty measurements in the United States have been seen to be highly flawed and
with widespread consensus for over three decades of debate and discussion has not resulted in
any considerable change in the statistic. The official poverty measure of the United States has
been the same as it was developed in the 1960s. This measure has been criticized heavily as the
current indicator of the poverty will full documentation on the basis of the family cash income.
Further this poverty measure is using the absolute threshold of the poverty which is not in pace
and accordance with the current standard of living and does not even differ by geographic area.

Various transformation has been seen in the political and academic discussion on poverty and
poverty measures over the past three decades (Haveman 2000). In order to erase this problem,
and to have insights of the changed behavior and nature, it is important to understand poverty
(Patrick Moynihan, 1969). It is important to consider that the poverty line varies highly with
family size. Every year, the message has been provided to the policymakers and the public by the
official statistic regarding the poverty trends, even when it has been argued by many that a
minimally decent living standard is not same as it was in the mid-1960s. A study by H. Luke
Shaefer and Kathryn Edin where the trends of extreme poverty were examined defining the
extreme poverty as living on less than $2 per day, and it is considered as the World Bank metric
of global poverty. In their study, they found that extreme poverty on the basis of money income
is seen to increase from 1996 to 2011 from 1.7 percent to 4.4 percent. On adding refundable tax
credits and non-cash benefits, the extreme poverty is seen to rise from 1.1 to 1.6 percent in the
same span. This indicated that poverty has increased and it could have been much worse without
additional resources that are being provided by the safety net programs.

The National Academy of Sciences (NAS) and its 1995 panel have studied the poverty measure
and criticized it thoroughly, mentioning the following points:
 While counting the family income, the poverty measurement excludes the in-kind
benefits like housing assistance and food stamps.
 While calculating the net income of the family on the basis of their working members, the
cost of earning incomes like child care costs has been ignored.
 While determining the consumption needs of the family, the regional variation in the cost
of living is disregarded, mainly in the cost of housing.

 While measuring the family income, the direct tax payments, income taxes and payroll
are ignored.
 While determining the consumption needs of the family, medical care needs and while
determination of the family income, the health insurance coverage are ignored.
 It is not updated as per the change in the consumption patterns of the households in the
U.S.
The depth of poverty provided by the Census Bureau regarding the income-to-poverty-ratio
measuring the income of the individual or the family to their poverty threshold. This will help in
measuring the poverty depth for people below the poverty threshold and also for those who are
above this threshold. Either CPS (Current Population Survey Annual Social and Economic
Supplement) or ACS (American Community Survey) can be used for measuring the poverty
depth.
Two reports are released by Census Bureau annually for describing the statistics related to
poverty United States. The official poverty measures of the nation are calculated in the first
report on the basis of the cash resources whereas the second one known as supplemental poverty
measure (SPM) which takes into account the cash resources along with the governmental
program’s non-cash benefits which are aimed particularly for the low-income families. This
current social poverty measure was developed by the then President Lyndon Johnson, in the
early 1960s on declaring the war against poverty. In order to help the low-income people, no
changes have been considered in this measure. However, SPM does not count all the resources
that have been channeled towards ameliorating the poverty, such as EITC and SNAP. If the SPM
statistics are to be believed, the poverty has increased from 2009 to 2012 by a margin of 0.9.

Recently, a study was done by researchers at Columbia University who estimated the values
associated with SPM from 1967 to 2012 annually. The importance of counting the benefits being
received by the poor. It was estimated the poverty rate in the absence of safety net programs and
cash safety being counted in the official measure.
Since 2010, the Census Bureau has been releasing the SPM report which extends from the social
poverty measure as it accounts for the necessary expenses along with government benefits.
Other than these two the only other alternative for measuring poverty only on the basis of income
level is the multidimensional approach. However, the factors like culture, gender, race,
geography, environmental problems are also identified, but these have not been factored into the
alternative policy or measure proposal.
It is difficult to improve the official poverty statistics of U.S. owing to the following measures:
 The odd historical accident leading to the Executive Office of the President to become the
official poverty measurement in charge.

 The longer the statistics go without any changes or improvements, it becomes harder to
incorporate changes, as all the programs are led by the Poverty Income Guidelines.
 The term poverty is considered to be a vague concept, and various arbitrary assumptions
are required for developing poverty measure.
Rebecca M. Blank (2012), discusses that the current official U.S. poverty measure is highly
outdated and is even non-responsive to various anti-poverty initiatives. The various efforts for
updating and improving the statistics are seen to have failed for various institutional, technical
and political reasons. The various methods for improving the poverty measure like assigning a
statistical agency for developing an alternative measure of income poverty. In this manner, the
authority for this measure can be improved from time to time. Control over the poverty
measurement from the Executive Office of the President in order to update and improve the
poverty measure. Various researchers have urged that one primary Revised Poverty Measure has
to be produced. Currently, research has been going on where four or five alternative Revised
Poverty Measures are selected, and the best one is evaluated. An appropriate resource measure
with a credible threshold for poverty can only be produced by providing an apt definition for
poverty. According to a study in 2015, the current poverty thresholds are listed as given below:
 $12,331 for a single individual under age 65
 $24,036 for a family of four with two children under age 18
 $14,326 a household of two people with a householder 65 years or older with no children
According to Blank (2008), public programs must be allowed to continue the definition of
poverty provided by OMB as the eligibility cutoff. The present poverty rate calculations along
with the underlying current poverty thresholds must be calculated by the Census regularly as

OMB has directed them to do so. This is because, on the reauthorization of the programs, a
decision has to be made on the advantages of switching to the new measure of the poverty. In
case the new thresholds are found to be higher or may be lower, the programs use lower or
higher (respectively) percentage of the threshold for avoiding the discontinuous changes in the
eligibility cut points. Similarly, the author suggests that on the basis of the current poverty rate
calculations, programs funds have to allocate which will also be an imperative factor on how to
make changes. According to the researchers, this method is only possible if suggestions are
provided for making the transition towards the new measures along with minimal program
disruption.
According to various studies like Ruggles (1990) and McKernan and Ratcliffe (2005), the
Survey of Income and Program Participation (SIPP) can be used for evaluating the proposed
changes in poverty measures. In the study given by McKernan and Ratcliffe (2005) the annual
poverty threshold was divided by 12 and the monthly thresholds were compared to the income of
every month. Whereas in Eller (1996) and Naifeh (1998) the thresholds on a monthly basis were
adjusted as per the required changes of the consumer price index.
U.S. Census Bureau and other studies have revealed that static poverty rates are different from
those who are under the new proposed measures (Besharov, 2006; Dalaker, 2005). Dynamic
differences suggest the static differences. These studies have suggested that alternate poverty
measured leading to lower rates of poverty result in short spell duration and fewer poverty spells.
Duncan and Rodgers (1991) have reported that lower poverty rates along with less poverty
persistence while measuring the income is seen to be measured as the after-tax money along with
food stamps as compared to the income measured before the tax money. However, it is highly

ambiguous to know the likelihood of entering as well as exiting the poverty under the alternate
poverty measures. Various researchers have the different perspective, and it has been analyzed
that using alternative poverty measures can lead to policy implications.
An Act called Measuring American Poverty or MAP Act had been evaluated in order to address
all the features dealing with criticism. MAP along with working towards eliminating the
challenges of NAS, will establish modern poverty measure which will lay a groundwork in order
to develop a Decent Living Standard Measure. This living standard measure is intended so as to
recognize that the family requires far more than so as to exceed the poverty line of the existing
era to lead a decent life. MAP is intending to create a Decent Living Standard as a critical
vehicle that will be beneficial in analyzing the importance of the higher number of families
looking for decent living standard along with reducing the problem of poverty. However, the bill
is estimated not to adopt to a relative measure, but it will become easier for calculating and
measuring and further to improve discussions on the strengths as well as the shortcoming of the
measures. (Greenberg, M. H., 2009).
The present set of measures are specified in an injunction of Office of Management and Budget
and these measures can be changed anytime by the administrators without Congressional action.
In various considerations, the administration action is the best result, and in light of that the
measures could be developed and constantly processed without checking on the elaborated rules
that are contained in parts of the MAP Act. For these purposes, the introduction of the MAP Act
is a crucial step forward in showing as to how the administration or Congress could develop the
recommendations for the National Academy of Sciences. So, the subsequent learning and
experiences are needed for the purpose of developing considerably better poverty measures and
also create groundwork for a Decent Living Standard.

References
1. Besharov, D. J., & Call, D. M. (2009). Income transfers alone won't eradicate
poverty. Policy Studies Journal, 37(4), 599-631.
2. Blank, R. M., & Greenberg, M. H. (2008). Improving the measurement of poverty.
Brookings Institution.
3. Dalaker, J. (2005). Alternative poverty estimates in the United States, 2003. US
Department of Commerce, Economics and Statistics Administration, US Census Bureau.
4. Dalaker, J., & Naifeh, M. (1998). Poverty in the United States, 1997. US Department of
Commerce, Bureau of the Census.
5. Duncan, G. J., & Rodgers, W. (1991). Has children's poverty become more
persistent?. American Sociological Review, 538-550.
6. Haveman, R. (2000). Poverty and the Distribution of Economic Well-Being since the
1960s. Economic Events, Ideas and Policies: The 1960s and After.
7. Innocenti, U. (2012). Measuring Child Poverty: New league tables of child poverty in the
world's rich countries. UNICEF-IRC. Retrieved 21 October 2016, from
https://www.unicef-irc.org/publications/660/
8. McKernan, S. M., & Ratcliffe, C. (2005). Events that trigger poverty entries and
exits. Social Science Quarterly, 86(s1), 1146-1169.
9. Moynihan, D. P. (Ed.). (1969). On understanding poverty: perspectives from the social
sciences (Vol. 1). Basic Books.
10. Ruggles, P. (1990). Drawing the line: Alternative poverty measures and their implications
for public policy.
11. Short, K., Shea, M., & Eller, T. J. (1996, August). Work-Related Expenditures in a New
Measure of Poverty. In Prepared for the 1996 Meetings of the American Statistical
Association.
12. Greenberg, M. H. (2009). It's time for a better poverty measure.Counterpoise, 13(3/4),
21.