Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure

Few economic indicators are more closely watched or more important for ew economic indicators are more closely watched or more important for policy than the offi cial poverty rate. It is used to gauge the extent of deprivapolicy than the offi cial poverty rate. It is used to gauge the extent of deprivation in the United States and to determine how economic well-being has tion in the United States and to determine how economic well-being has changed over time. The poverty rate is often cited by policymakers, researchers, changed over time. The poverty rate is often cited by policymakers, researchers, and advocates who are evaluating social programs that account for more than half and advocates who are evaluating social programs that account for more than half a trillion dollars in government spending. Eligibility for some means-tested transfer a trillion dollars in government spending. Eligibility for some means-tested transfer programs is determined based on the poverty thresholds, and local poverty rates programs is determined based on the poverty thresholds, and local poverty rates affect the allocation of billions of dollars in federal funds. affect the allocation of billions of dollars in federal funds. The methods for calculating the current poverty measure, largely unchanged The methods for calculating the current poverty measure, largely unchanged since the 1960s, have been criticized by many researchers. In response, the Census since the 1960s, have been criticized by many researchers. In response, the Census Bureau has led a two-decade process of research and discussion of poverty measureBureau has led a two-decade process of research and discussion of poverty measurement with an eye to revising the offi cial measure. The process has involved hundreds ment with an eye to revising the offi cial measure. The process has involved hundreds of papers, dozens of offi cial Census Bureau publications (U.S. Census 2010), of papers, dozens of offi cial Census Bureau publications (U.S. Census 2010), and two National Academy of Sciences reports (Citro and Michael 1995; Iceland and two National Academy of Sciences reports (Citro and Michael 1995; Iceland 2005). We will not summarize this vast literature here. Rather, we will examine 2005). We will not summarize this vast literature here. Rather, we will examine the properties of three measures of poverty: the offi cial U.S. poverty rate; the new the properties of three measures of poverty: the offi cial U.S. poverty rate; the new Supplemental Poverty Measure fi rst released by the U.S. Census Bureau in fall 2011; Supplemental Poverty Measure fi rst released by the U.S. Census Bureau in fall 2011; and a consumption-based measure of poverty. We will focus on two fundamental and a consumption-based measure of poverty. We will focus on two fundamental goals of these measures: to identify the most disadvantaged and to assess changes goals of these measures: to identify the most disadvantaged and to assess changes