A Rich New Poverty Measure

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The New York Times
By: Nancy Folbre
May 10, 2010

The Census Bureau recently announced plans to develop a new Supplemental Poverty Measure (S.P.M.), also referred to as a Supplemental Income Poverty Measure (SIPM).
If you want to remember the acronym, imagine a phone app that allows you to sip virtual coffee that increases your alertness to technical issues of poverty measurement.

Poverty researchers like me will not require this imaginary app, as we are already overexcited.

Most of us dislike the official poverty lines used to determine who, exactly, qualifies as poor. Most of us can recite at least five reasons why these measures (based on a mid-1960s assessment of the costs of a minimal food budget) are narrow, out of date and downright misleading.

Most of us can also expound on how current methods of measuring poverty make it difficult, if not impossible, to accurately assess the impact of anti-poverty policies.

Food assistance administered through the Supplemental Nutritional Assistance Program (SNAP) has been a mainstay of our safety net during the current recession. But since food stamps are not income, they don't show up in our income-based poverty measures.

The Earned Income Tax Credit (E.I.T.C.) is our largest cash-assistance program other than unemployment insurance in this recession. Our poverty measures are based on pre-tax, rather than after-tax, income. So, by definition, the E.I.T.C. does not reduce poverty.

It's hard to find anyone more passionate about these inconsistencies than Professor Timothy Smeeding, current director of the Institute for Research on Poverty at the University of Wisconsin. He wrote his doctoral dissertation in 1975 on the importance of developing measures of post-benefit, post-tax income to better inform public policy.

When I learned that Professor Smeeding was headed to a meeting at the Brookings Institution that he helped organize to discuss the new SIPM, I asked for his take on it.

He is thrilled that the new measure will take near-cash benefits and taxes into account to supplement conventional poverty measures.

He emphasizes its other innovations: poverty thresholds will be linked to accurate measures of expenditures on food, shelter, clothing and utilities, rather than just food.

It will subtract some work-related costs, such as the child-care expenditures of employed parents, to better capture disposable income.

Professor Smeeding concedes that the measure has some kinks in it that will need to be worked out, including better estimates of out-of-pocket health care expenses and differences in regional costs of living.

I'm worried about other factors that affect family living standards, like the costs and benefits of unpaid care of dependents.

Curious about other criticisms, I reached out to Shawn Fremstad of the Center for Economic and Policy Research, also on his way to the discussion at the Brookings Institution.

In his view, the SIPM sets its thresholds too low, excluding many struggling families from the category of poverty. Mr. Fremstad also warns that adopting the new measure by itself could sideline efforts to develop more complete measures of basic economic security that would include consideration of family wealth as well as income. (I might explore some of these issues in future posts.)

I'm not yet sure where I stand. As Professor Smeeding reminded me, the perfect can be the enemy of the good.  This new measure, whatever its limitations, represents a rich addition to our statistical infrastructure.

But I also agree with Mr. Fremstad that we shouldn't pass up the opportunity to insist on even better measures.

This strategic dilemma feels pretty familiar. If only I could find a phone app that could resolve it.

Nancy Folbre is an economics professor at the University of Massachusetts Amherst.

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This page contains a single entry by CFED published on May 10, 2010 4:27 PM.

One Man's Approach to Fighting Poverty was the previous entry in this blog.

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