What Is Poverty? - Controversies Over U.s. Poverty Measurements

In the paper "Reconsidering the Federal Poverty Measure" (University of Maryland School of Public Policy, Welfare Reform Academy, June 14, 2004), Douglas J. Besharov and Peter Germanis discuss problems with the use of thresholds and guidelines, noting two commonly cited failures of the measurements:

1. The method of measuring poverty in the United States does not take into account all forms of income—specifically, the federal poverty threshold does not count noncash forms of aid, such as food stamps, Medicaid, school lunch programs, housing assistance, and the State Children's Health Insurance Program. Nor does it recognize the Earned Income Tax Credit, the monetary value of assets such as houses, or income brought into a household by non-family members, such as a mother's boyfriend.
2. The current poverty threshold calculation that assumes spending on food accounts for one-third of a household's budget most likely fails to reflect more contemporary household spending patterns. In the early 2000s food spending was estimated to be one-seventh of a household's income. Additionally, the calculation has not been accurately updated to reflect the costs of other current needs such as child care and higher taxes.

Besharov and Germanis write that many commentators believe a more accurate picture of poverty could be gained by measuring household consumption of certain goods and services rather than household income, while others argue that neither income nor consumption measurements can provide insight into the physical and emotional aspects of living in poverty and that, instead, "well-being" indicators—similar to the composite indicators discussed above—should be used.

In 2002 the Census Bureau began including "alternative estimates" in its publications on poverty, largely in response to the 1995 National Academy of Sciences/Committee on National Statistics' (NAS/CNSTAT) Panel on Poverty and Family Assistance, which concluded that the U.S. method of measuring poverty "no longer provides an accurate picture of the differences in the extent of economic poverty among population groups or geographic areas of the country, nor an accurate picture of trends over time" (Measuring Poverty: A New Approach, National Research Council, 1995). The Census Bureau's 2003 report Alternative Poverty Estimates in the United States: 2003 examined the new measures of income and, more specifically, the recommendations of the NAS/CNSTAT panel report, in comparison with the old measures. In June 2004 the National Academy of Sciences hosted a Workshop on Experimental Poverty Measures, which examined issues including the role of childcare and medical expenses, home ownership, and demographic and geographic differences in assessing poverty. As of 2005, U.S. government agencies still relied heavily on the traditional poverty measures, although some, such as the Census Bureau, included alternative measures in their research to gain a broader view of poverty in the United States.