Last year the U.S. Census Bureau, with support from the Bureau of Labor Statistics (BLS), released the first report describing research on the Supplemental Poverty Measure (SPM).The SPM extends the information provided by the official poverty measure by including many of the government programs designed to assist low-income families and individuals that are not included in the current official poverty measure. The current official poverty measure was developed in the early 1960s, and only a few minor changes have been implemented since it was first adopted in 1969 (Orshansky, 1963, 1965a, 1965b; Fisher, 1992). The official measure consists of a set of thresholds for families of different sizes and compositions that are compared to before-tax cash income to determine a family’s poverty status. At the time they were developed, the official poverty thresholds represented the cost of a minimum diet multiplied by three (to allow for expenditures on other goods and services).
Concerns about the adequacy of the official measure have increased during the past decades (Ruggles, 1990), culminating in a Congressional appropriation in 1990 for an independent scientific study of the concepts, measurement methods, and information needed for a poverty measure. In response, the National Academy of Sciences (NAS) established the Panel on Poverty and Family Assistance, which released its report, titled Measuring Poverty: A New Approach, in the spring of 1995 (Citro and Michael, 1995). Based on its assessment of the weaknesses of the current poverty measure, this NAS panel of experts recommended having a measure that better reflects contemporary social and economic realities and government policy. In their report, the NAS panel identified several major weaknesses of the current poverty measure.
This report presents a poverty measure that is based largely on the NAS Panel’s recommendations, with deviations reflecting more recent research and suggestions from the ITWG. Particular emphasis is on internal consistency between the thresholds and resources. The NAS Panel noted: “It is important that family resources are defined consistently with the threshold concept in any poverty measure.” The SPM, as defined by the ITWG, is an internally consistent poverty measure that is based on spending “outflows” and money “inflows.” Spending outflows, or outlays are those for basic needs only: food, clothing, shelter, utilities, and other basic necessary goods and services. Resources include money income from all sources plus the value of near-money benefits that help the family meet spending needs, less necessary expenses, like work-related expenses and taxes that must be paid. A family is designated as poor if its annual money inflow, net of necessary expenses, falls below the threshold level of money outflow. (author abstract)