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How We Measure Poverty and Income
Posted By jennifer On September 6, 2012 @ 10:08 pm In Income,Poverty | 2 Comments
Written by: David Johnson
Income, poverty and health insurance estimates for 2011 from the Current Population Survey (CPS) will be released Wednesday, Sept. 12, 2012. One-year estimates from the 2011 American Community Survey (ACS) will be released on Thursday, Sept. 20, 2012.
In all likelihood, the national estimates from these two sources will not be identical. Why not? Which is correct? Well, it’s complicated.
The Current Population Survey serves as the nation’s primary source of statistics on labor force characteristics. A supplement to the survey provides the official annual statistics on the nation’s income and poverty levels as well as statistics on age, sex, race, marital status, educational attainment, employee benefits, work schedules, school enrollment, health insurance, noncash benefits and migration.
The American Community Survey, on the other hand, is the only source of small-area estimates available on a wide range of important social and economic characteristics for all communities in the country. In addition to income, poverty and health insurance, these topics include education, language ability, the foreign-born, marital status, migration, homeownership, the cost and value of our homes and many more.
Estimates from these two surveys differ for a number of reasons. First, income questions on the CPS are much more detailed than the summary questions asked on the ACS.
Second, the reference periods for the two surveys are very different. The CPS asks respondents to report on their income in the previous calendar year. The ACS asks about income in the prior 12 months. Since the ACS is a continuous survey administered throughout the year, some respondents to the 2011 ACS (those who fill out the survey in January) are reporting income received between January 2010 and December 2010 while other respondents (those who fill out the survey in December) are reporting income received between December 2010 and November 2011.
Third, for the CPS, trained interviewers sit down with respondents to complete the questionnaire while the ACS is primarily a self-reporting mail-back survey. (Trained interviewers follow-up with households who do not respond to the ACS by mail.)
These differences often result in different national estimates for such key indicators as poverty, median income and inequality. Despite these differences in the “levels” of these indicators, the trends over time tend to be very similar across the two surveys. The following graph shows poverty rates from the ACS compared with poverty rates from the CPS for previous years. The red line adjusts for the differences in reference periods.
Many people contact us each year asking how to know which estimate to use for a particular purpose. For national estimates, we recommend the CPS because it provides a consistent historical time series at the national level and can also be used to look at limited state-level trends. However, because of the larger sample size and smaller sampling errors we recommend using the ACS for subnational geographies.
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