Written by: Trudi Renwick and Liana Fox, Social, Economic and Housing Statistics Division
Since the publication of the first official U.S. poverty statistics in 1964, there has been a continuing debate about the best way to measure income and poverty in the United States.
In 2010, an interagency technical working group asked the U.S. Census Bureau and the U.S. Bureau of Labor Statistics to develop a new measure that would improve our understanding of the economic well-being of American families and enhance our ability to measure the effect of federal policies on those living in poverty. The technical design of the supplemental poverty measure draws on the recommendations of a 1995 National Academy of Sciences report and the extensive research on poverty measurement conducted over the past 20 years. See the history of poverty measures in the United States here.
On September 13, 2016, the Census Bureau will release the sixth report on the supplemental poverty measure, containing estimates for the 2015 calendar year. The report presents estimates for the official and supplemental poverty measures and discusses differences between the two measures. The major differences are listed in the table below and in this infographic.
The official poverty measure compares an individual’s or family’s pretax cash income to a set of thresholds that vary by the size of the family and the ages of the family members. These official poverty calculations do not take into account the value of in-kind benefits, such as those provided by nutrition assistance or housing and energy programs. Nor do they take into account regional differences in living costs or expenses, such as housing.
However, the supplemental poverty measure takes into account family resources and expenses not included in the official measure as well as geographic variation. First, it adds the value of in-kind benefits that are available to buy basic goods to cash income. In-kind benefits include nutritional assistance, subsidized housing and home energy assistance. Then it subtracts necessary expenses for critical goods and services not included in the thresholds from resources. Necessary expenses that must be subtracted include income taxes, Social Security payroll taxes, childcare and other work-related expenses, child support payments to another household, and contributions toward the cost of medical care and health insurance premiums.
Thresholds used in the supplemental poverty measure are produced by the Bureau of Labor Statistics using Consumer Expenditure Survey data that show how much people spend on basic necessities (food, clothing, shelter and utilities) and are adjusted for geographic differences in the cost of housing. The supplemental poverty measure thresholds are not intended to assess eligibility for government assistance.
Next week’s report will compare 2015 supplemental poverty estimates with 2015 official poverty estimates for numerous demographic groups. It will also provide state-level supplemental poverty statistics using three years of Current Population Survey Annual Social and Economic Supplement data and compare 2014 supplemental poverty estimates with 2015 estimates. In addition, the report will examine the effect on supplemental poverty rates of excluding specific resource or expenditure elements, such as noncash benefits, tax credits and medical expenses.