the rationale for the current poverty threshold · the rationale for the current poverty threshold...
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The Rationale for the Current Poverty Threshold
Thesia I. GarnerBureau of Labor Statistics, U.S. Department of Labor
Measuring Poverty in the 21st Century ConferenceStanford Center on Poverty & Inequality
March 11, 2016
Disclaimer: Any views expressed are mine and not those of the BLS.
Outline Interagency Technical Working Group (ITWG) for Supplemental
Poverty Measure (SPM) Thresholds
Components and justification
Examined For Whom Housing Updating In-kind benefits Point in the distribution (address in health care session)
Remaining issues
2
Where we are … Where to next?
Current SPM thresholds based on spending
Expand to include in-kind
Expand to include health care as need (later session)
Value of housing need for owners: spending vs. consumption
Consistent with including in-kind for FSU (recommended by NAS as option)
Estimation sample
Equivalence scales
Updating
3
ITWG: Establishing a Threshold
Following the recommendations of the NAS panel, based on expenditures for set of commodities all must purchase: food, shelter, clothing and utilities (FSCU)
Among population not poor, but below the median
A key criterion: thresholds and resources be conceptually consistent with each other
4
ITWG: Components and Justification (1)
Expansion of “family” unit or SPM unit All related individuals who live at same address, any co-resident unrelated
children who cared by the family (e.g., foster children) and any co-habitors and their children
Justification: Composition of families in U.S. continues to change
Estimation sample (as opposed to reference unit) includes all SPM units with exactly 2 children Justification: Growing number of children live in units with different
numbers of adults Justification: Units with 2 children: largest percentage of units with children
5
ITWG: Components and Justification (2)
Adjust thresholds for housing status, distinguishing renters, owners with mortgages, and owners without mortgages Justification: Significant number of low-income families own homes without
a mortgages and therefore have quite low shelter expense requirements; not taking into account could overstate their poverty status
Include reduction in mortgage principal as expenditure Justification: Must be paid to keep one’s housing
Use most recent 5 years of data on equivalized expenditures for the reference unit sample. Justification: Larger sample expected to increase stability of thresholds and
ensure they move more slowly than NAS from year-to-year (updating to reflect real growth in consumption)
6
ITWG: Components and Justification (3)
Multiply FCSU among reference sample by 1.2 (NAS refers to this as “plus a little bit more” (personal care, reading, etc.) Justification: NAS Panel tested different bundles and multiplier
From distribution of equivalized FCSU expenditures within reference sample, select dollar amount at 33rd percentile of the distribution. Justification: Assumption 33rd percentile equivalent to 78%-83% of median
Include in calculation of FCSU value of any in-kind benefits that counted on resource side for FCSU. Justification: Necessary for consistency with resources
Adjust for geographic price differences across area Justification: Costs for housing (shelter+utilities) differ across area
7
ITWG: BLS and Census
Basic thresholds produced at Bureau of Labor Statistics Justification: BLS experts in expenditures and behavior of consumer
units BLS contributed to research on and production of NAS thresholds –
expect to continue to serve in role
Adjustments done at Census Bureau Economic unit size (equivalence scale) Differences in cost of living across geographic areas Justification: Census Bureau expert on poverty resources and
ACS for geographic adjustment
8
Based on Whom?
9
SPM-5 years
NAS-3 years
Official-1963
NAS- families with 2 adults and 2 children
SPM-CUs with 2 children
Official: families with 3 or more people
Standards of living
Estimationsample
Represented bySPM- 33rd
percentile FCSU
NAS-78%-83% of median FCSU
Official: All spending needs
For Whom? Pooled Data for 2010
10
17,609
12,015
10,338
6,925
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
20,000
(SPM Base) (NAS Base)
5 Year Sample 5 Year Sample 3 Year Sample 3 Year Sample
+2C 2A+2C +2C 2A+2C
Nu
mbe
r of
Con
sum
er U
nit
s
Sample Specifications
Source: Garner (Brookings, 2012)
Shelter Needs by CE Lower Before-Tax Money Income: 2010
11
41
9 9 1217
25
19 23
32
34
34
72 68
5749
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
all Less than$5,000
$5,000 to$9,999
$10,000 to$14,999
$15,000 to19,999
Owner with mortgage Owner without mortgage Renter
SourceSource: https://www.bls.gov/cex/2010/Standard/income.pdf
12
Share of CUs by Housing Tenure for All and SPM Unit 2A+2C: 2010
41.0%
25.0%
34.0%
48.6%
9.3%
42.1%
0%
10%
20%
30%
40%
50%
60%
Own with mortgage Own without mortgage Rent
CUs in U.S. 2010 CUs in 30-36th FCSU Percentile for 2010 Threshold
Source: Garner and Gudrais, Brookings presentation, November 7, 2011 for pooled 5 year estimation sample (estmationsample all Cus with 2 children converted to 2 adults with 2 children, and https://www.bls.gov/cex/2010/Standard/income.pdf
5 Years of Data and Updating SPM Thresholds: Moving from 2014 to 2015
13
2010Q2-2011Q1
2011Q2-2012Q1
2012Q2-2013Q1
2013Q2-2014Q1
2014Q2-2015Q1
2015Q2-20161Q1
Pooled CE data converted to 2014 threshold year $$
Pooled CE data converted to 2015 threshold year $$
Updating SPM Thresholds for 2A+2C
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$16,000
$18,000
$20,000
$22,000
$24,000
$26,000
$28,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Updated each Year
$16,000
$18,000
$20,000
$22,000
$24,000
$26,000
$28,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2005 Base
$16,000
$18,000
$20,000
$22,000
$24,000
$26,000
$28,000
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2009 Base
Owners with mortgagesRenters
Owners without Mortgages
Using 3 years of data….less stable
Updated with All Items CPI_U
Subsidies in Thresholds
15
ITWG stated …“so far as possible with available data, the calculation of FCSU should include any in-kind benefits that are counted on the resource side for food, shelter, clothing and utilities. This is necessary for consistency of the threshold and resource definitions.” (March 2010)
FCSU = sum (food, clothing, shelter, utilities) at micro-level
SPM Threshold = FCSU + little bit more
Supplemental Nutrition Assistance Program (SNAP)Housing SubsidiesSupplemental Nutrition Program for Women, Infants, and Children (WIC)
National School Lunch Program (NSLP)
Low-Income Home Energy Assistance (LIHEAP)
Underlying Assumption
Resources to meet “needs”
Thresholds represent “needs”
16
“Needs” defined as Food Clothing Shelter Utilities + “a little bit more” for
personal care, non-work related transportation, etc.
For resources: cash + value of in-kind benefits for what in thresholds
For thresholds: spending + value of in-kind benefits
Therefore: Thresholds are not arbitrary but have specific meaning
Problem: Thresholds and Resources Inconsistently Defined
Thresholds Resources: Official
17
Expenditures for FCSU
(including SNAP)
With All In-Kind Benefits
Cash income
Problem: Thresholds and Resources Consistently Defined
Thresholds Resources
18
Expenditures for FCSU
(including SNAP)
With SNAP In-Kind Benefits
With All In-Kind Benefits
Cash income
Other Food Subsidies
Problem: Thresholds and Resources Inconsistently Defined
Thresholds Resources
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Expenditures for FCSU
(including SNAP)
With SNAP In-Kind Benefits
Housing &Energy Subsidies
Cash income
Other Food Subsidies
Housing & Energy Subsidies
Problem: Thresholds and Resources Consistently Defined
Thresholds Resources
20
Other Food Subsidies
Expenditures for FCSU (includng
SNAP)
With SNAP In-Kind Benefits
Cash income
Housing & Energy Subsidies
Challenge: Data in the U.S. Consumer Expenditure Interview Survey
Limited data on Rental Assistance Programs Indicator variables for rented living quarters
– Is this house a public housing project, that is, it is owned by a local housing authority or other local public agency? (CE variable: pub_hous)
– Are your housing costs lower because the Federal, State, or local government is paying part of the cost? (CE variable: govtcost)
Total rent payments for each of last 3 months (do not include direct payments by local, state, or federal agencies)
Expenditures for utilities
No data on programs but data on potential participants National School Lunch Program (NSLP) Supplemental Nutrition Program for Women, Infants, and Children
(WIC) Low income Home Energy Assistance (LIHEAP)
21
SPM Thresholds for 2 Adults with 2 Children with and without Imputed In-Kind Benefits (based on eligibility and
reported housing assistance participation): 2012
22Source: Garner, Short, and Gudrais, JSM Proceedings 2015
$25,784
$25,105
Without imputed in-kind
$21,400
$26,812
$26,276
With imputed in-kind
$21,892
$20,000
$21,000
$22,000
$23,000
$24,000
$25,000
$26,000
$27,000
OWNERS WITH MORTGAGES
RENTERS OWNERS WITHOUT MORTGAGES
Note: based “33rd” percentile
Poverty Rates by Age Group Using SPM Thresholds with and without Imputed
In-Kind Benefits: 2012
23
16.0%
18.0%
15.5%
Without imputed in-kind
14.8%
17.0%
19.3%
16.4%
With imputed in-kind
15.8%
ALL PEOPLE IN U.S. UNDER 18 YEARS 18 TO 64 YEARS OVER 64 YEARS
Source: Garner, Short, and Gudrais, JSM Proceedings 2015. Poverty rates based on SPM Units and Resources using Current Population Survey, 2013 Annual Social and Economic Supplement
Where we are … Where to next?
Current SPM thresholds based on spending
Expand to include in-kind
Expand to include health care as need (later session)
Value of housing need for owners: spending vs. consumption
Will be more consistent with including in-kind for FCSU (recommended by
NAS as option)
Estimation sample
Equivalence scales
Updating
24
Contact InformationThesia I. Garner
Senior Research Economist
Division of Price and Index Number ResearchOffice of Prices and Living Conditions
202-691-6576 [email protected]
http://stats.bls.gov/pir/spmhome.htm
SPM Thresholds 2A+2C: FCSU with Housing Adjustment
SPM thresholds, with multiplier, by housing tenure h
Housing tenure h Owners with mortgages Renters Owners without mortgages
Other adjustments Equivalence scales applied for other SPM units Geographic applied: share of thresholds only
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"33 ." "33 ." "33 ." housing (1.2 * ( ) ( ))per FCSU per FCSU per for hFCSU S U S U= + + +−
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