Using the American Community Survey to Create a National Academy of Sciences-Style Poverty Measure

Work by the New York City Center for Economic Opportunity

CEO’s Mandate, Direction, & Key Challenge

• Create a more useful tool for policymaking

• Adopt NAS recommendations

– Capture policy effects

– Create realistic poverty thresholds

• Employ American Community Survey– Large annual sample for NYC

– But ACS does not include much of what is needed to measure family resources as recommended by NAS

The Official Poverty MeasureAn Income Adequacy Approach

Threshold:

– Established in the mid-1960s at three times the cost of the USDA’s “Economy Food Plan”

– Adjusted annually by the change in the Consumer Price Index

– Uniform across the U.S.

Resources:

– Total family pre-tax cash income

What’s wrong with the current measure? Definition of resources is too narrow

Pre-tax cash does not capture much of what public policy does to support low-income families.

– EITC and other refundable tax credits– Food Stamps and other nutritional programs– Housing subsidies such as public housing and

section 8 housing vouchers

What’s wrong with the current measure? Food is no longer one-third of family expenditures

Utilities6.2%

Clothing4.4%

Other21.3%

Housing31.7%Transportation

18.5%

Healthcare4.6%

Food13.2%

Source: US Bureau of Labor Statistics, Consumer Expenditure Survey.

What’s wrong with the current measure? Threshold has lost value relative to median family income

137%

90

100

110

120

130

140

1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004

19

64

=1

00

Pe

rce

nt

Median Family Income Poverty Threshold

Source: US Bureau of the Census

What’s wrong with the current measure? Threshold does not reflect the high cost of living in NYC

Source: US Department of Housing and Urban Development

Fair Market Rents, Two Bedroom Apartment

$498$805 $871 $932 $944

$1,318$1,529 $1,592

$867

$0$400$800

$1,200$1,600$2,000

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Thresholds based on a percentage (80.5) of median annual reference family expenditures for these necessities:

– Food– Clothing– Shelter– Utilities

• Plus a little more for miscellaneous expenses (x 1.2)• Adjusted for inter-area differences in housing costs (via HUD FMRs)

Resources based on annual income available to family to obtain items in threshold including:

– Cash Income, after-taxes– Value of in-kind subsidies for

food– Adjustment for Housing

Status– Deduction for work-related

expenses (child care and transportation)

– Deduction for medical out-of-

pocket expenses (MOOP)

CEO Application of NAS Method

Creation of the CEO Poverty Threshold Reference Family (Two adults, Two children), 2006

Source: US Bureau of the Census and US Dept. of Housing and Urban Development

NAS Threshold for entire U.S. (based on food, clothing, shelter & utilities)

$21,818

Shelter & Utility Share, 44% of $21,818 = $9,600

Non-Shelter & Utility Share, 56% of $21,818 = $12,218

Shelter & Utility Share, Adjusted for Ratio of NYC/US Fair Market Rent (1.45) =

$13,920

CEO Threshold: Adjusted Shelter &

Utility Share + Non-Shelter & Utility Share = $26,138

2006 Poverty Rates Using CEO Threshold With Alternative Income Concepts

Source: NYC CEO.

Income Concept: Rate:

1. Pre-tax cash 23.9

2. After-tax 23.2

3. After-tax, plus Nutritional Assistance 21.8

4. After-tax, plus Nutritional, plus Housing

Status Adjustment18.6

5. After-tax, plus Nutritional, plus Housing,

minus Work-Related Expenses20.4

6. After-tax, plus Nutritional, plus Housing,

minus Work-Related Expenses, minus MOOP23.0

Distribution of Population,By Intervals of the Poverty Threshold:

Source: NYC CEO

Percent of Threshold

Poverty Measure

CEO OFFICIAL

Percent of population

Cumulative percent

Percent of population

Cumulative percent

Under 50 6.5 6.5 7.4 7.4

50-74 6.9 13.4 4.7 12.1

75-99 9.6 23.0 5.8 18.0

100-124 11.1 34.1 5.0 23.0

125-149 10.2 44.3 4.8 27.8

Comparing Poverty Rates, By Age Group

26.6

20.0

32.027.2

14.518.1

0

10

20

30

40

Under 18 18 thru 64 65 & up

Age Group

Perc

ent

CEO OFFICIAL

Source: NYC CEO

Comparing Poverty Rates, By Family Type

15.8

36.5

16.113.9

37.3

7.9

0

10

20

30

40

Two-Parent Single-Parent No Children

Per

cent

CEO Official

Source: NYC CEO

Comparing Poverty Rates Using Different Resource Measures, By Age

33.9

19.5

27.526.6

20.0

32.0

0

10

20

30

40

Under 18 18 to 64 65 and over

Per

cent

Official resource measure NAS resource measure

Source: NYC CEO

Comparing Poverty Rates Using Different Resource Measures, By Family Type

20.0

45.7

13.715.8

36.5

16.1

0

10

20

30

40

50

Two-Parent Single-Parent No Children

Per

cent

Official resource measure NAS resource measure

Source: NYC CEO

Comparing Poverty Rates, By Nativity/Citizenship

21.8 21.6

28.6

18.6

13.3

20.7

0

10

20

30

40

Citizen by birth Foreign born, naturalizedcitizen

Not a citizen

Perc

ent

CEO OFFICIAL

Source: NYC CEO

Comparing Poverty Rates, By Race/Ethnicity

16.3

23.925.9

29.7

10.0

20.718.0

25.8

0

10

20

30

40

Non-HispanicWhite

Non-HispanicBlack

Non-HispanicAsian

Hispanic, any race

Perc

ent

CEO OFFICIAL

Source: NYC CEO

CEO’s Current Work

• Track change over time

• Assist similar efforts by other cities and states

• Bring poverty measure into City policy planning

• Advocate for change in federal measure

For More Information

• CEO Poverty Measurement Report: http://www.nyc.gov/ceo/