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Measuring Poverty: A New Approach
AHS, and multiplied the result by two. The basis for their multiplier was the HUD limit of 30 percent on the amount of income families who receive rent subsidies are expected to contribute to the rent plus an estimate from CEX data that food accounts for about 20 percent of total expenditures. (This method follows Orshansky's approach of using the spending of average families to determine the food component of the multiplier but then determines the housing component of the multiplier on the basis of program standards for lower income families.) They computed another set of thresholds in the same manner but using the 35th percentile value of the rental distribution (see Table 2-2). Their thresholds are, respectively, 42 and 53 percent higher than the official threshold for 1989.
Several points emerge from the work by Ruggles (1990) and Weinberg and Lamas (1993). First, the level of the poverty threshold is obviously affected by the choice of the standard.11 In the case of the food component, several analysts have argued that the Thrifty Food Plan is unrealistically restrictive and that the Low-Cost Food Plan should be used instead.12 Second, over time, if the developers of poverty thresholds rely on program standards that are set by legislation, the standards may change for many reasons other than an evaluation of need (such as the desire to cut program costs). This problem is evident in Ruggles' HUD-based thresholds, for which changes were legislated in the early 1980s for both the housing standard (from the 50th to the 45th percentile) and the basis for the multiplier (from a 25% to a 30% share of income).13 Had these changes not been made, it is likely that the HUD-based thresholds in Table 2-2 would have increased as a percent of the official threshold in the late 1980s rather than remaining flat.
Renwick and Bergmann (1993) took a categorical approach to defining a poverty budget, which they refer to as a basic needs budget (BNB). Their approach is based on adequacy standards, not only for food, but also for housing and household operations, transportation, health care, clothing, child
Why there is not more of a difference between the Weinberg and Lamas (1993) thresholds and the Ruggles (1990) thresholds, which are based on different percentiles of the rent distribution (see Table 2-2), is not clear. Weinberg and Lamas calculated the 25th and 35th percentiles of the rent distribution of all nonsubsidized rental units, while the HUD fair market rents used by Ruggles represent the 45th or 50th percentile of two-bedroom units occupied by recent movers and having other specified characteristics. In addition, the data sources were somewhat different.
Indeed, Orshansky herself developed two sets of poverty thresholds, one based on the Economy Food Plan and the other on the Low-Cost Food Plan.
Indeed, CEX data for 1991 indicate that the housing share of total after-tax expenditures was about 24 percent (for all consumer units and four-person units), not 30 percent (Bureau of the Census, 1993d: Table 708).