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43–757 2008

MEASURING POVERTY IN AMERICA 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

INCOME SECURITY AND FAMILY SUPPORT 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TENTH CONGRESS 

FIRST SESSION 

AUGUST 1, 2007 

Serial No. 110–56 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

CHARLES B. RANGEL, New York, Chairman 

FORTNEY PETE STARK, California 

SANDER M. LEVIN, Michigan 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

MICHAEL R. MCNULTY, New York 

JOHN S. TANNER, Tennessee 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

EARL POMEROY, North Dakota 

STEPHANIE TUBBS JONES, Ohio 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

RAHM EMANUEL, Illinois 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

ALLYSON Y. SCHWARTZ, Pennsylvania 

ARTUR DAVIS, Alabama 

JIM MCCRERY, Louisiana 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JIM RAMSTAD, Minnesota 

SAM JOHNSON, Texas 

PHIL ENGLISH, Pennsylvania 

JERRY WELLER, Illinois 

KENNY C. HULSHOF, Missouri 

RON LEWIS, Kentucky 

KEVIN BRADY, Texas 

THOMAS M. REYNOLDS, New York 

PAUL RYAN, Wisconsin 

ERIC CANTOR, Virginia 

JOHN LINDER, Georgia 

DEVIN NUNES, California 

PAT TIBERI, Ohio 

JON PORTER, Nevada 

JANICE MAYS, Chief Counsel and Staff Director 

BRETT LOPER, Minority Staff Director 

SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT 

JIM MCDERMOTT, Washington, Chairman 

FORTNEY PETE STARK, California 

ARTUR DAVIS, Alabama 

JOHN LEWIS, Georgia 

MICHAEL R. MCNULTY, New York 

SHELLEY BERKLEY, Nevada 

CHRIS VAN HOLLEN, Maryland 

KENDRICK MEEK, Florida 

JERRY WELLER, Illinois 

WALLY HERGER, California 

DAVE CAMP, Michigan 

JON PORTER, Nevada 

PHIL ENGLISH, Pennsylvania 

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public hearing records 

of the Committee on Ways and Means are also published in electronic form. The printed 

hearing record remains the official version. Because electronic submissions are used to 

prepare both printed and electronic versions of the hearing record, the process of converting 

between various electronic formats may introduce unintentional errors or omissions. Such occurrences are inherent in the current publication process and should diminish as the process 

is further refined. 


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C O N T E N T S 

Page 

Advisory of July 25, 2007, announcing the hearing .............................................. 2 

WITNESSES 

Patricia Ruggles, Ph.D., National Academy of Sciences ....................................... 6 

John Iceland, Ph.D., Associate Professor, Sociology Department, University 

of Maryland, College Park ................................................................................... 17 

Nancy Cauthen, Ph.D., Deputy Director, National Center for Children in 

Poverty, Mailman School of Public Health, Columbia University ................... 28 

Douglas J. Besharov, Joseph J. and Violet Jacobs Scholar in Social Welfare 

Studies, American Enterprise Institute for Public Policy Research ................ 36 

Mark Greenberg, Executive Director, Task Force on Poverty, Center for American Progress ........................................................................................................ 54 

SUBMISSIONS FOR THE RECORD 

Richard Alarco ́n, statement .................................................................................... 72 

Wider Opportunities for Women, statement ......................................................... 79 


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(1) 

MEASURING POVERTY IN AMERICA 

WEDNESDAY, AUGUST 1, 2007 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON WAYS AND MEANS, 

SUBCOMMITTEE ON INCOME SECURITY AND FAMILY SUPPORT, 

Washington, DC. 

The Subcommittee met, pursuant to notice, at 10:00 a.m., in 

room B–318, Rayburn House Office Building, Hon. Jim McDermott 

(Chairman of the Subcommittee), presiding. 

[The advisory announcing the hearing follows:] 


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ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON 

INCOME SECURITY AND FAMILY SUPPORT 

FOR IMMEDIATE RELEASE CONTACT: (202) 225–1025 

July 25, 2007 

ISFS–11 

McDermott Announces Hearing on 

Measuring Poverty in America 

Congressman Jim McDermott (D–WA), Chairman of the Subcommittee on Income 

Security and Family Support of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing on the definitions and standards 

used to measure the number of Americans living in poverty. The hearing will 

take place on Wednesday, August 1, 2007, at 10:00 a.m. in B–318, Rayburn 

House Office Building. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. However, any individual or organization 

not scheduled for an oral appearance may submit a written statement for consideration by the Subcommittee and for inclusion in the record of the hearing. 

BACKGROUND: 

On August 28th, the Census Bureau will release statistics on the depth and 

breadth of poverty in 2006. In 2005, nearly 37 million Americans were officially 

poor—an increase of 5.4 million since 2000. In 2005, the poverty threshold for a 

family of four with two children was $20,444. 

The official poverty rate is a critical indicator of how widely shared prosperity is 

in the economy, a key benchmark for targeting resources towards the most disadvantaged, and a useful measure of the impact of programs and policies on vulnerable populations. 

However, there is a broad consensus that the poverty measurement has become 

less accurate in highlighting economic hardship than when it was created more than 

40 years ago. For example, the poverty thresholds were created in relation to consumption when the average family of three or more persons spent about one-third 

of its after-tax income on food. Today, food demands only one-seventh of that family’s budget, while the share of income devoted to other expenses, such as housing 

and health care, has grown. Furthermore, the Federal poverty threshold for a family 

of four represented about 50 percent of median income when first devised, while it 

now represents only about 30 percent of median income. Finally, the current poverty 

measurement fails to count certain benefits, including the Earned Income Tax Credit and food stamps, as well as certain work-related expenses, including child care 

and transportation. 

There have been numerous suggestions for revising the poverty measure, including recommendations published in 1995 by a National Academy of Sciences Panel 

on Poverty and Family Assistance. The panel recommended both changes in how 

family resources are calculated and corresponding adjustments to the poverty 

threshold. A number of options were provided, nearly all of which would have increased the number of Americans considered poor. 

In announcing the hearing, Chairman McDermott stated: ‘‘We need a poverty 

measurement for 2007, not 1963. Unfortunately, our poverty measure has not 

kept pace with societal changes over the past half century. Improvements 

are needed so we can fully understand how many Americans are denied access to a reasonable standard of living, and so we can target resources to 

those most in need.’’ 


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FOCUS OF THE HEARING: 

The hearing will consider the current poverty measure, its limitations, and possible alternatives. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘110th Congress’’ from the menu entitled, ‘‘Hearing Archives’’ (http://waysandmeans.house.gov/Hearings.asp?congress=18). Select the hearing for which you would like to submit, and click on the link entitled, 

‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, completing all informational forms and clicking ‘‘submit’’ on the 

final page, an email will be sent to the address which you supply confirming your 

interest in providing a submission for the record. You MUST REPLY to the email 

and ATTACH your submission as a Word or WordPerfect document, in compliance 

with the formatting requirements listed below, by close of business August 15, 

2007. Finally, please note that due to the change in House mail policy, the U.S. 

Capitol Police will refuse sealed-package deliveries to all House Office Buildings. 

For questions, or if you encounter technical problems, please call (202) 225–1721. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing record. As always, submissions will be included in the record according to the discretion of the Committee. 

The Committee will not alter the content of your submission, but we reserve the right to format 

it according to our guidelines. Any submission provided to the Committee by a witness, any supplementary materials submitted for the printed record, and any written comments in response 

to a request for written comments must conform to the guidelines listed below. Any submission 

or supplementary item not in compliance with these guidelines will not be printed, but will be 

maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word or WordPerfect 

format and MUST NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised that the Committee relies on electronic submissions for printing the official 

hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons, and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone and fax numbers of each witness. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://waysandmeans.house.gov. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

f 

Chairman MCDERMOTT. Welcome to the Committee. Last night 

I went home at 3:30 in the morning from the Rules Committee having been talking about SCHIP, and as I got out of my car, I noticed 

that the guy next door to me is selling his house. So, at that hour, 

you might as well go ahead and find out how much he’s selling it 

for. I live around the Marine Corps barracks down in Southeast, 

and one of those row houses is now selling for $745,000. I said to 

myself, I guess this is a timely hearing, because when you talk 

about poverty that was once based on the food basket, housing is 


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now such a question that it really brings it to my mind. It’s part 

of the reason why I scheduled this hearing. 

At the end of this month the Census Bureau will release statistics on the number of Americans living in poverty last year, and 

I know everyone in the room is hoping that we’ll finally see a decline in poverty, especially after the record in recent years. 

Since 2000, the number of poor has climbed by 5.4 million. That’s 

an average of almost 3,000 Americans every single day for 5 years. 

But even as we wait to see the new Census poverty figures, we 

know that will tell really only part of the story about the depth and 

the breadth of poverty in the United States. There’s a broad recognition that our poverty measure has failed to keep pace with 

changing patterns of consumption, employment, standards of living 

and government assistance over the last 40 years. 

Our current poverty definition was developed in 1963, so I think 

it’s reasonable to think about an update. That’s before the Beatles’ 

first trip to the United States before the establishment of Medicare, 

before Martin Luther King, Jr., made his famous march from 

Selma to Montgomery to press for civil liberties. A lot has happened in the last four decades in America, except in defining poverty. 

To set our poverty thresholds, we still rely on the early 1960 cost 

of providing a minimally adequate food plan to a family, based on 

information that families spend about one-third of their aftertax income on food in the mid 1950s. We multiplied that amount by three 

and there’s our number. Other than updating for inflation, we’re 

applying a 1963 standard based on 1950 data in 2007. It really 

doesn’t make sense to me, and that is why we are here today. 

During this period, the proportion of family income dedicated to 

food has significantly declined while the proportion needed for 

other necessities, such as housing and medical care, has grown considerably. Mothers have become an integral part of the workforce 

and therefore childcare has become a major family expense. Food 

stamps and the Earned Income Tax Credit were established to provide direct assistance to low-income households. Of course, standards of living in America have generally increased over the last 

four decades. Our poverty measurement has largely ignored all of 

these developments. An accurate reflection of poverty is important 

for several reasons. 

A valid measure illustrates how many Americans are failing to 

meet the basic standard of economic need. It also indicates the impact that policies and programs have on reducing that level of 

need. Finally, it is critically important in the targeting of resources 

to individuals, to communities and to States. In fact, over 80 Federal programs reference some percentage of the Federal poverty 

program in determining individual eligibility or funding allocations 

for States. 

To comprehensively update our poverty measure, we need to consider what constitutes a minimal level of economic well-being and 

what income, benefits and costs should count toward and against 

that threshold. 

There have been many past recommendations for such a revision, 

including the National Academy of Sciences’. The vast majority of 

these proposals show more Americans living in poverty than under 


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the official measure. In contrast, however, a few have suggested 

that we look at only half of the equation adding additional sources 

of income, such as earned income tax credit. Taken by itself, such 

a step would continue to ignore changes in consumption patterns 

and in general standards of living. 

It means the basic needs of the poor are permanently fixed in 

time. At various times in our history, indoor plumbing, central 

heating and refrigerators were not considered a basic need. Does 

anyone here want to suggest that they are not a basic need today? 

Now, I look forward to hearing from our witnesses today about 

alternative ways to measure poverty to ensure that we are accurately counting every American who has trouble meeting those crucial needs. 

I now want to yield to my ranking member, Mr. Weller. 

Mr. WELLER. Good morning. Thank you, Mr. Chairman. I welcome the witnesses before our Committee and thank you for your 

time in joining us today. 

Today’s hearing involves how our country measures poverty. This 

follows prior hearings in this Subcommittee and the full Committee 

in which we explored the cost of poverty; how U.S. poverty measurement differs from other countries and possible solutions to poverty. As several members on this side of the aisle said in prior 

hearings, one of the first failings of our current poverty measure 

is the fact it does not count tens of billions of dollars in taxpayer 

funded assistance provided to reduce poverty for literally millions 

of families. 

This omission limits the usefulness of today’s poverty measure. 

It also devalues the sacrifices of taxpayers who pay for those benefits with their hard-earned tax dollars and increases the apparent 

number of families in poverty. Several witnesses today suggest 

counting the value of more antipoverty benefits to determine 

whether families are poor or not. 

Major assistance not counted today includes food stamps, public 

housing, the earned income tax credit and healthcare coverage. 

These also constitute the fastest growing portions of our nations’ effort to help low income families escape poverty. So, unless we act, 

more and more of our effort to alleviate poverty will be ignored 

each passing year. Consider what this means for families. 

Let’s say the Jones family of four has an annual income of 

$30,000, all from wages. Current rules count wages as income for 

purposes of judging whether a family is poor. Since the poverty 

threshold for a family of four is about $20,000, and the income of 

the Jones family is above that level, the Jones family is officially 

not poor. Now, let’s say they have neighbors. The Smith family is 

also a family of four. The Smith family also has a total of $30,000 

in annual income, but the Smith’s income comes from multiple 

sources: $18,000 from wages; plus a total of $12,000 in housing, 

healthcare, food stamps, and earned income tax credit benefits provided by taxpayers. 

Under current rules, none of the $12,000 in taxpayer benefits 

provided the Smith family is counted as income. So, since their 

$18,000 in wages fall short of the $20,000 poverty threshold for a 

family of four, the Smith family is officially poor. This makes little 

sense. 


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That’s why I introduced a bill yesterday that would provide more 

clarity about both the extent of poverty in the United States and 

the effectiveness of current antipoverty programs. My legislation, 

H.R. 3243, would direct the Census Bureau to report on poverty as 

measured three ways. First, Census would retitle the current official poverty rate as the partial benefits poverty rate, which is what 

it is. The second measure, called a full benefits poverty rate, would 

count means tested food, housing and healthcare benefits as income. 

The final measure, called the full benefits and taxes poverty rate 

would also add in the value of tax credits, like the earned income 

tax credit and subtract taxes paid. This legislation will help us better understand both who is poor and the effectiveness of current 

antipoverty benefits. While this hearing today will help us understand how poverty is measured, that’s not enough. We also need to 

press on with what works to reduce poverty. 

As we saw in the progress against poverty following the 1996 

Welfare Reform law, that starts with promoting more full-time 

work instead of welfare dependence and it also means promoting 

more healthy marriages, which also reduce poverty and welfare dependence for the long run. 

Mr. Chairman, I look forward to hearing from the witnesses; and, 

I again thank them for their participation today. 

Chairman MCDERMOTT. Thank you, we welcome all of you, and 

as my colleague has said we thank you for coming here and spending your time trying to educate us about how to make better public 

policy. 

We will start today with Dr. Ruggles, who is at the National 

Academy of Sciences. 

Dr. Ruggles. 

Dr. RUGGLES. Thank you. 

Chairman MCDERMOTT. If you will press that button so you 

are on and your full statements will all be in the record. So, we 

would like you to try and summarize and stay within 5 minutes, 

if you can. Somewhere we have a light I guess. It’s over there. 

Dr. RUGGLES. All right, thank you. 

Chairman MCDERMOTT. Please 

STATEMENT OF PATRICIA RUGGLES, NATIONAL RESEARCH, 

COUNCIL OF THE NATIONAL ACADEMY OF SCIENCES 

Dr. RUGGLES. Well, I am happy to be here today, Mr. Chairman and Mr. Weller, and I have to say, Mr. Chairman, you’ve already managed to say in your opening statement many of the 

things that I have planned to say here today. 

Chairman MCDERMOTT. That’s why I talk first. 

Dr. RUGGLES. In my testimony today I plan to first review the 

existing measure and its limitations, and then discuss some alternatives for revising the measure, including the NAS recommendations. Then finally, I want to consider the implications of that kind 

of a revision for public policy programs. 

As you noted, it’s been more than 40 years since our official poverty measure was first designed and most experts believe that it 

is now seriously out-of-date. The measure grew out of a series of 

studies undertaken by Mollie Orshansky for the Social Security AdVerDate Aug 31 2005 00:09 Oct 16, 2008 Jkt 043757 PO 00000 Frm 00010 Fmt 6633 Sfmt 6602 E:\HR\OC\43757.XXX 43757

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ministration in the early 1960s. Orshansky started with a series of 

food budgets put together by the Department of Agriculture. These 

food budgets gave her the amount of money families of different 

sizes and types would need to spend annually to assure a minimally adequate diet. Then using data from a 1955 survey, she calculated that average families spend about one-third of their total 

incomes on food. Lacking any other data, she just multiplied her 

food budgets by three to get approximate levels of basic needs. 

Although Orshansky’s estimates of basic needs, which she 

termed ‘‘poverty thresholds,’’ were necessarily very approximate, 

they were a considerable advance over earlier work because at 

least they recognized that needs varied by family size and type. In 

1969 a slightly modified version of the Orshansky scale became the 

official poverty level for the United States statistical establishment 

as a whole. Since 1969 the measure has been subjected to considerable criticism, but it still forms the basis for our official poverty 

measure. 

Much of the discussion about the Orshansky measure focuses on 

the specific poverty thresholds that it calculated, but Orshansky 

made another choice that’s also been very important for poverty 

measurement over time. That is she chose to look at only pre-tax 

cash income. The official poverty measure actually consists of two 

parts. The set of thresholds that she calculated and the measure 

of family resources that is compared to the threshold. In order to 

decide if a particular family is poor, its income or consumption 

level is compared to the threshold and a level of poverty is determined based on whether the family’s resources fall above or below 

that threshold, just as in the example that Mr. Weller gave. 

When Orshansky put together her measure, pre-tax, cash income 

was all she could measure. That was all we had survey data on. 

But we now collect data on a whole lot of other things, like, for example, the non-cash benefits that families get, but also things like 

the work expenses that they need to pay in order to go to work, 

for example, as Mr. McDermott mentioned, many families today include working mothers. Many of those mothers must pay for 

childcare in order to earn the money that they bring home. It 

doesn’t make sense in thinking about how much money they have 

available to pay for rent and to buy food, not to include those 

childcare expenses as something that they must pay. 

So, it’s not just on the addition side that we need to worry about 

correctly measuring income. We also need to worry about things 

that get subtracted from income. Either way, in thinking about income, it’s important to keep in mind that in comparing income to 

thresholds, you can’t just change one side of the equation. If you’re 

going to update the income measure to take into the account the 

different kinds of income that people get today and the joint expenses they have, you also need to think about adjusting the 

thresholds. 

Most economists believe, as Adam Smith put it as long ago as 

1776, that people can be considered poor if they are unable to afford the things that, as he put it, ‘‘the custom of the country renders it indecent for creditable people, even of the lowest order, to 

be without.’’ In other words, poverty is not just the inability to afford a subsistence diet. It varies from time to time and place to 


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place. The implications of this belief for poverty measurement can 

be envisioned by imagining a poverty line set in 1900. 

At that time, basic needs would not have included indoor plumbing, central heating, electricity, or many other needs that we now 

take for granted, because the custom of the country did not include 

those things, even for most of those who were well off, let alone of 

the lowest order. Today, however, Americans who cannot afford 

those things would generally be considered poor. Indeed, a poverty 

threshold that did not include those things would be fairly meaningless, since it would be very difficult for the urban poor in particular to find housing without them. Failing to include them in 

budgets, therefore, would restrict the poor to a standard of housing 

that no longer exists in this country and would not be acceptable 

to most. 

An approach to measuring poverty that takes into account 

changes in standard of living over time is often referred to as a relative poverty measure, as opposed to the absolute poverty measure 

embodied in our official thresholds. Some analysts argue that an 

absolute measure, one that sets a poverty line at a fixed level at 

a particular point in time and then subsequently adjusts only for 

changes in prices, is needed to assess programs because a measure 

adjusted for changes in standards of living presents too much of a 

moving target. 

Such analysts assert that if the poor become better off in material terms because society as a whole is becoming better of, that’s 

important evidence of public policy success and should be taken 

into account in measuring the need for continued assistance. Most 

countries do use some kind of relative poverty measure, but I think 

there is a general consensus that that is probably not what we 

most would like to do in the United States. 


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There have been a number of reassessments of the measurement 

of poverty in the United States over time and this chart compares 

some of them. The black line that goes right across the middle is 

our current, official poverty threshold, which since it is adjusted 

only for prices when you look at it in fixed dollars, it is just a 

straight line. 

The other measures that you see here are a relative threshold; 

one set at 50 percent of the median income, a measure based on 

Gallup Poll results that reports what people think is the amount 

that is minimally necessary for people not to be poor; and then finally that little green line at the end are the thresholds developed 

by the National Academy of Sciences. As you can see, the median 

family income line and the subjective line started out below the official threshold, cross over it just about at the time Mollie 

Orshansky set her thresholds and have continued to rise over time. 

We do not have the data to calculate the NAS measure back 

nearly as far as those other two measures, but you can see on this 

chart that it falls somewhere between the official measure and a 

purely relative measure. 

As I have mentioned, the most serious and comprehensive reassessment of the U.S. poverty measure to date was undertaken by 

the National Research Council of the National Academies of 

Sciences in the early 1990s in response to a congressional mandate. 

This scientific study by an independent panel of experts led to the 

report, ‘‘Measuring Poverty: a New Approach.’’ In setting poverty 

thresholds, the Academy recommended an intermediate approach 

that was neither strictly absolute nor entirely relevant. Under the 

NAS approach, a market basket of basic goods, including food, 


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clothing, shelter and a small allowance for other needs would serve 

as the basis for a new set of poverty thresholds. 

Unlike our official thresholds, these thresholds would be adjusted 

for differences in cost of living in different parts of the country. The 

method for adjusting for differences in family sizes would be updated to reflect differences in family needs. Finally, the thresholds 

would be updated periodically based on consumption patterns as 

consumption patterns changed and ideas about what constituted 

basic needs changed, the thresholds would change with them. This 

type of approach is more difficult to implement than the present 

system, because it requires some judgment calls about what people 

need, but it has the advantage of tracking what most people mean 

by poverty much more closely than either the official measure or 

a purely relative measure. This type of updating is not unprecedented. 

Similarly, periodic revisions are used to update the market basket underlying the consumer price index, for example. A measure 

of this type will generally increase more over time than a strictly 

absolute measure. Because the standards of living rise, people generally raise their expectations for even minimal consumption levels. 

But the increases will be linked to changes in consumption levels 

and costs rather than to changes in income. 

Wrap it up. Okay, well just quickly before we do, the chart that 

should be up here and isn’t—if you could make that go up. 

Chairman MCDERMOTT. Do we put in the cost of technology? 

Dr. RUGGLES. There we go. Yes, really. 

Dr. RUGGLES. This chart summarizes the differences between 

the NAS recommendations and both the official measure and a 

purely relative measure. The main differences are the thresholds, 


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11 

which are based on current consumption rather than either income 

or an old consumption survey. It includes some non-cash income. 

It deducts out-of-pocket medical. It deducts work expenses. It deducts taxes. The family size adjustment is based on something 

other than the mix of family sizes and types that was around in 

1969. 

[The prepared statement of Dr. Ruggles follows:] 

Prepared Statement of Patricia Ruggles, Ph.D., National Academy of 

Sciences 

* Views expressed in this testimony are solely those of the author and should not 

be taken to reflect those of her current employer, the National Research Council of 

the National Academies. 

Mr. Chairman and members of the Committee, I am happy to be here today to 

discuss the measurement of poverty. Poverty measurement is important for public 

policy, because many of our programs are designed to help the neediest among us. 

A good measure of the extent of that need is essential in designing programs that 

will alleviate poverty and that will help to ensure equality of opportunity for all 

Americans. 

Unlike most other countries, the United States has an official poverty measure, 

which has been widely used in designing and assessing programs to combat poverty. 

That measure is a legacy of the War on Poverty, and over time it has been very 

helpful in identifying those who need help, and in understanding what does and 

doesn’t work in providing that help. It has been almost 50 years since that measure 

was first designed, however, and most experts believe that it is now seriously out 

of date. 

In my testimony today I will discuss three topics relating to the poverty measure. 

First, I will review the existing measure and will outline its limitations. Second, I 

will discuss some alternatives for revising that measure. And finally, I will consider 

the potential implications of such a revision for public assistance programs. 

The Official Poverty Measure 

The current official poverty measure grew out of a series of studies undertaken 

by Mollie Orshansky for the Social Security Administration in the early and mid1960s. Orshansky did not have the wealth of studies on needs and consumption that 

we have today available to her at that time, so she used the best proxies that she 

could find. 

She started with a series of food budgets put together by the Department of Agriculture. These were much like today’s Thrifty Food Plan (TFP), the food needs index 

used to set food stamp levels. These food budgets gave her the amount of money 

families of different sizes and types would need to spend to assure a minimally adequate diet. Then, using data from a 1955 survey, Orshansky calculated that on average families spent about one-third of their total incomes on food. Lacking any other 

data, she simply multiplied her food budgets by three to get approximate levels of 

basic needs for all goods and services. 

Although Orshansky’s estimates of basic needs—termed poverty thresholds—were 

necessarily very approximate, they were a considerable advance over earlier work 

in that they at least recognized that needs varied by family size and other factors. 

Once Orshansky’s scale had been published, it was widely adopted by other researchers. Finally, in 1969 a slightly modified version of the Orshansky scale was 

mandated by the Bureau of the Budget (predecessor of today’s OMB) as the official 

poverty measure for the government statistical establishment as a whole. These 

thresholds were to be updated each year to reflect changes in prices, but nothing 

else. Since 1969 the Orshansky measure has been subjected to considerable criticism, but, with minor changes, it still forms the basis for the official poverty measure. 

Much of discussion about the Orshansky measure focused on the specific poverty 

thresholds it calculated, but Orshansky also made another choice that had important implications for the official poverty measure. The official poverty measure actually consists of two parts—the set of thresholds discussed above and a measure of 

family resources that is compared to those thresholds. In order to decide if a particular family is poor, its income or consumption level is compared to the threshold, 

and a level of poverty is determined based on whether the family’s resources fall 

above or below the threshold. In making this comparison, Orshansky used the only 

measure of family economic resources available to her—pre-tax cash income. Although we now collect data on many other aspects of family needs and resources, 


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the official poverty definition still bases its estimates on pre-tax cash income. This 

measure has become more and more outdated as taxes, non-cash benefits, and work 

expenses such as child care have come to play a larger role in family budgets. 

Alternative Measures of Poverty 

In considering alternatives to our official poverty measure, we must examine both 

the thresholds used to define poverty and the methods used to compute the incomes 

that are compared to those thresholds. Adjusting one side of the measure without 

changing the other produces misleading and often contradictory results. For example, adding non-cash benefits such as child care subsidies to income, without adjusting the thresholds to reflect the increased need for child care as more and more 

mothers of young children work outside the home, will obscure the very real hardships faced by many working mothers and their children. Ultimately, any proposed 

alternative must be assessed in terms of its treatment of both sides of the measure. 

Setting Poverty Thresholds. Two major types of criticism have been leveled at the 

thresholds embodied in the official poverty measure. First, there have been many 

technical complaints. The adjustments for family size and type, for example, are 

based on the distribution of family sizes in the population in 1969, and bear little 

resemblance to today’s needs. In fact, the entire needs measure is rather ad hoc, 

and many revisions have been suggested. Family needs have also changed as more 

family members have gone into the labor force, and as the numbers of single-parent 

families has risen. 

The second type of criticism of the official poverty line is much more fundamental. 

Most economists believe, as Adam Smith put it in 1776, that people can be considered poor if they are unable to afford the things that ‘‘the custom of the country 

renders it indecent for creditable people, even of the lowest order, to be without.’’ 

In other words, poverty is not just the inability to afford a subsistence diet; instead, 

the meaning of poverty varies from time to time and place to place. 

The implications of this belief for poverty measurement can be envisioned by 

imagining a poverty line set in 1900, for example. At that time, basic needs would 

not have included indoor plumbing, central heating, electricity, or many other things 

that we now take for granted—because the ‘‘custom of the country’’ did not include 

those things even for most of those who were well-off, let alone those ‘‘of the lowest 

order.’’ Today, however, Americans who cannot afford those things would generally 

be considered poor. Indeed, a poverty threshold that didn’t include them would be 

fairly meaningless, since it would be very difficult for the urban poor, in particular, 

to find housing without them. Failing to include them in budgets, therefore, would 

restrict the poor to a standard of housing that no longer even exists in this country, 

and would not be acceptable to most as a basis for public policy. 

An approach to measuring poverty that takes into account changes in standards 

of living over time is often referred to as ‘‘relative’’ poverty measure, as opposed to 

the ‘‘absolute’’ poverty measure embodied in our official thresholds. Some analysts 

argue that an absolute measure—one that sets a poverty line at a fixed level at a 

particular point in time and that subsequently adjusts only for changes in prices— 

is needed to assess programs, because a measure adjusted for changes in standards 

of living presents too much of a moving target. Such analysts assert that if the poor 

become better off in material terms because society as a whole is becoming better 

off, that is important evidence of public policy success and should be taken into account in considering the need for continued assistance programs. A relative approach to poverty measurement, in contrast, is seen by such analysts as biased toward continuing high poverty rates, because progress against poverty can only be 

made if the underlying distribution of resources changes. People who are in favor 

of helping those in need do not necessarily favor large changes in the distribution 

of income, which supporters of an absolute measure argue would be necessary to 

show progress under a relative poverty measure. 

Most developed countries use some type of relative measure in assessing progress 

against poverty, however. The OECD has published a measure based on 50 percent 

of median family income, for example, while Eurostat uses a measure based on 60 

percent of the median. Such measures increase over time as family incomes increase, but continue to identify those whose resources fall substantially below the 

norm. Interestingly, Orshansky’s threshold for a two parent, two child family fell 

at about 50 percent of median income when it was first introduced. Because it has 

been updated only for price changes over time, however, the official poverty threshold for such a family has now fallen to about 35 percent of median family income. 

While this type of income-related measure does give policy makers useful information about relative resources, it has a few drawbacks as a poverty measure. One of 

the most important is that when incomes fall during a recession, the poverty thresholds will fall too, even though basic needs may not have declined. More broadly, this 


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measure does indeed track resources rather than needs over time, and as such does 

not directly measure how many people have a level of resources that society might 

consider ‘‘indecent.’’ 

Various proposals have been made over time to update the official poverty measure. A thorough assessment by an interagency task force in 1976 concluded that 

even then the measure was seriously out of date and needed revision, but the proposed revisions were never implemented. 

The most serious and comprehensive reassessment of the U.S. poverty measure 

was undertaken by the National Research Council (NRC) of the National Academy 

of Sciences (NAS) in the early 1990s, in response to a Congressional mandate. This 

scientific study by an independent panel of experts led to the report Measuring Poverty: A New Approach. This study made a number of important recommendations 

relating both to the setting of poverty thresholds and to the measurement of economic resources. 

In setting poverty thresholds, the Academy report recommended an intermediate 

approach that was neither strictly absolute nor entirely relative. Under the NAS approach, a market basket of basic goods including food, clothing, shelter, and a small 

allowance for other needs would serve as the basis for a new set of poverty thresholds. Unlike our official thresholds, these thresholds would be adjusted for differences in costs of living in different parts of the country. The method for adjusting 

for differences in family sizes would also be updated to reflect today’s family needs. 

Finally, these thresholds would be updated periodically as people’s consumption patterns—and thus, their ideas about what constitute ‘‘basic needs’’—changed over 

time. 

This type of approach is somewhat more difficult to implement than the present 

system, because it requires some judgment calls about what people need, but it has 

the advantage of tracking what most people mean by poverty much more closely 

than either the official measure or a purely relative measure. And this type of updating is not unprecedented—similar periodic revisions are used to update the market basket underlying the Consumer Price Index, for example. A measure of this 

type will generally increase more over time than a strictly ‘‘absolute’’ measure, because as standards of living rise people generally raise their expectations for even 

minimal consumption levels, but the increases will be linked to changes in consumption levels and costs rather than to changes in income. Research on what the public 

thinks is a minimum for ‘‘basic’’ needs, based on Gallup poll data, shows that the 

level has indeed risen over time, but not as much as income has risen. 

The figure below, put together by John Iceland, shows how poverty thresholds (adjusted for changes in prices) would have varied over time under four different measures—the official measure, a relative measure at 50 percent of median income, a 

subjective measure based on polling data, and the NAS-recommended measure. As 

can be seen, all three of the alternative measures would have produced higher 

thresholds than the official measure, but the NAS measure falls between the official 

measure and an entirely relative measure. 


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Measuring Economic Resources. Poverty thresholds, however, are only half the 

story. The official poverty measure also uses a method of computing family income 

that is widely considered to be seriously outdated. When Orshansky undertook her 

original studies, the only information on family incomes that was available was 

about cash income before taxes. This was not as big a limitation in 1963 as it is 

today, because there were few regular sources of non-cash benefits and the poor 

paid very little in taxes—and received no refundable credits. Orshansky also failed 

to account for work expenses such as day care in measuring poverty, but again that 

was not as large a limitation when most families had only one earner and single 

mothers were comparatively rare. 

Today, of course, the story is different. Low-income families often pay substantial 

payroll taxes, and many qualify for the refundable Earned Income Tax Credit. Many 

receive non-cash benefits such as food stamps and housing subsidies that effectively 

work like cash in increasing their ability to meet basic needs. And many working 

mothers must pay for child care—leaving their net earnings substantially lower 

than their apparent cash incomes. The NAS report recommended taking all of these 

changes into account in computing family incomes. The official measure, however, 

is still based strictly on pre-tax cash income. 

Another change in the computation of income recommended by the NAS report 

was that out-of-pocket medical expenses should be deducted from income in considering whether or not someone is poor. The logic of this recommendation is that lowincome families are likely to have little choice about paying for medical care and 

prescriptions, and anything they must spend on health care comes out of the funds 

available for other basic consumption needs. 

Over time, the cost of medical care has risen dramatically, and more recently the 

number of uninsured has also increased. These factors have considerably increased 

the amount that low-income people, especially the elderly, must spend on their medical needs. It is also true that the quality of care has improved substantially—many 

people are alive today who would have died at a younger age given the medical 

standards of the 1960s. But if we do not allow for the costs of today’s medical care 

in setting poverty standards, many lower-income people with expensive medical 

needs will not be treated as poor, even if they have very low disposable incomes. 

In effect, most observers argue, not counting those needs in measuring poverty implies that advances in medical care since the 1960s should only be available to those 

with higher incomes. 

Theoretically, the costs of medical care could be incorporated into the measure of 

basic needs—the poverty thresholds—rather than being deducted from income. In 


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practice, however, out-of-pocket medical expenses vary so much from person to person that a one-size-fits-all threshold cannot adequately take them into account. It 

is for this reason that the NAS recommended that they be deducted from the income 

measure instead. 

The table below summarizes the differences between the official poverty measure, 

a revised measure like the one recommended by the NAS panel, and a purely relative measure such as 50 percent of the median income. It suggests that a measure 

based on the NAS recommendations is more closely attuned to the specific needs 

and resources of the low-income population than either the official poverty measure 

or a purely relative measure. 

Table 1: Characteristics of Alternative Poverty Measures 

Official Measure NAS Panel Measure 50% of Median 

Thresholds Based on 1955 food 

consumption survey 

Based on current 

consumption needs 

Based on median 

family income 

Non-Cash Income Excluded ‘‘Cash-like’’ sources 

included 

Excluded 

Out-of-Pocket Medical Not considered Deducted from income Not considered 

Expenses 

Work Expenses Not considered Deducted from income Not considered 

Taxes Not considered Deducted from income Usually not 

considered 

Family size Based on food needs for Based on the relative Usually none 

adjustment a 1969 mix of family 

sizes and types 

needs of additional 

adults and children 

Implications for Public Programs of Revising the Poverty Measure 

In assessing the direct impact on federal programs of changes in the poverty 

measure it is important to understand that there are actually two versions of the 

measure. In addition to the poverty thresholds published by the Census Bureau for 

research and statistical purposes, there are ‘‘poverty guidelines’’ published by the 

Department of Health and Human Services (HHS). These are the poverty measures 

used for administrative purposes such as determining program eligibility. 

The HHS guidelines are closely related to the Census measures, but have a few 

differences. First, Census’s thresholds are determined for past years only—when 

new poverty estimates come out in August or September of each year, they are 

based on the previous year’s income data. For example, poverty rates for 2006 will 

be announced later this month. Because inflation rates for 2007 are not yet known, 

Census cannot yet calculate the poverty thresholds for 2007. 

The poverty guidelines, which come out in February, are based on the thresholds 

produced by Census the previous fall, but are updated using preliminary inflation 

estimates—so that estimated 2007 thresholds are applied to program determinations made in 2008. The guidelines also use a simplified and more rational set of 

family size adjustments than those used in the official measure. Finally, the guidelines refer only to the poverty thresholds—methods of determining the income to be 

compared to the guidelines are left up to individual program rules. Few programs 

use income-computing methods anything like those used by Census for the official 

poverty measure. For example, most programs allow for the deduction of work expenses, and many take into account benefits received from other programs. 

The two biggest programs that use the federal poverty guidelines in their eligibility criteria are the Food Stamp Program (FSP) and Medicaid. Both programs implicitly recognize that the thresholds produced under the guidelines are unrealistically low; the FSP sets gross income eligibility at 130 percent of the poverty guidelines, while Medicaid uses 133 percent. The school lunch and breakfast programs 

use 130 percent of the guidelines to determine eligibility for free meals, and 185 percent for reduced-price meals. Special subsidies for prescription drugs are also available under Medicare for individuals below 130 percent and 150 percent of poverty. 

Census poverty estimates (although not generally the thresholds themselves) are 

used for some program-related purposes. A typical use involves poverty estimates 

for states and localities, which are considered as one factor in a multi-factor funding—allocation formula. These estimates are not based on the same data as the national poverty rates published each year by the Census Bureau; instead, they are 


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produced using Decennial Census and American Community Survey data, which are 

inputs into models of changing local-area incomes over time. The largest program 

using such estimates is the Title I grant program for education. 

In other words, although many programs address the problem of poverty, and others take poverty-related issues into account in allocating funds, the Census poverty 

thresholds themselves are not generally a direct factor in program design. The 

major programs that use the HHS guidelines in determining eligibility all use levels 

that are well above the Census thresholds, implying that program designers are 

aware that current threshold levels are unrealistic. And the programs that use Census poverty numbers in allocating grants use estimates produced by a complex 

model based on data that is several years old. 

Introduction of an alternative Census poverty measure, therefore, might not have 

any direct impact on program eligibility, depending on the relationship between that 

alternative and the HHS guidelines. If both the current official measure and the alternative were maintained for some time, the HHS guidelines could continue to be 

computed exactly as they are now. Over time, alternative calculations of the guidelines could be modeled and program rules could be modified appropriately on an asneeded basis. And over the longer run, a measure that tracked changing needs more 

closely than the official measure does would presumably improve program eligibility 

assessments. 

Similarly, producing an alternative measure would not necessarily affect programs with funding allocated by formulas involving poverty, at least in the short 

run. Most of these formulas depend on the comparative poverty status of a specific 

locality relative to the state or the nation as a whole. These estimates of comparative poverty status are typically not very sensitive to small differences in the specific 

poverty thresholds used. In fact, any changes allocations resulting from changes in 

the thresholds might be hard to identify, because typically local poverty rates are 

only one factor in the allocation formula and the other factors are also changing 

over time. In any case, the official thresholds would almost certainly have to be used 

for small area poverty estimation in the near future, until new data were available 

and the models could be updated. In the longer run, switching to a poverty measure 

that tracks real needs more closely might be expected to improve our ability to allocate funds appropriately. 

Conclusion 

There is a widespread consensus among experts that a revision of the official U.S. 

poverty measure is both feasible and needed. The current measure is based on underlying data, assumptions, and measurement methods that were assembled more 

than 40 years ago. Without an update, the measure is becoming progressively more 

removed from a real measure of needs. No other major statistic produced by the federal government has been issued over so long a period of time without being rebenchmarked and having its methodology updated. It is time for a revision of the 

poverty measure similar to those that are performed routinely for other measures 

such as the Consumer Price Index (CPI) and Gross Domestic Product (GDP). 

The alternative measure produced using the recommendations of the NAS panel 

on poverty measurement does a good job of addressing the shortcomings of the current official poverty measure. The Census Bureau has already produced a series of 

estimates of poverty under this measure, showing that it can be implemented. Some 

details of the measure remain to be determined—there are possible variations in 

data and methods for measuring some income sources and expenses, for example. 

But these issues could be quicklGy addressed either through an interagency task 

force or with the help of outside experts, as was done in the case of the CPI. And 

as Census’s work so far has demonstrated, all of the variations on this methodology 

produce a consistent picture of need in the U.S. that differs in important ways from 

the picture obtained using the official measure. 

Revising the poverty measure doesn’t have to mean radical short-run changes in 

federal programs, however. The Census poverty thresholds are not a direct input 

into program rules, and they have only an indirect effect on funding-allocation formulas. Further, as with any change in methodology, the effects of the revision 

should be tracked over time. For the next several years the current measure and 

the alternative could both be produced so that the potential impacts of the change 

can be assessed. Over the longer run, anti-poverty programs can only be improved 

by using a poverty measure that does a better job of tracking changes in the needs 

of the poor. 

Thank you for this opportunity to testify, and I look forward to answering any 

questions you may have. 

f 


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Chairman MCDERMOTT. Thank you. 

Dr. Iceland is Associate Professor of Sociology at the University 

of Maryland and I think once worked with the Census. 

Dr. Iceland. 

Dr. ICELAND. Thank you. Thank you for having me here today. 

Chairman MCDERMOTT. Do you want to turn on your microphone so that the reporter can get it down? 

Dr. ICELAND. Sure. 

STATEMENT OF JOHN ICELAND, PH.D., ASSOCIATE 

PROFESSOR OF SOCIOLOGY, UNIVERSITY OF MARYLAND 

Dr. ICELAND. Thank you, Chairman, and members of the Subcommittee. 

I appreciate having this opportunity today to talk about these 

issues. In this short presentation, I will talk about different kinds 

of poverty measures, focusing on absolute, relative, and the NAS 

recommended measure. I will elaborate on some of the themes 

mentioned by yourself and Dr. Ruggles. I will discuss their 

strengths and weaknesses and show results of what poverty rates 

look like when using the different measures. 

Overall, here is the story I wanted to leave you with. While various poverty measures are useful, I believe the NAS panel-recommended measure is the single-most informative one, because, 

first, it measures the ability of families to meet their basic needs, 

while second, it also takes into account the fact that such needs 

can change over time. Let me take a step back and talk briefly 

about what absolute and relative poverty measures are. 

They both involve comparing a family’s income to a poverty 

threshold to determine whether that family is poor. Absolute measures, such as the current U.S. official measure, use thresholds that 

typically attempt to define a truly basic need standard. Relative 

measures, more commonly used in Europe, explicitly define poverty 

as a condition of comparative disadvantage. Thresholds are often 

pegged at, say, 50 percent of median household income. The key 

distinction between the two is that absolute poverty lines remain 

constant over time, while relative ones rise in real dollars as standards of living rise. 

The NAS panel proposed a hybrid, sometimes termed ‘‘quasi-relative poverty measure.’’ The thresholds of such a measure changes 

as real spending on basic goods change. Because the poverty lines 

can change over time in real dollars, the measure is at least in part 

relative. However, since it is not based on mean or median incomes 

as most relative poverty measures are, it is not wholly relative either. There are advantages and disadvantages of alternative measures. The main advantage of absolute measures is that they are 

easy to understand. For example, if there is starvation and hunger, 

then there is clearly poverty, regardless of general standards of living. 

The main theoretical criticism of absolute measures is that what 

people judge to be poor varies across time and place. In addition, 

sometimes real needs also rise in richer countries. For example, a 

poor family cannot simply build a shack on the outskirts of a U.S. 

city without getting in trouble for violating building ordinances. If 

you own a car, then you must pay insurance leaving less money to 


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meet other needs. Such requirements would be unreasonable in societies with low standards of living. 

I would like to just briefly show the figure also shown in Dr. 

Ruggles’ testimony to make a couple of additional points and to 

highlight the different measures. 


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Dr. ICELAND. So, again, here from the previous figure we saw 

the absolute poverty threshold, which remains the same over time, 

being as it is an absolute measure. There were questions asked by 

Gallup on what people thought about poverty. Notice how well it 

tracks median incomes. This is half the median income. The last 

thing I would like to note from here, at the end we have the NAS 

threshold, which goes back only to the early 1990s. The version of 

the NAS threshold that includes out-of-pocket medical expenses 

shown here is a little higher than the official threshold, though the 

two thresholds closely tracked each other for most of the 1990s. 

However, the NAS threshold rose modestly more quickly after 

1999 when real spending on a basic bundle of items rose faster 

than inflation, largely due to relative increases in housing and 

medical costs. Thus, the NAS measure again takes into account 

real changes in need, while the official threshold does not. 

Figure 2 shows using different poverty measures, so the poverty 

rate is highest when using the relative poverty measure, whose 

thresholds are higher than those used in the other measures. The 


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‘‘disposable income’’ measure, which recently appeared in a Census 

report, shows the lowest poverty rate, because it has a more refined 

measure of family resources that includes among other things inkind transfers as it should. 

However, this measure still uses the outdated referenced family 

official threshold. The NAS poverty rate is only modestly above the 

official rate, because it has a higher threshold, but takes into account in-kind benefits. My written testimony provides more details 

on these issues, including how poverty rates differ across demographic groups when using alternative measures. 

To conclude, poverty measurement efforts in the U.S. are approaching a crossroads. A key theoretical issue is whether poverty 

should refer to a subsistence standard, such as severe malnutrition, 

economic marginalization or something in between. The NAS 

panel-recommended measure has the advantage of increasing, in 

real terms, spending on basic items increase, as to reflect changes 

in real standards of living. Yet, it is not responsive to changes in 

spending patterns on other more discretionary items such as luxury goods that may occur as median incomes rise and thus reflected in purely relative poverty measures. 

Thus, while all of these measures tell something useful about 

people’s economic well-being, the NAS measure is in my view the 

single most informative poverty measure among them. While no 

measure will ever garner universal support, this NAS measure 

very much represents a broad consensus among a wide array of social scientists on how to best measure poverty. 

[The prepared statement of Dr. Iceland follows:] 

Prepared Statement of John Iceland, Ph.D., Associate Professor, Sociology 

Department, University of Maryland, College Park 

Chairman McDermott and members of this subcommittee, I thank you for the opportunity to testify before you. I sincerely applaud your efforts to revisit poverty 

measurement issues. In order to best target our policy efforts, we, as a country, 

need to have a good yardstick by which to measure progress. 

There are a number of poverty measures one could use to estimate levels of economic well-being in society. Income poverty measures are perhaps the most common. They usually involve comparing a family or household’s income to a poverty 

threshold to determine whether that family or household is poor. Two basic types 

of income poverty measures are absolute and relative measures. Absolute measures, 

such as the current U.S. official measure, are ones that typically attempt to define 

a truly basic—absolute—needs standard that remains constant over time and perhaps updated only for inflation, as in the case of the U.S. official poverty measure. 

Relative measures, which are more commonly used by researchers in Europe, explicitly define poverty as a condition of comparative disadvantage, to be assessed 

against some evolving standard of living. The key distinction between the two is 

that absolute poverty lines remain constant over time, while relative ones rise in 

real dollars as standards of living rise. 

In the United States there has been growing dissatisfaction with the current official poverty measure (described in more detail below). At the request of Congress, 

the National Academy of Sciences (NAS) convened a panel of researchers in the 

early1990s to review this poverty measure and make recommendations for a new 

one. The panel produced a report, Measuring Poverty, which proposed a hybrid poverty measure (National Research Council 1995). The thresholds of such a measure 

would change as real spending on basic goods (e.g., food, clothing, and shelter) 

change. Because the poverty lines change over time in real dollars, the measure is, 

at least in part, relative. However, since it is not based on mean or median incomes, 

as most relative poverty measures are, it is not wholly relative either. 

Overall, each of these income poverty measures is informative and they should be 

viewed as complementary sources of information about people’s economic well-being. 

My own view, however, is that the hybrid poverty measure recommended by the 


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1Much of the analysis in this testimony is drawn from a recent paper I wrote (Iceland 2005) 

that provides greater detail about poverty measurement issues and challenges. 

NAS panel is the single most informative income poverty measure because it best 

measures the ability of families to meet their basic needs while also recognizing that 

such needs can change over time.1

Background 

The Current Official Poverty Measure 

The current official poverty measure has two components: poverty thresholds and 

the definition of family income that is compared to these thresholds. Mollie 

Orshansky, an economist at the Social Security Administration, developed poverty 

thresholds in 1963 and 1964 by using the ‘‘Economy Food Plan’’ (the lowest cost food 

plan) for families of different types and sizes prepared and priced by the U.S. Department of Agriculture. To arrive at overall threshold figures, Orshansky multiplied the price of the food plans by three, based on information from the 1955 

Household Food Consumption Survey that indicated that families of three or more 

people had spent about one-third of their after-tax income on food in that year. The 

thresholds have been updated yearly for inflation using the Consumer Price Index 

(CPI). 

The definition of family resources used to compare to the thresholds is the Census 

Bureau’s definition of income—gross annual cash income from all sources, such as 

earnings, pensions, and cash welfare. A family and its members are considered poor 

if their income falls below the poverty threshold for a family of that size and composition. 

The current official poverty measure was, for a time, a sensible indicator of material deprivation in the U.S. At the time of its initial adoption by the Office of Economic Opportunity in 1965, the poverty lines were set at a dollar level that coincided with people’s views of poverty. The method of measuring people’s resources— 

gross cash income—also managed to fairly accurately capture the income people had 

to meet their basic needs. 

Over the past 40 years, however, the poverty measure has become increasingly 

outdated. The poverty lines, originally devised by multiplying the cost of food needs 

by three to account for other needs (such as clothing and shelter), no longer captures 

families’ basic needs in par because of the rapid growth in housing prices and other 

expenditures (such as medical care and childcare) relative to food prices. Today, people spend closer to one-sixth or one-seventh of their income on food rather than onethird. While the official poverty threshold for a four-person family once coincided 

with people’s views of the dollar amount needed to support such a family in the 

1960s—as reported in public opinion surveys—this was no longer true by the 1990s 

(National Research Council 1995). 

Many have also argued that the definition of money income used in the official 

measure—gross cash income—inadequately captures the amount of money people 

have at their disposal to meet basic needs. It has been argued that taxes should 

be subtracted from income, as this money cannot be spent to meet basic needs, and 

that in-kind or near-money government benefits should be added, such as food 

stamps, housing and child care subsidies, and the EITC. The omission of these items 

from the official definition of income has become increasingly serious in recent years 

because government transfers are now concentrated in benefits that are not considered part of families’ gross cash income. The unfortunate result is that the current 

official poverty measure no longer accurately captures either people’s perceptions of 

poverty or the effect of various policies on people’s resources. 

The 1995 National Research Council Report on Poverty and Subsequent Research 

In response to the increasingly apparent weaknesses of the official poverty measure, the U.S. Congress appropriated funds for an independent scientific study of the 

official poverty measure, which led to the 1995 National Research Council (NRC) 

report, Measuring Poverty: A New Approach. The report recommended that a new 

poverty threshold be calculated by determining, for a reference family of two adults 

and two children, a dollar amount for food, clothing, shelter, and utilities, and then 

increasing that dollar amount by a modest percentage to allow for other needs (such 

as household supplies, personal care, and non-work-related transportation). The dollar amount would be scaled down from the median spending for those four basic 

items using data gathered in the Consumer Expenditure Survey (CE). This threshold would then be adjusted for families of different sizes and types by using an 

equivalence scale. Finally, unlike in the official U.S. poverty measure, the thresholds would be further adjusted for housing cost variations across regions and metropolitan areas of different population sizes. 


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2Many of these papers are available on a Census Bureau website. See http://www.census.gov/ 

hhes/www/povmeas/nas.html. 

Family resources in the NRC report are defined as the value of cash income from 

all sources plus the value of near-money benefits that are available to buy goods 

and services covered by the new thresholds, minus some basic expenses. Cash income sources are the same as those in the current official Census Bureau poverty 

measure. The income definition also includes near-money income: food stamps, housing subsidies, school breakfast and lunch subsidies, home energy assistance, assistance received under the Woman, Infants, and Children nutritional supplement 

(WIC) program (if the data are available), the EITC, and realized capital gains (or 

losses). Basic expenses to be subtracted include taxes, child care and other workrelated expenses of working parents, medical out-of-pocket costs, and, if the data are 

available, child support payments made to another household. Taxes represent a 

nondiscretionary expense in that people cannot spend this money. Child care and 

other work-related expenses (such as commuting expenses) are also subtracted because, the panel argued, these costs are often incurred if parents are to work and 

earn labor market income. 

The release of the NRC report in 1995 was followed by considerable research activity. The Census Bureau released a few subsequent reports that were devoted to 

experimental poverty measures (for example, Short et al. 1999; Short 2001). Over 

50 research papers on experimental poverty measures have been written by researchers in various other government agencies, including the Bureau of Labor Statistics, the Department of Health and Human Services, and the Office of Management and Budget, to name a few, and by researchers at think tanks and various 

universities.2 This research has helped identify strengths and weaknesses in the 

NRC recommendations. The National Academy of Sciences convened another workshop in 2004 to review the elements in the measure. On the whole, workshop participants agreed that the measure represented a significant improvement over the 

current official poverty measure; participants also made additional recommendations on some of the elements (National Research Council 2005). 

Strengths and Weaknesses of Absolute and Relative Poverty Measures 

Technical issues aside, there are conceptual advantages and disadvantages of alternative measures. The main advantage of absolute measures is that they are conceptually easy to understand and intuitively appealing. For example, if there is starvation and hunger, then there is clearly poverty—regardless of how high or low the 

overall standards of living in a society. The main theoretical criticism of absolute 

measures is that what people judge to be poor varies across both time and place. 

Standards of living in the developed and developing world clearly differ. Even within the U.S., as standards of living change, so have people’s perceptions of what poverty means. Poverty lines and minimum subsistence budgets devised by researchers 

and social workers in the early 1900s were, in inflation-adjusted dollars, generally 

between 43 and 54 percent of the subsequent U.S. official poverty thresholds devised 

in 1963 (Fisher 1995). Economists describe this phenomenon as the ‘‘income elasticity of the poverty line’’—the tendency of successive poverty lines to rise in real 

terms as the real income of the general population rises. Some people therefore 

argue that poverty is by its nature relative; people are poor when others think of 

them as poor. 

Relative poverty measures address this weakness of absolute measures. Relative 

measures are explicitly based on the notion that poverty is relative to a society’s 

existing standards of living. Implicit is that people are social beings who operate 

within relationships. People whose resources are significantly below the resources 

of others, even if they are physically able to survive, may not be able to participate 

adequately in social organizations and relationships. Adam Smith (1776) argued 

that to be poor was to lack what was needed to be a ‘‘creditable’’ member of society. 

He noted that in his day (the 18th century), a man needed a linen shirt if he was 

to appear in public ‘‘without shame.’’ 

The most common method of measuring relative poverty is setting a threshold at 

a percentage of the national median household income. For example, analysts comparing poverty across countries in the European Community and the United Kingdom have often specified a poverty threshold at half the median income. Other relative thresholds, such as 40 percent of the median or 60 percent of the median 

household income (the latter is the official European Union poverty threshold), have 

also been used by researchers. 

Relative measures also have advantages and disadvantages. On the positive side, 

advocates argue that the relative notion underlying these measures fits with both 

the historical record and changing views of poverty. Second, sometimes real needs 


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do indeed rise in richer countries. For example, while a car may be a luxury in some 

countries, in a society in which most families own cars, and where public transportation services are also poor, a car may often be needed to find a job and commute 

to work. Moreover, car owners in many places may be required to purchase car insurance, thus leaving families with less disposable income to meet other needs. Such 

requirements would be considered unreasonable in societies with lower standards of 

living. 

On the other hand, some have asserted that relative measures conceptually unappealing, believing that ‘‘poverty’’ should refer to a truly subsistence standard. Relative measures can also, at times, behave in deceptive ways over the short run, particularly during periods of economic growth and recession. In particular, relative 

thresholds sometimes decline in bad times as median incomes fall. This could result 

in a decline in measured poverty rates, even though low-income people are faring 

(and feel themselves faring) worse than before. 

Nevertheless, it is no accident that relative measures have become more common 

in rich industrialized countries and in analyses that involve cross-national comparisons in the developed world. The Organization for Economic Cooperation and Development (OECD) argues, for example, that absolute poverty lines have little meaning 

in such societies, and that poverty should be thought in more in terms of exclusion 

from standards of living generally available to others in the same society (OECD 

2001). Measuring poverty in terms of absolute need—such as starvation—has simply 

become less meaningful because of how infrequently it occurs in these contexts. 

Empirical Analysis 

The analysis below has three parts. I begin by examining how different poverty 

thresholds behave over time, including how they compare to people’s subjective notions of poverty. This is followed by a look at poverty rates derived from different 

measures. Finally, I compare official and NAS poverty rates across demographic 

groups to show what types of differences they produce. 

Trends in Thresholds 

As described earlier, research has shown that people’s opinions of what constitutes poverty increase as standards of living increase. A pair of studies by Denton 

Vaughan (1993, 2004) examined subjective, absolute, and relative poverty thresholds 

in the United States. The subjective poverty thresholds were essentially based on 

the following question last asked by the Gallup Organization in 1993: 

People who have income below a certain level can be considered poor. 

That level is called the ‘‘poverty line.’’ What amount of weekly income 

would you use as a poverty line for a family of four (husband, wife and two 

children) in this community? 

Vaughan estimated a subjective poverty standard back to 1946 based on a few assumptions (see his papers for details). He found that over the period, the subjective 

poverty threshold averaged about 52 percent of the median four-person family income net of taxes—a figure that closely approximates the level at which a typical 

relative poverty threshold is operationalized (see Figure 1). Despite some fluctuations, the subjective poverty needs standard declined from about 56 percent of the 

median income in the 1947–1950 period to about 49 percent in the 1984–1989 period, perhaps indicating that subjective poverty thresholds may rise modestly less 

quickly than relative poverty thresholds (Vaughan, 2004: 16). 

Nevertheless, it is clear that relative thresholds perform better when evaluated 

vis-a`-vis subjective thresholds than the official U.S. poverty threshold, which is an 

absolute threshold. As such, this threshold remained constant over time in real dollars. Vaughan’s (2004) study indicates that while the official poverty threshold projected back to 1947 was higher than the subjective poverty threshold in that year 

(35 percent greater), these thresholds were about equal at the time that Mollie 

Orshansky devised the official poverty thresholds in 1963 and 1964, and by 1989 

the official poverty threshold was in fact only 81 percent of the subjective one. This 

indicates that the official poverty threshold has indeed become less socially meaningful since the 1960s, and considerably less meaningful over time than the relative 

threshold. 


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3The inflation-adjusted measure is termed ‘‘MSI–GA-CPI’’ while the other is ‘‘MS–GA-CE’’ in 

the Census Bureau tables. 

There is no poverty threshold time series based on recommendations by the National Academy of Sciences that spans enough time to appropriately evaluate how 

they compare with subjective notions of poverty, since no version of NAS thresholds 

exist before 1989. The version of the NAS poverty threshold that includes out-ofpocket medical expenses (shown in figure 1) is a little higher than the official 

threshold, though the two thresholds fairly closely tracked each other for most of 

the 1990s. However, the NAS threshold rose modestly more quickly after 1997, 

when real spending on a basic bundle of items rose faster than inflation, largely due 

to relative increases in housing and medical costs (see also U.S. Census Bureau 

2007a). 

Poverty Estimates Using Alternative Measures 

Figure 2 shows poverty rates using different poverty measures in 2005 (except for 

the relative measure, which refers to poverty in 2000). In addition to the official 

poverty measure, the figure includes two NAS-based measures. One has thresholds 

that have been updated only for inflation since 1999, while the other has thresholds 

that have been updated for changes in real spending on basic goods using Consumer 

Expenditure Survey data, as recommended by the NAS panel (U.S. Census Bureau 

2007a).3 The ‘‘disposable income’’ measure is a new one included in a recent Census 

Bureau Report on income and poverty (U.S. Census Bureau 2007b). This measure 

uses the same reference family threshold as is used in the official poverty measure 

(though it uses a different method for adjusting this threshold for families of different sizes and composition). In addition to money income, this measure adds capital gains, imputed rental income, and the value of noncash transfers such as food 

stamps, housing subsidies, and free lunches. It subtracts work expenses (though not 

childcare), federal and state income taxes, payroll taxes, and property taxes for 

owner-occupied homes. The relative poverty measure comes from Luxembourg Income Study (2007), and it uses a threshold equal to half the median household income in the U.S. 


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4 I would have preferred to use the NAS measure with CE-adjusted thresholds rather than 

inflation-adjusted thresholds, but there were no demographic cross-tabulations with the former 

available on the Census Bureau website. 

The poverty rate is highest when using the relative poverty measure (17.6 percent), whose thresholds are higher than those used in the other measures. The ‘‘disposable income’’ measure shows the lowest poverty rate (10.3 percent) because it has 

a more refined measure of family resources that includes in-kind transfers. However, this measure still uses the outdated official thresholds (except for including a 

more refined equivalence scale). 

The figure also shows that the official poverty and the inflation-adjusted NAS poverty rates are the same, at 12.6 percent each. Note that the NAS measure with CEadjusted thresholds is a little higher at 13.5 percent, mainly because spending on 

basic goods has risen in real dollars since 1999. The early 2000s witnessed a rise 

in housing prices in many areas of the country. Figure 3 illustrates these poverty 

rate trends in more detail. 

Table 1 shows how poverty rates vary across demographic groups when using the 

official poverty measure versus the NAS measure with inflation-adjusted thresholds.4 While the overall poverty rates are the same, we see that NAS poverty rates 

are higher for people in married-couple families and the elderly. These differences 

have been noted by previous research (Short et al., 1999). Married-couple families 

are less likely to receive government transfers and often incur higher work-related 

expenses. The elderly often have higher out-of-pocket medical expenses. African 

Americans and people in female-householder families tend to have lower poverty 

rates when using the NAS measure, in part due to greater receipt of non-cash government transfers. 


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Conclusion 

Poverty measurement research efforts in the United States are approaching a 

crossroads. Most people recognize the significant faults of the current official poverty measure, but no new measure has yet taken its place. There has been increasing use of relative measures among academic researchers, as is already common in 

Europe, but not really among those outside the academy. Some poverty researchers 

have also shown interest in the quasi-relative measure recommended by the National Academy of Sciences panel. A key theoretical issue is whether ‘‘poverty’’ 

should refer to a subsistence standard, such as severe malnutrition or starvation (a 

notion associated with absolute poverty measures), or to economic marginalization 

(one associated with relative measures), or to something in between. 

I would argue that the NAS panel-recommended poverty measure addresses many 

weaknesses of both purely absolute and purely relative measures. On the positive 

side, the NAS panel-recommended measure is technically a more refined measure 


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than the current official poverty measure in both the construction of the thresholds 

and the definition of income used. It is designed to gauge the impact of government 

programs on poverty, given that both cash and non-cash government benefits are 

taken into account in the measure of family income. 

Conceptually, the NAS measure has the advantage of increasing, in real terms, 

as spending on basic items increase, as to reflect changes in real standards of living. 

Yet, it is not responsive to changes in spending patterns on other, more discretionary items—such as luxury goods—that may occur as median incomes rise. I believe that this is a desirable property of a poverty measure. Relative poverty thresholds, in contrast, are simply responsive to changes in median income; as such they 

less directly measure the ability to attain basic goods or capabilities. Thus, while 

all of these measures tell us something useful about people’s economic well-being, 

the NAS poverty measure is, in my view, the single most informative poverty measure among them. 

References 

Fisher, Gordon M. 1995. ‘‘Is There Such a Thing as an Absolute Poverty Line 

Over Time? Evidence from the United States, Britain, Canada, and Australia on the 

Income Elasticity of the Poverty Line.’’ U.S. Census Bureau, Poverty Measurement 

Working Paper: http://www.census.gov/hhes/www/povmeas/papers/elastap4.html. 

Iceland, John. 2006. Poverty in America (2nd Edition). Berkeley, CA: University of 

California Press. 

Iceland, John. 2005. ‘‘Measuring Poverty: Theoretical and Empirical Considerations.’’ Measurement 3, 4: 199–235. 

Luxembourg Income Study. 2007. ‘‘Luxembourg Income Study (LIS) Key Figures.’’ 

Available at: http://www.lisproject.org/keyfigures.htm, retrieved July 27, 2007. 

National Research Council. 1995. Measuring Poverty: A New Approach. Panel on 

Poverty and Family Assistance, Constance F. Citro and Robert T. Michael, eds. 

Committee on National Statistics. Washington, DC: National Academy Press. 

National Research Council. 2005. Workshop on Experimental Poverty Measures: 

Summary of a Workshop. Washington, D.C.: National Academy Press. 

Organization for Economic Cooperation and Development. 2001. OECD Employment Outlook. OECD (June). 

Short, Kathleen. 2001. Experimental Poverty Measures: 1999. U.S. Census Bureau, 

Current Population Report, Consumer Income, P60–216. Washington, D.C.: U.S. 

Government Printing Office. 

Short, Kathleen. 2003. ‘‘Material and financial hardship and alternative poverty 

measures 1996.’’ Paper presented at the annual meeting of the American Statistical 

Association, San Francisco. 

Short, Kathleen and Thesia I. Garner. 2002. ‘‘A Decade of Experimental Poverty 

Thresholds: 1990 to 2000.’’ U.S. Census Bureau Poverty Measurement Working 

Paper (June). http://www.census.gov/hhes/www/povmeas/papers/decade.pdf. 

Short, Kathleen, Thesia I. Garner, David Johnson, and Patricia Doyle. 1999. Experimental Poverty Measures: 1990 to 1997. U.S. Census Bureau, Current Population Report, Consumer Income, P60–205. Washington, D.C.: U.S. Government 

Printing Office. 

Smith, Adam. 1776. An Inquiry into the Nature and Causes of The Wealth of Nations. Republished, Oxford: Clarendon Press, 1976. 

U.S. Census Bureau. 2007a. ‘‘Official and National Academy of Sciences NAS 

Based Poverty Rates: 1999 to 2005.’’ U.S. Census Bureau Tables of Alternative Poverty Estimates, available at: http://www.census.gov/hhes/www/povmeas/tables.html, 

retrieved July 27, 2007. 

U.S. Census Bureau. 2007b. The Effect of Taxes and Transfers on Income and Poverty in the United States: 2005. U.S. Census Bureau, Current Population Report, 

P60–232. Washington, D.C.: U.S. Government Printing Office. 

Vaughan, Denton R. 2004. ‘‘Exploring the use of the public’s views to set income 

poverty thresholds and adjust them over time.’’ U.S. Census Bureau Poverty Measurement Working Paper. http://www.census.gov/hhes/www/povmeas/papers/ 

wkppov20_cen.pdf. 

Vaughan, Denton R. 1993. ‘‘Exploring the use of the public’s views to set income 

poverty thresholds and adjust them over time.’’ Social Security Bulletin 56, 2 (summer): 22–46. 

f 

Chairman MCDERMOTT. Thank you, very much. 


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Nancy Cauthen is a Ph.D. from Columbia University from the 

National Center for Children in Poverty, Mailman School of Public 

Health. 

STATEMENT OF NANCY K. CAUTHEN, DEPUTY DIRECTOR, NATIONAL CENTER FOR CHILDREN IN POVERTY, MAILMAN 

SCHOOL OF PUBLIC HEALTH, COLUMBIA UNIVERSITY 

Dr. CAUTHEN. Good morning, and thank you Chairman 

McDermott and members of the Subcommittee for this opportunity 

to testify. 

I want to make three points this morning. First, I want to emphasize why the subject of this hearing—that is, how we measure 

poverty in the United States—is so important. Child and family 

poverty exact a high toll on our society. To reduce both the human 

and societal costs of poverty, we need a better measure than we 

currently have to identify who needs assistance and what kind of 

assistance. 

An extensive body of research has definitively linked economic 

hardship to a range of adverse educational, health, social, and emotional outcomes for children that place constraints on their human 

potential and limit their future productivity. At the same time, 

there is compelling evidence that we can positively affect the developmental trajectories of children affected by poverty, if we invest 

adequate resources and proven strategies and especially if we intervene early. 

If, as a nation, we decide to make a commitment to reduce child 

poverty, which to date we have not done, it is imperative that we 

have the right measures to identify it and quantify its scope. My 

second point is that, as the two previous witnesses have argued, 

that the National Academy of Science’s approach for updating the 

poverty measure would be a welcome improvement over our current measure. But we need to be clear that the NAS alternative 

still represents a minimal level of subsistence, not a decent, modest, standard of living. 

The NAS recommendations produce poverty thresholds that are 

not substantially higher than the current thresholds as we just saw 

on the charts. We are still talking about a poverty level of roughly 

$20,000 to $23,000 a year for a family of four, whether that family 

lives in New York City or rural Talbot County, Georgia, for example—localities which obviously have dramatically different living 

costs. Research consistently shows that families with incomes of up 

to twice the official poverty level experience many of the same material hardships as families who are officially poor. These hardships 

include things like being evicted from one’s apartment, having utilities shut off, going without needed medical or dental care, or having unstable or unsafe childcare. 

Emerging findings from research on child development suggest 

that these types of material hardships are key to understanding 

why poverty harms children, and I would be happy to say more 

about that later. 

My final point is that there has been a considerable amount of 

research, especially over the last decade, about what it really takes 

for families to make ends meet. Many of us have adopted 200 percent of the Federal poverty level as a proxy for low income, that 


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is, a level below which families will have difficulty meeting basic 

needs and will face material hardship. But of course this level varies by region, State and locality. Family budget research conducted 

by my organization and others suggests that families need an income of anywhere between one and a half to over three times the 

current poverty level to make ends meet, and I have provided a 

number of specific examples in my written testimony. 

But even research on family budgets makes conservative assumptions about expenses. This is still an approach that focuses on 

day-to-day needs. The work on basic budgets includes housing, 

food, childcare, health insurance, transportation, payroll and income taxes, and a small amount for other necessities. But none of 

this includes resources for things like household furnishing, a rainy 

day fund, disability or life insurance, or any of the kinds of cushions that would help a family withstand a major medical crisis, a 

job loss or other financial setback. 

Family budget approaches are helpful for understanding what it 

takes for a family to get by but not what it takes to get ahead. 


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1These figures refer to the federal poverty guidelines, which are used for administrative purposes, such as determining financial eligibility for benefit programs. For statistical purposes, researchers use a different—but quite similar—version of the federal poverty measure, the federal 

poverty thresholds, issued by the U.S. Census Bureau. Both the guidelines and the thresholds 

are commonly referred to as the federal poverty level (FPL). 

In conclusion, I would like to suggest that the United States, as 

the wealthiest nation in the world, needs a range of measures to 

assess how children and families are doing that go beyond a minimal level of subsistence. Adopting the NAS recommendations for a 

revised poverty measure would be an important and highly worthwhile first step, but it is not enough. 

Thank you. 

[The prepared statement of Dr. Cauthen follows:] 

Prepared Statement of Nancy Cauthen, Ph.D., Deputy Director, National 

Center for Children in Poverty, Mailman School of Public Health, Columbia University 

Thank you, Chairman McDermott and members of the subcommittee for this opportunity to testify. I’d like to begin by thanking you for holding this hearing and 

addressing the important issue of how we measure poverty. 

My name is Nancy Cauthen, and I am the Deputy Director of the National Center 

for Children in Poverty (NCCP). NCCP is a policy research organization at Columbia University’s Mailman School of Public Health. Our mission is to promote the 

health, economic security, and well-being of America’s most vulnerable children and 

families. NCCP uses research to identify problems and find solutions at the state 

and national levels. 

My testimony will address the following points: 

• Child and family poverty exact a high toll on our society, so it is critical that 

we measure it in a way that allows us to best identify who needs assistance 

and what kinds of assistance. 

• Although the National Academy of Sciences 1995 recommendations and subsequent refinements for updating the official poverty measure offer the most 

promising approach, the thresholds would still be too low to identify all those 

who need help. 

• To improve child and family well-being, we must address not only income poverty but also material hardship. 

• Family budgeting approaches provide an alternative way to understand what it 

takes for families to meet their basic needs and to achieve a reasonable standard of living. 

What’s at Stake: Why Poverty Matters 

There is now abundant evidence that not only does poverty create hardship and 

adversity for those who experience it, but poverty also exacts a high toll on our entire society. Testimony presented before the full Ways and Means Committee in 

January estimated that child poverty costs the United States $500 billion per year, 

which is roughly equivalent to 4 percent of Gross Domestic Product. These costs are 

attributed to reductions in productivity and economic output, increases in crime, 

and increases in health expenditures (Holzer, Schanzenbach, Duncan, and Ludwig 

2007). A report prepared by the General Accounting Office and presented at the 

same hearing also found that poverty has large negative economic and social impacts (Nilsen 2007). 

These and many other studies point to the seriousness of child poverty as a longstanding, nationwide problem. Using our current poverty measure, in 2005, 13 million children—18 percent of children in the United States—were growing up in families with income below the federal poverty level, which in 2007 is $17,170 for a family of three and $20,650 for a family of four (Fass and Cauthen 2006).1 But as I 

will argue, these figures significantly underestimate the numbers of children living 

in families who struggle to make ends meet. Considerable research indicates that 

it takes, on average, an income of twice the federal poverty level to meet basic 

needs. Using this definition of low income, 39 percent of children are living in families that are struggling financially. 


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The Effects of Income Poverty on Children 

An extensive body of research literature has definitively linked economic hardship 

to a range of adverse educational, health, and social outcomes for children that limit 

their future productivity (for reviews of this literature, see Gershoff, Aber, and 

Raver 2003; Cauthen 2002). Poverty can impede children’s cognitive development 

and their ability to learn. It can contribute to behavioral, social, and emotional problems. And poverty can contribute to poor health among children. 

Research also indicates that the strength of the effects of poverty on children’s 

health and development depends in part on the timing, duration, and intensity of 

poverty in childhood. The risks posed by poverty appear to be greatest among children who experience poverty when they are young and among children who experience persistent and deep poverty. The negative effects of poverty on young children, 

troubling in their own right, are also cause for concern given that these effects are 

associated with difficulties later in life—teenage childbearing, dropping out of 

school, poor adolescent and adult health, and poor employment outcomes. 

As discouraging as this research might be, there is compelling evidence that we 

can positively affect these trajectories by investing adequate resources in proven 

anti-poverty strategies. Research is clear that we must reach children in poor families when they are very young and simultaneously address the needs of their parents (Shonkoff and Phillips 2000). 

A holistic approach to reducing child poverty requires increasing family incomes, 

improving parental employment outcomes, investing in high-quality early care and 

learning experiences, and strengthening families. I do not mean to downplay the 

enormity of the task (Haskins 2007)—it would require a huge financial commitment 

as well as tremendous political will. But the point is simply that it’s possible—the 

evidence is clear that in the long term, sound investments in the healthy development of children can increase economic productivity and improve overall prosperity, 

while reducing inequality (Knitzer 2007). 

Increasing Family Income Improves Child Outcomes 

More than a decade of research shows that increasing the incomes of low-income 

families—net of other changes—can positively affect child development, especially 

for younger children (for a review, see Cauthen 2002). Experimental studies of welfare programs offer some of the strongest evidence to date about the importance of 

income. For example, welfare programs that increase family income through employment and earnings supplements have consistently shown improvements in 

school achievement among elementary school-age children; other studies have also 

shown links between increased income and improved school readiness in young children. 

In contrast, welfare programs that increase levels of employment without increasing income have shown few consistent effects on children. Moreover, findings from 

welfare-to-work experiments show that when programs reduce income, children are 

sometimes adversely affected. Other studies have shown links between increased income and reductions in behavioral problems in low-income children and youth 

(Costello, Compton, Keeler, and Angold 2003). It is not just the amount of income 

that matters but also its predictability and stability over time; research has shown 

that unstable financial situations also can have serious consequences for children 

(Wagmiller, Lennon, Kuang, and Aber 2006). 

Reducing the consequences of child poverty will require more than increasing family incomes. But too often, policy discussions about reducing child poverty focus only 

on the symptoms of poverty—low educational achievement, social and behavioral 

problems, and poor health. Yet poverty itself is the single biggest threat to healthy 

child development: improving child outcomes requires explicit attention to lifting 

families up economically. 

Determining the Best Way to Measure Poverty 

For quite some time, there has been a consensus among social scientists that the 

current poverty measure needs to be improved. The United States measures poverty 

by a standard developed more than 40 years ago, using data from the 1950s that 

indicated families spent about one-third of their income on food. The official poverty 

level was set by multiplying food costs by three. Since then, the figure has been updated annually for inflation but the methodology has otherwise remained unchanged. The federal poverty level is adjusted by family size but is the same across 

the continental U.S. 

The Current Measure 

The usefulness of the current measure has declined over time for two reasons 

(Cauthen and Fass 2007): 


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1. The poverty thresholds—that is, the specific dollar amounts—are too 

low because they are based on outdated assumptions about family expenditures. 

Food now comprises about one-seventh of an average family’s expenditures—not 

one-third as was assumed under the original poverty measure. At the same time, 

the costs of housing, child care, health care, and transportation have grown disproportionately. Thus, the poverty level no longer reflects the true cost of supporting 

a family at a minimally adequate level. In addition, the current poverty measure 

is a national standard that does not adjust for the substantial variation in the cost 

of living from state to state and among urban, suburban, and rural areas. 

2. The method used to determine whether a family is poor does not accurately count family resources, overestimating resources for some and 

underestimating them for others. 

When determining whether a family is poor, income sources counted include earnings, interest, dividends, Social Security, and cash assistance. But income is counted 

before subtracting payroll, income, and other taxes, overestimating how much families have to spend on basic needs. And the method understates the resources of families who receive some types of government assistance because the federal Earned 

Income Tax Credit is not counted nor are in-kind government benefits—such as food 

stamps and housing assistance—taken into account. 

Thus, by not reflecting an accurate picture of family expenses and resources, one 

unfortunate consequence of the way we currently measure poverty is that the measure cannot be used to evaluate the effectiveness of the very programs designed to 

help alleviate poverty. 

The 1995 National Academy of Sciences Recommendations 

Social scientists have been debating the usefulness of the current poverty measure 

for quite some time. The most extensive effort to date to address the concerns about 

the measure began with the work of a distinguished panel of experts appointed by 

the National Academy of Sciences (NAS) at the behest of Congress. In the decade 

since the panel’s report was released in 1995 (National Research Council 1995), social scientists at the U.S. Bureau of the Census and the Bureau of Labor Statistics, 

as well as at universities and research centers, have continued to build on the panel’s work. 

To address the primary concerns about the current poverty measure, the NAS 

panel recommended that: 

1. The poverty threshold comprise a budget for food, clothing, and shelter. 

The amounts budgeted would be based on expenditure data, and the figures would 

be updated annually. The shelter amount would include utilities, and the threshold 

would allow a small additional amount for other common needs (such as household 

supplies, personal care, and non-work-related transportation). The panel discussed 

whether the measure should be adjusted for regional differences in living costs. This 

point has generated considerable debate and contention—the concerns are both technical and political. 

2. The measure of resources include cash and near-cash disposable income that is available for basic needs that are common to all families. 

The resource measure would exclude certain expenses that are non-discretionary 

for the families that incur them (e.g., work-related expenses such as child care and 

out-of-pocket medical care expenses). But it would include in-kind benefits (e.g. food 

stamps, subsidized housing, school lunches, and home energy assistance). The measure is calculated after taxes, so payroll taxes would be excluded, but the Earned Income Tax Credit and other tax credits would be included in determining family resources. 

Researchers do not agree on all the specific technical aspects of the NAS and subsequent recommendations. But there is almost universal agreement among social 

scientists that the NAS recommendations would provide the nation with a far more 

useful poverty measure than the current one. And pragmatically, the NAS approach 

is viewed as the most viable option for creating a bipartisan political consensus 

around a new measure. 

The NAS recommendations would undoubtedly be an important improvement over 

what we have. And they also provide a way to measure the impact of poverty reduction programs, most of which did not exist when the original measure was created. 


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What Are We Measuring? 

But even if we reach a consensus on a revised poverty measure along the lines 

of the NAS recommendations—and I hope we do—we need to be clear about what 

we are measuring. Both the current measure and the NAS versions attempt to 

quantify a minimal level of subsistence below which we have agreed, as a society, 

that no individual or family should fall. 

Any judgment about what constitutes a minimally acceptable level of subsistence 

is, of course, normative. Human beings can survive on a variety of income levels. 

In 2005, 8 percent of children in the U.S.—nearly 6 million children—were surviving 

despite living in households with incomes of less than half the poverty line, which 

was just under $10,000 annually for a family of three. Yet, in the wake of Hurricane 

Katrina, many Americans seemed shocked to learn that we still have a sizable number of desperately poor people in our country. 

In short, questions about how we define poverty require value judgments not only 

about how to define a minimal level of subsistence but whether that is in fact a decent and just way to define poverty in a wealthy society. 

Implementing the NAS recommendations produces poverty thresholds that are 

not vastly different from the current ones, which means they do not reflect the substantial improvement in living standards that have occurred in the U.S. over the 

last 40-plus years. When the current poverty measure was developed, the threshold 

for a family of four equaled about 50 percent of the median income for a four-person 

family. But over time, that percentage has dropped dramatically. Today the poverty 

threshold for a four-person family represents only about 30 percent of the median 

income (Ziliak 2005). 

The question becomes: for what purpose are we measuring poverty and what do 

we want to do with the information? One of the most compelling reasons to establish 

an agreed upon measure of poverty is to identify who in the population is in need 

of assistance—and what kind of assistance—and the scope of that need. To the degree that we want a poverty measure that can inform policy, especially with regard 

to improving the well-being of children and families, we may need different kinds 

of measures. 

The Difference Between Poverty and Material Hardship 

The current poverty line does not accurately predict the likelihood that a family 

will experience material hardship (Iceland and Bauman 2007). Examples of material 

hardships include being evicted, missing rent payments, having utilities shut off, 

going without needed medical or dental care, or having unstable child care. Research consistently shows that families with income of up to twice the official poverty level experience many of the same hardships as families who are officially 

poor—while families with income above twice the poverty line are substantially less 

likely to experience material hardships. Overall, about two thirds of families with 

income between 100 and 200 percent of the federal poverty level experience one or 

more material hardships such as not having enough food or having utilities turned 

off because of inability to pay bills (Boushey, Brocht, Gundersen, and Bernstein 

2001; Amey 2000). Some hardships, such as difficulties paying for child care and 

health care, are common among middle-income families as well. 

A critical finding emerging from the child development literature is that material 

hardships play an important role in determining whether or not children will be 

negatively affected by growing up in a low-income family. Not surprisingly, facing 

such hardships is associated with diminished parental investments in children and 

increased parental stress, which in turn negatively affect children (Gershoff, Aber, 

Raven, and Lennon 2007). It is now clear that to reduce the effects of poverty on 

children, we need to increase family incomes and reduce the experience of material 

hardship (Gershoff 2003). 

Any new poverty thresholds based on the NAS recommendations would not be 

substantially higher than current thresholds. Alternative poverty levels calculated 

by the Census Bureau that incorporate many of the NAS suggestions indicate that 

the threshold for a two-parent family with two children would increase by about 

$3,000 (Bernstein 2007). Since research indicates that families with incomes of up 

to twice the current poverty thresholds face high levels of material hardship, it 

seems likely that even with an NAS-based alternative, there will continue be many 

families who are deemed non-poor by the new measure while not being able to meet 

their basic needs. 

Measuring What It Takes to Make Ends Meet 

There has been a considerable amount of research over the last decade about 

what it takes to make ends meet. One such effort was spearheaded by Diana Pearce, 

for Wider Opportunities for Women, who developed a methodology for creating ‘‘SelfVerDate Aug 31 2005 00:09 Oct 16, 2008 Jkt 043757 PO 00000 Frm 00037 Fmt 6633 Sfmt 6621 E:\HR\OC\43757.XXX 43757

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2 Basic Family Budgets vary based on the number of children in a family but not their ages. 

3For a detailed description of the methodology used to create NCCP’s Basic Needs Budgets, 

see the User Guide for the Family Resource Simulator and consult the section on ‘‘Calculating 

Family Expenses.’’ 

Sufficiency Standards’’ (Pearce 2001, 2006). The standards quantify how much 

money a family needs to cover basic expenses, such as housing, food, child care, 

transportation, health insurance, and payroll and income taxes; a small amount is 

also allocated for other necessities (examples include clothing, diapers, household 

items, and school supplies). The standards vary by locality—to account for variations in the cost of living—and by family type (two-parent or single-parent and the 

number and ages of children). The budgets assume that the families receive no public benefits. Self-Sufficiency Standards have been developed for 36 states. 

The Economic Policy Institute (EPI) undertook a similar effort and created ‘‘Basic 

Family Budgets’’ (Berstein, Brocht, and Spade-Aguilar 2000; Allegretto 2005). The 

methodology differs somewhat from that for the Self-Sufficiency Standards, but the 

concept is the same—what does it take for different types of families in different 

localities to cover the costs of basic living expenses?2 EPI has calculated basic budgets for over 400 localities across the country. The organization characterizes Basic 

Family Budgets as providing ‘‘a realistic measure of the income required to have a 

safe and decent though basic standard of living.’’ 

Building on this earlier work, NCCP has created ‘‘Basic Needs Budgets’’ for different family types in over 80 localities in 14 states plus the District of Columbia.3

We developed these budgets in conjunction with a project, Making ‘‘Work Supports’’ 

Work, that analyzes the effects of federal and state work support programs—earned 

income tax credits, child care and housing assistance, and food stamps—on the ability of low-wage workers to make ends meet. 

Despite some differences in methodology, all three of these efforts provide additional evidence for the finding that families on average need an income of twice the 

current poverty level to cover the costs of basic expenses. NCCP has found that, depending on locality, this figure ranges from about 150 to over 300 percent of poverty. For example, Table 1 shows that it takes an annual income of about $30,000 

for a single-parent family with two children to make ends meet in Atlanta, Georgia, 

but a similar family living in Rockville, Maryland would need over $50,000. 

NCCP’s Basic Needs Budgets, as well as the Self-Sufficiency Standards and EPI’s 

Basic Family Budgets, include only the most basic daily living expenses and are 

based on modest assumptions about costs. For example, the budgets in Table 1 assume that family members have access to employer-sponsored health coverage when 

not covered by public insurance, even though the majority of low-wage workers do 

not have access to employer coverage. NCCP’s Basic Needs Budgets do not include 

the cost of out-of-pocket medical expenses for copayments and deductibles, which 

can be quite costly, particularly for families with extensive health care needs. The 

budgets do not include money to purchase life or disability insurance or to create 

a rainy-day fund that would help a family withstand a job loss or other financial 

crisis. Nor do they allow for investments in a family’s future financial success, such 

as savings to buy a home or for a child’s education. In short, these budgets indicate 

what it takes for a family to cover their most basic living expenses—enough to get 

by but not enough to get ahead. 


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Implications 

These various measures—poverty measures, measures of material hardship, basic 

budgets—are not alternative ways of looking at the same thing, but rather they provide mechanisms for capturing and quantifying different phenomenon, which may 

require different (if overlapping) policy responses. Given this, what are the implications of adopting a new poverty measure along the lines of the NAS recommendations? 

First, we would need to acknowledge that the official poverty level in the United 

States would remain a measure of deprivation and hardship rather than a measure 

of a decent, if modest, standard of living. Such a measure would still—if more accurately—identify only the most needy. Many families above this level still need assistance. 

Second, we would need to think through the implications for programs that currently use the poverty level (or a percent of the poverty level) to determine eligibility. One possibility is to structure our assistance programs in ways that reflect 

the fact that working families with incomes above the poverty level need assistance 

with basic needs. The provision of public health insurance is one such model to build 

on—for example, providing free health insurance to families below (or near) the poverty line, and subsidized health insurance to somewhat higher income families, with 

premiums and copayments that gradually rise with family income. Similarly, a child 

care program informed by this understanding might provide free or very low-cost 

care to families living below the poverty line and reduced-cost child care to those 

above poverty but below a basic budget level (with the government subsidy decreasing as income increases). Cash assistance programs, on the other hand, would remain targeted at officially poor families, who have very low (or no) earnings (most 

state eligibility limits for cash assistance are currently well below the poverty level). 

Third, I would hope that adopting the NAS approach for measuring income poverty would be accompanied by government efforts to also measure hardship, asset 

poverty, and other measures that inform us about how families are doing. Too many 

of our current policies are ‘‘too little, too late.’’ We typically wait until children and 

families are in deep trouble before we assist them, rather than investing heavily in 

prevention—we should help all families succeed instead of trying to patch them up 

once they have fallen. But we will need better measures—and concepts broader than 

poverty—to do so. 

References 

Allegretto, Sylvia A. 2005. Basic Family Budgets: Working Families’ Incomes 

Often Fail to Meet Living Expenses Around the U.S. Washington, DC: Economic Policy Institute. 

Amey, Cheryl. 2000. Families Struggling to Make it in the Workforce: A Post Welfare Report. Washington, DC: Children’s Defense Fund. 

Bernstein, Jared. 2007. More Poverty than Meets the Eye (Economic Snapshots 

April 11, 2007). Washington, DC: Economic Policy Institute. 

Bernstein, Jared, Chauna Brocht, and Maggie Spade-Aguilar. 2000. How Much is 

Enough? Basic Family Budgets for Working Families. Washington, DC: Economic 

Policy Institute. 

Boushey, Heather, Chauna Brocht, Bethney Gundersen, and Jared Bernstein. 

2001. Hardships in America: The Real Story of Working Families. Washington, DC: 

Economic Policy Institute. 

Cauthen, Nancy K. 2002. Policies that Improve Family Income Matter for Children. New York: National Center for Children in Poverty, Mailman School of Public 

Health, Columbia University. Available at: http://nccp.org/publications/pub— 

480.html. 

Cauthen, Nancy K. and Sarah Fass. 2007. Measuring Income and Poverty in the 

United States. New York: National Center for Children in Poverty, Mailman School 

of Public Health, Columbia University. Available at: http://nccp.org/publications/ 

pub—707.html. 

Costello, E. J, Compton, S., Keeler, G., Angold, A. 2003. ‘‘Relationships between 

poverty and psychopathology: A natural experiment.’’ Journal of the American Medical Association, 290(15), 2023–2029. 

Fass, Sarah and Nancy K. Cauthen. 2006. Who Are America’s Poor Children: The 

Official Story. New York: National Center for Children in Poverty, Mailman School 

of Public Health, Columbia University. Available at: http://nccp.org/publications/ 

pub—684.html. 

Gershoff, Elizabeth T. 2003. Low Income and Hardship Among America’s Kindergartners. New York: National Center for Children in Poverty, Mailman School of 

Public Health, Columbia University. Available at: http:// /nccp.org/publications/ 

pub—530.html. 


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Gershoff, Elizabeth T., J. Lawrence Aber, and C. Cybele Raver. 2003. Child poverty in the United States: An evidence-based conceptual framework for programs 

and policies. In F. Jacobs, D. Wertlieb, & R. M. Lerner (Eds.), Handbook of Applied 

Developmental Science: Promoting Positive Child, Adolescent, and Family Development through Research, Policies, and Programs (Vol. 2, pp. 81—136). Thousand 

Oaks, CA: Sage. 

Gershoff, Elizabeth T., J. Lawrence Aber, C. Cybele Raver, and Mary Clare 

Lennon. 2007. ‘‘Income is not enough: Incorporating material hardship into models 

of income associations with parent mediators and child outcomes.’’ Child Development, 78, 70–95. 

Haskins, Ron. 2007. Alleviating Child Poverty in the Long Run. Testimony before 

the Chairman, Committee on Ways and Means, House of Representatives. January 

24, 2007. 

Holtzer, Harry, Diane W. Schanzenbach, Gregory J. Duncan, and Jens Ludwig. 

2007. The Economic Costs of Poverty in the United States: Subsequent Effects of 

Children Growing Up Poor. Washington, DC: Center for American Progress. 

Iceland, John and Kurt Bauman. 2007. ‘‘Income poverty and material hardship: 

How strong is the association?’’ The Journal of Socio-Economics 36, 376–396. 

Knitzer, Jane. 2007. Testimony on the Economic and Societal Costs of Poverty. 

Testimony before the Chairman, Committee on Ways and Means, House of Representatives. January 24, 2007. Available at: http://nccp.org/publications/pdf/text— 

705.pdf. 

National Research Council. 1995. Measuring Poverty: A New Approach. Panel on 

Poverty and Family Assistance, Constance F. Citro and Robert T. Michael, eds. 

Committee on National Statistics. Washington, DC: National Academy Press. 

Nilsen, Sigrid R. 2007. Poverty in America: Consequences for Individuals and the 

Economy. Testimony before the Chairman, Committee on Ways and Means, House 

of Representatives. Washington, DC: Government Accounting Office. 

Pearce, Diana M. 2001. ‘‘The Self-Sufficiency Standard: A new tool for evaluating 

anti-poverty policy.’’ Poverty & Race, 10 (2). 

Pearce, Diana M. 2006. The Self-Sufficiency Standard for Pennsylvania. Holmes, 

PA: PathWaysPA. 

Shonkoff, Jack P. Deborah A. Phillips. (Eds.). National Research Council & Institute of Medicine. 2000. From Neurons to Neighborhoods: The Science of Early Childhood Development. Washington, DC: National Academies Press. 

Wagmiller, Robert., Mary Clare Lennon, Li Kuang, Philip Alberti, and J. Lawrence Aber. 2006. ‘‘The dynamics of economic disadvantage and children’s life 

chances.’’ American Sociological Review, 71(5): 847–866. 

Ziliak, James. 2006. ‘‘Understanding poverty rates and gaps: Concepts, trends, 

and challenges.’’ Foundations and Trends in Microeconomics, 

f 

1(3), 127–199. 

Chairman MCDERMOTT. Thank you very much for your testimony. 

Douglas Besharov is the Joseph and Violet Jacobs Scholar in Social Welfare Studies at the American Enterprise Institute. 

Mr. Besharov? 

STATEMENT OF DOUGLAS J. BESHAROV, JOSEPH AND VIOLET 

JACOBS SCHOLAR, SOCIAL WELFARE STUDIES AT THE 

AMERICAN ENTERPRISE INSTITUTE 

Mr. BESHAROV. Chairman McDermott, Mr. Weller, and other 

Members of the Committee, it is a pleasure to be here. 

My message, reluctantly, is to tell you why you should not 

change the official measure, and in fact why you cannot do it. I 

come to this conclusion after having gone through a twelve-month 

process of exploring all sorts of options with a blue ribbon group, 

government officials and outside experts. 

In my written testimony, I go through the flaws of the current 

official measure, about which you have heard a great deal. You 

have mentioned them as well: it does a poor job accounting for inflation; does not count market income very well; and it does not 


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take wealth into consideration. (That $750,000 townhouse doesn’t 

even fit in the measure.) It doesn’t subtract taxes. It doesn’t account for changing household composition or changing consumption 

patterns which you also mentioned, Mr. Chairman. It doesn’t deal 

with growing national affluence. It doesn’t even try to deal with geographic differences in expenditures and costs. 

Finally, and most importantly, it doesn’t give credit for our large, 

maybe insufficient, efforts to alleviate poverty. First, I think you 

should not change the official poverty line. My testimony opens 

with Ronald Reagan’s famous quip, ‘‘We declared war on poverty 

and poverty won.’’ That’s only possible because the current measure doesn’t count all the things we do for low-income America. 

Our committee examined two papers that were quite decisive in 

our thinking. One was by Christopher Jencks from Harvard University. His work, like that of a number of other specialists, found 

that the material condition of the poor has improved tremendously 

over the last 30 years. 

We have not talked about how people are actually doing, but 

that’s tremendously important. Another paper, which is from the 

Democrats on the Joint Economic Committee of 2 years ago, analyzes the kinds of changes to the poverty measure that many people have proposed, which suggests that progress and poverty reduction over the past two decades is much greater than the official 

poverty measure would indicate. Anti-poverty programs like the 

EITC, combined with changing family formation patterns, rising 

teen birthrates, and increases in cohabitation, resulted in significant decreases in poverty. 

My point is not that we shouldn’t do everything else that has 

been suggested, but it is essential, as a matter of policy, to be able 

to understand and accept the credit that the tens of billions of dollars of Federal aid now make for low-income people; the analysis 

from the Joint Economic Committee and others—on the left and 

the right—is that we ought to give credit to past efforts, and raising the thresholds without doing anything else negates that possibility. 

That is why I think you shouldn’t change the official measure. 

One quick mention about relative measures of poverty; Western 

Europe is now in the throes of reconsidering relative measures, because as an economy gets richer, and when income dispersion increases as it did in Ireland and is now happening in England and 

in Germany, poverty rises even though the incomes of people at the 

bottom are also increasing. I would say this is why there should 

be many measures. You can have a relative measure but you have 

to couple it with an absolute measure. 

You can potentially have a measure about economic 

marginalization. You just cannot use it as the measure for determining eligibility for food stamps, because I think that we are talking about the true economic margin and marginalization at $40,000 

a year of income. I wouldn’t suggest food stamps for that family. 

Median family income is about $49,000, so this family is pretty 

close to the median. 

Before I run out of time, allow me to suggest why you cannot, 

in my opinion, change the official measure. I say this with all due 

respect, we thought this through a lot, because we were eager to 


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have a success here. First, technically, there is absolutely no agreement about how to correct or geographic differences in the cost of 

living. Just to give you an example, the one attempt that was made 

by the Census Bureau shows that the poverty rate in California 

would go from 13.2 percent to 17.8 percent. 

There is a vast argument about how to value housing. There also 

are large conceptual problems within the NAS approach. Some people think that subtracting the cost of transportation from someone’s 

income who lives in West Virginia, and commutes to Washington 

so that that family can live in a bigger home than those of us closer 

to the city is not a way to measure poverty. That’s also not involved 

in the Federal poverty measure. People want to account for the cost 

of child care, but rarely want to count the $24 billion we spend a 

year on child care subsidies. 

I mention these things, not because I think there is a solution, 

but because I think there is no solution to the technical and conceptual problems of changing the poverty measure in a way that 

it can be used for setting eligibility for programs, and that’s the 

key point I want to make here. 

Today’s debate in the House is about multiples of the poverty 

line, not because Congress thinks that the poverty line itself is 

magical, but because the Congress, in its political wisdom, is finding a more absolute number within that. 

I have clearly run out of time here. I would be delighted to answer any questions. 

[The prepared statement of Mr. Besharov follows:] 


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f 

Chairman MCDERMOTT. Thank you. Mark Greenberg is the 

Executive Director of the taskforce on poverty, Center of American 

Progress Institute. 

Mark? 

We will probably have another vote, and then we’ll have a little 

bit, and so understand, we are going to get up and go. Whatever 

you have got to say, say it up front. 

STATEMENT OF MARK GREENBERG, DIRECTOR, TASK FORCE 

ON POVERTY, CENTER FOR AMERICAN PROGRESS INSTITUTE 

Mr. GREENBERG. We are aware and, Mr. Chairman and members of the Subcommittee, first let me thank you for holding this 

hearing, for the other hearings you have held over the course of the 

year in efforts to bring renewed attention to the importance of addressing poverty in the United States. 


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For purposes of my oral testimony right now, I want to do three 

things. I want to briefly focus on why, in my view, it is important 

to develop and improve measure of poverty. I want to talk about 

some principles to guide the process and then make some suggestions for how you might move forward. 

As indicated, I have been serving as the Director of a task force 

on poverty for the Center for American Progress, and we actually 

spent the better part of the year working on how to make the case 

for why the nation should address poverty and making recommendations for what should be done about it. In the course of 

that, we did a lot of consultation around the country and as we did 

so, our principal focus was not on the measure of poverty, but a 

couple of things kept coming up. First, when we would talk to people around the country about approaches to addressing poverty, the 

recurrent theme is that it is problematic to start with the existing 

measure, because the existing measure is rarely useful as a way of 

measuring need, because it is so low in relation to the cost of living. 

The existence of things like family budgets, of self-sufficiency 

standards, of setting program eligibility as the multiple of the poverty line, of a set of research that increasingly treats 200 percent 

of poverty as a measure of low income. All those are different ways 

in which people are saying we need a better measure to reflect 

what it costs to make ends meet, that the poverty line simply does 

not reflect it. 

It is also true that it is a problem in my view that the existing 

measure does not well pick up the effects of policy. When we looked 

at a set of policies for improving family well-being, expanding the 

earned income tax credit, raising the child tax credit, improving 

childcare assistance, increasing housing subsidies, in each case we 

faced the issue that if you make a set of changes which will clearly 

improve well-being, it is not going to be picked up in the official 

measure. It is, in my view, important that we have an effective 

measure that both looks at what families need to get by and then 

does effectively measure the resources that are available to them 

to do it. 

That really is crucial as a means of developing policies for moving ahead. Now, I also think that the case for developing a better 

poverty measure had been made in a thoughtful and compelling 

way by the National Academy of Sciences panel a dozen years ago, 

and when they did so, I think a central insight from their approach 

is that in thinking about how to address poverty, the first question 

should not be what income do we count, but rather, what is it that 

we are trying to measure. 

The poverty line needs to be something where we can articulate 

what it is trying to measure. It needs to be a reasonable one, something that is understandable to the public, something that is broadly acceptable, and the current measure fails to meet that standard. 

It does so for many of the reasons Mr. McDermott talked about in 

his opening, that when one tries to explain to anyone that this was 

a measure developed in the early 1960s, based upon a food plan at 

that time multiplied by three, and we have only since then adjusted for prices, people do not understand how that is a useful 


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way of thinking about what it is that families need to get by. So, 

we need a better measure to do it. 

The National Academy of Sciences also focused on what they 

refer to as internal consistency in thinking about the measure, and 

essentially what they meant by that is that you want to start by 

what it is that you are trying to measure, then develop a measure 

of it. That if you are trying to measure the cost, if you think what 

should be in the poverty measure is a set of basic needs, articulate 

what those are, determine what the costs of those are, count the 

resources that are available to meet them, don’t count the resources that are not available to meet them. 

In my view, that is a thoughtful, reasonable way to think about 

moving ahead. There can certainly be and indeed there are real 

disagreements about what we should think about as the basic need. 

In the case of the National Academy of Sciences panel, the approach they took was to essentially say we should look at food, 

clothing, shelter, and a little more. I think a compelling case can 

be made, but that is an inadequate way of looking at basic needs, 

that we need to have a broader sense of it. 

That it is not that everything beyond that is. If we are thinking 

about what it is that children need to grow up in a healthy, developmentally appropriate way to be contributing members of society, 

we all aspire to more than food, clothing and shelter. So it makes 

sense to build that in. Similarly, if we think about the recognized 

importance of people being able to save for education or homeownership, for retirement, or for the future needs of children, we 

would want to build in things like that. So, a whole set of things 

ought to be considered, but I would most emphasize that I think 

the NAS overall framework offers a useful starting point for moving forward. 

So, let me just quickly say, in terms of a concrete recommendation for the panel, while the NAS has a useful approach, it clearly 

is a starting point. There are a lot of both conceptual and technical 

issues still to be resolved. So, I would make two broad recommendations to you. One is that I believe it would be useful to 

direct the Census Bureau to report back to you, and in that report 

for them to address to what extent it is feasible to replace the existing measure with something using the NAS as a starting point. 

Second, what are the kinds of data limitations that affect the 

ability to do that and the ability to measure poverty well. 

What would need to be done to address them? What would it cost 

to do that? So, that Congress can have that in front of you; and, 

then, because it has been a dozen years since the NAS report, what 

does the research and experimentation and analysis since then tell 

us about whether particular recommendations ought to be reconsidered or new ones built in. 

My final point then is, as several other panelists have suggested, 

it is important to have additional measures. No single measure is 

going to reflect everything that we would want to know. Just as we 

have a poverty measure, it would be useful to develop this broader 

measure of a make ends meet or a decent living standard. It might 

be useful to have the measure of relative poverty in relation to median income. It would be useful to have a measure of asset poverty. 

[The prepared statement of Mr. Greenberg follows:] 


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1Task Force members were Angela Glover Blackwell, Founder and CEO, PolicyLink (cochair); Peter B. Edelman, Professor of Law, Georgetown University (co-chair); Rebecca 

Blank, Dean, Gerald R. Ford School of Public Policy, Henry Carter Adams Collegiate Professor 

of Public Policy, University of Michigan; Linda Chavez-Thompson, Executive Vice President, 

AFL–CIO; Reverend Dr. Floyd H. Flake, President, Wilberforce University; Wizipan 

Garriott, Law Student and Board President of the He Sapa Leadership Academy; Maude 

Hurd, National President, ACORN; Charles E. M. Kolb, President, Committee for Economic 

Development; Meizhu Lui, Executive Director, United for a Fair Economy; Alice M. Rivlin, 

Senior Fellow and Director, Greater Washington Research Program, Brookings Institution; Barbara J. Robles, Associate Professor, Arizona State University; Robert Solow, Professor Emeritus, Massachusetts Institute of Technology; Dorothy Stoneman, Founder and President, 

YouthBuild USA; and Wellington E. Webb, Former Mayor of Denver. 2Task Force on Poverty, From Poverty to Prosperity: A National Strategy to Cut Poverty in 

Half (Center for American Progress, April 2007), available at http://www.americanprogress.org/ 

issues/2007/04/pdf/poverty_report.pdf. 

Prepared Statement of Mark Greenberg, Executive Director, Task Force on 

Poverty, Center for American Progress 

Mr. McDermott and Members of the Subcommittee: 

Thank you for holding this hearing and others this year, bringing renewed attention to the importance of addressing poverty in America. In this testimony, I will 

provide some brief background, and then discuss why the method for measuring 

poverty should be updated, some principles that should guide the effort and recommendations to move the process forward. 

I am the director of the Task Force on Poverty at the Center for American 

Progress (CAP), a non-profit, non-partisan public policy think tank in Washington, 

D.C. I am on leave from the Center for Law and Social Policy, where I was the Director of Policy. CAP’s fourteen-member Task Force1 was charged with making a 

case for why the nation should address poverty and proposing a strategy for how 

to do so. In April, CAP’s Task Force released its report, From Poverty to Prosperity: A National Strategy to Cut Poverty in Half.2

Our Task Force’s principal focus was not on the definition of poverty, but rather 

strategies for addressing it. Nevertheless, the question of how poverty should be defined came up repeatedly in our efforts, in two significant and related ways. 

• First, when seeking the views of state and local actors about strategies to reduce poverty, one of the most common initial observations was that it was rarely useful to use the official poverty line as a measure of need, because it was 

so low in relation to living costs. In recent years, the increased reliance on approaches like self-sufficiency standards, family budgets, and setting program 

eligibility at some multiple of the poverty line is a direct response to concerns 

that the poverty line simply doesn’t adequately reflect the amounts that families need in order to get by. • Second, as our Task Force considered policy responses to reduce poverty, we 

faced, in practical terms, an issue that is routinely recognized in the academic 

discussions of poverty measurement. Many initiatives that would clearly improve economic well-being for low-income families would have no effect on poverty under official measures, because the official measure does not count the effects of tax policy and near-cash benefits or adjust for work-related costs. For 

example, expanding the Earned Income Tax Credit or Child Tax Credit would 

not reduce the official poverty rate (except indirectly if it affected employment), 

even though it would increase family resources. Expanding child care assistance 

would not reduce the official poverty rate (except by raising employment) even 

though it would defray costs that families face in going to work. Expanded 

housing subsidies or improved food stamp participation rates would also not affect the official poverty rate. 

We ultimately addressed the first issue by emphasizing in our report that while 

37 million Americans were living in poverty, a far larger group faced the challenge 

of making ends meet, and by developing policy proposals that were sensitive to and 

grounded in this reality. We addressed the second issue by using a modified measure of poverty when calculating the poverty reduction effects of our proposals, drawing upon recommendations from the National Academy of Sciences’ Panel on Poverty and Family Assistance: Concepts, Information Needs and Measurement Methods in Measuring Poverty: A New Approach (National Research Council, 1995). 

This modified measure counted the effects of tax policy, treated food stamps and 

housing benefits as income, and deducted out-of-pocket child care expenses from income. Only in doing so could one fully see the real effects of a set of policies in improving family well-being. At the same time, we could not readily incorporate every 

NAS recommendation into our analysis, and only adjusted poverty thresholds to the 


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3For a detailed discussion of the methodology, see Linda Giannarelli, Laura Wheaton, and 

Joyce Morton, Estimating the Anti-Poverty Effects of Changes in Taxes and Benefits with TRIM3 

(Urban Institute, April 25, 2007), available at http://www.urban.org/publications/411450.html. 4 Harry Holzer, Diane Whitmore Schanzenbach, Greg J. Duncan, and Jens Ludwig, al., The 

Economic Costs of Poverty: Subsequent Effects of Children Growing Up Poor (Center for American Progress, January 24, 2007), available at http://www.americanprogress.org/issues/2007/01/ 

pdf/poverty_report.pdf. 

extent necessary to begin our analysis with the same number of people in poverty 

as would be the case under official measures.3 Our experience underscored the need 

for the federal government to improve and modernize the definition of poverty, in 

order to develop both more realistic thresholds, a better measure of resources, and 

a more effective way to gauge the effects of government policies. 

While my principal focus in this testimony is on the need to improve the poverty 

measure, I want to begin by emphasizing that we get much valuable information 

from the current one. The current measure is a useful and reliable indicator of the 

extent of serious deprivation, and of the extent of disparities across races, sex, and 

ages, workers and non-workers, and other groups. Most importantly, year-to-year 

changes help us understand whether more or fewer families are struggling to get 

by. Alternative measures—including those based on the National Academies of 

Sciences recommendations—show different poverty levels, but typically reflect quite 

similar trends because the largest sources of income and, thus, the largest ‘‘driver’’ 

of poverty rates will be cash income from sources that are included in the official 

measure. 

I believe the poverty measure can be significantly improved. Still, the shortcomings of the current measure should not be used to dismiss the information provided by the current poverty measure about the state of our nation. 

Why Should the Measure of Poverty be Updated? 

There are few, if any, defenders of the current poverty measure. It remains in 

place for two principal reasons. First, there are a host of genuinely difficult conceptual and technical issues to be resolved in determining how poverty should be measured. Second, adopting any alternative measure is fraught with political controversy 

because it will likely result in either more or fewer people reported as ‘‘poor’’ (either 

immediately or in the long run); greater or lesser measured poverty rates for particular demographic, racial, and geographical and other subgroups; and uncertain 

implications for determining eligibility and distributing funds for individuals, localities, and states. 

Given these challenges, why is it important to update the measure of poverty? 

No single statistic can capture every dimension of need, consumption, hardship 

or well-being. An income statistic measures, at best, income, but not how that income is spent; what would have happened if it had been spent differently; or whether a family has greater or lesser needs due to particular individual, family, neighborhood, or regional factors. An income statistic may provide little or no insight into 

factors that affect current and future well-being such as health, education, social 

and family relationships, community conditions, and others. Moreover, any time a 

line is drawn, differences between those slightly below and slightly above the line 

may be minimal or non-existent. And, even families with identical incomes and 

needs may be very differently situated based on the presence or absence of assets, 

which are reflected at best only indirectly through any income-based poverty measure. 

Moreover, important dimensions of need cannot be measured by income alone. 

Policy efforts in Europe often situate their discussions of income poverty within a 

broader context of social inclusion, a term used to encompass concern about those 

outside the social mainstream who are unable to fully participate in the normal activities of citizens. The idea of social inclusion emphasizes that integration of people 

into the social mainstream calls for addressing the range of issues that prevent full 

participation in society, and that this necessarily calls for going beyond a narrow 

focus on income. 

Accordingly, the poverty measure cannot and should not be the sole measure of 

need or well-being, but it is important. Research commissioned for CAP’s Task Force 

on Poverty found that the cost to the U.S. economy from children growing up in persistent poverty is in the range of $500 billion a year.4 The poverty measure provides 

a broad picture of the number and characteristics of Americans who are living with 

incomes below a level generally recognized as inadequate to meet crucial needs. 

Moreover, ideally the poverty measure would show the extent of deprivation before 

and after taxes and government transfers, so that there is a clear picture of the exVerDate Aug 31 2005 00:09 Oct 16, 2008 Jkt 043757 PO 00000 Frm 00062 Fmt 6633 Sfmt 6621 E:\HR\OC\43757.XXX 43757

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tent to which government policy is or is not reducing deprivation. As such, it is in 

all of our interests to have a better measure than the current one. 

What are the principal problems with the current measure? Many of the difficulties were catalogued in the thoughtful and balanced 1995 report of the National 

Academy of Sciences panel, Measuring Poverty: A New Approach. Among the 

concerns identified by the NAS panel: 

• the current poverty thresholds cannot be justified as reflecting contemporary 

costs for meeting basic needs; • the poverty measure does not reflect the costs of child care and other work-related expenses; • it does not reflect regional cost variations; • it does not reflect that funds spent to meet health care costs are not available 

to meet other needs; • it does not reflect that funds spent to meet child support obligations are not 

available to meet other needs; • it does not reflect the impact of taxes; and • it does not reflect the provision of near-cash benefits such as food stamps and 

housing assistance. 

Sometimes in discussing poverty measurement, an individual may focus on one 

particular problem with the measure—e.g., that it is too low, or does not count taxes 

or near-cash benefits. An important insight from the NAS panel is the need to look 

at the issues together using an internally consistent approach to measurement. A 

poverty measurement effort should be able to articulate what it is seeking to measure, and its thresholds and rules about which resources are counted should be consistent with each other and the underlying purpose. For example, if the goal is to 

measure whether families have sufficient resources to meet their food, clothing, and 

shelter needs, then it makes sense to set a threshold that reflects the resources 

needed to do so, to count resources that are available to meet the needs, and not 

count as resources items that are not available to meet those needs. But if, for example, the threshold is not constructed to include the amounts needed to pay for 

medical costs, child care, and work expenses, then the amounts families must pay 

for those costs should not be counted as available to meet other needs. Alternatively, 

if the goal is to measure whether families have resources to meet a broader set of 

needs, then the thresholds and counting rules should be constructed consistent with 

that intent. 

Thus, a fundamental problem with the current measure is that it is not clear 

what it seeks to measure, the thresholds are not based on the actual costs of meeting a set of needs in today’s economy, and it brings no consistent approach to when 

income is counted or excluded in the measurement. It fails to count resources that 

are available to meet basic living costs, and yet counts resources that are not available to meet basic living costs. The result is a framework that distorts our understanding of when families are in need, and impairs our ability to see whether government efforts to provide assistance are improving family well-being. 

What Should the Poverty Line Measure? 

The key insight offered by the NAS should be the starting point for any discussion 

of measuring poverty: before asking what should be counted as income, one should 

begin by asking what the poverty line seeks to measure. Then, decisions about how 

thresholds are set and which resources are included or excluded should be made in 

a manner consistent with the decision about what’s being measured. 

In a broad sense, the current thresholds are often viewed as being the levels of 

income that families need in order to meet their most basic needs. However, the actual dollar figure for the current thresholds is essentially an arbitrary figure: it reflects an early-1960s calculation of the cost of a low cost food plan designed for temporary or emergency use when funds are low, multiplied by three because food represented about one-third of a family budget in 1955, and then essentially adjusted 

only for changes in the consumer price index. Since that time, there have been dramatic changes in family budgets and living standards that are not reflected in the 

measure. As such, there is no real justification for the current thresholds other than 

they continue a historical series and there is not agreement on what should replace 

them. 

Since the poverty line has only been adjusted to reflect changes in prices since 

the 1960s, it has fallen over time in relation to family median income. The poverty 

threshold for a family of four was about 49 percent of median income for a family 

of four in 1959; it was 28.4 percent of median income for a family of four in 2005. 

Thus, having income below the poverty line now means that a family is much further from the mainstream than was the case in earlier decades. Notably, interVerDate Aug 31 2005 00:09 Oct 16, 2008 Jkt 043757 PO 00000 Frm 00063 Fmt 6633 Sfmt 6621 E:\HR\OC\43757.XXX 43757

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5Sylvia Allegretto, Basic family budgets: Working families’ incomes often fail to meet living 

expenses around the U.S. (Economic Policy Institute, September 1, 2005), available at http:// 

www.epi.org/briefingpapers/165/bp165.pdf. 6Wider Opportunities for Women, Setting the Standard for American Working Families 

(2003), available at http://www.wowonline.org/docs/FINAL_FESS_report_072103.pdf. 7 National Center for Children in Poverty, Measuring Income and Poverty in the United States, 

(April 2007), http://www.nccp.org/publications/pdf/text_707.pdf. 8 Corporate Voices for Working Families Survey, (July–August 2004). 

9Market Research Bureau LLC, Poverty Pulse, Wave VII, (Catholic Campaign for Human Development, January 2007), available at http://www.usccb.org/cchd/PovertyPulseVII.pdf. 10Lake Research Partners, Survey Conducted for Northwest Areas Foundation, (April 2007), 

available at http://programs.nwaf.org/pr/nwaf/info/document/NWAF_topline_natl_and_states.pdf. 

national comparisons often measure poverty in relation to 50 percent of median income. In the United Kingdom’s commitment to end child poverty by 2020, a principal measure is the share of children in families below 60 percent of median income. Evidence from multiple sources suggests that a substantially higher figure would 

be used if the goal were to determine the amount that a family needs to ‘‘get by’’ 

or ‘‘make ends meet.’’ The NAS’ report expressly recognized that by 1992, the 

amount that survey respondents estimated a family needed to ‘‘get along’’ in the 

community was 76 percent higher than the poverty level. In recent years, a number 

of groups have developed various family budgets, generally intended to reflect a 

level at which a family can ‘‘make ends meet’’ or live decently. While methodologies 

differ, the analyses typically find that the average amount needed to attain such a 

standard is roughly twice the current poverty line, with significant regional variation. For example, the Economic Policy Institute has calculated basic family budgets for over 400 communities, intended to reflect the income a family needs to secure 

safe and decent-yet-modest living standards in the community. The budget items 

that are included in the basic family budgets are: housing, food, child care, transportation, health care, other necessities, and taxes. EPI concluded that the range of 

basic family budgets for a two-parent, two-child family was $31,080 (rural Nebraska) to $64,656 (Boston, Massachusetts). The median family budget of $39,984 

contrasted with the $19,157 poverty threshold for this size family.5 Wider Opportunities for Women has worked with states, localities, and community groups in most 

states to develop self-sufficiency standards. Self-sufficiency standards are calculated 

using a standard methodology that considers the costs of food, housing, medical 

care, transportation, child care, miscellaneous costs, and taxes. These studies routinely find that the amount a family needs to meet basic costs under such a budget 

is at least twice the federal poverty line.6 The National Center for Children in Poverty’s estimates, using its Basic Needs Budget Calculator, are that across the country, families on average need an income of about twice the official poverty level, or 

roughly $40,000 for a family of four, to meet basic needs. In a high-cost city like 

New York, the figure is over $50,000, whereas in rural areas, the figure is in the 

low $30,000s.7

Recent public opinion surveys also repeatedly find the public estimates that 

amounts needed to live decently are substantially higher than the poverty level. 

Note that surveys use a range of wording which could affect survey results: 

• In a 2004 survey by Corporate Voices for Working Families, 59 percent of respondents thought a family of four needed to earn at least $40,000—an amount 

over twice the federal poverty line—‘‘to support a family of four at a decent 

level.’’ Only one percent thought that income of $15,000 to $20,000 was sufficient to do so.8

• A 2006 survey for the Catholic Campaign for Human Development reported 

that most (55 percent) respondents thought the amount of income a family of 

four needed to meet basic needs was $36,000 or more; 11 percent thought it was 

$20,000 or less.9

• In an April 2007 survey conducted for Northwest Areas Foundation, 69 percent 

of a national sample indicated that a family of four needed to earn $40,000 or 

more ‘‘in order to make ends meet’’ in their community. In state samples, the 

percentage indicating $40,000 or more was needed was 55 percent in Idaho; 57 

percent in Iowa; 66 percent in Minnesota; 51 percent in Montana; 54 percent 

in North Dakota; 62 percent in Oregon; 50 percent in South Dakota; and 71 percent in Washington. Seven percent of national respondents, and 5 to 16 percent 

of state respondents thought $20,000 or less was sufficient to ‘‘make ends 

meet.’’10

Note that the public appears to draw a distinction between the amounts needed 

to make ends meet and the appropriate level for a poverty line. In 2001, an NPR/ 


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11See http://www.npr.org/programs/specials/poll/poverty/staticresults.html. 12 U.S. Census Bureau, Poverty Thresholds for Two-Adult-Two-Child Family Following NAS 

Recommendations: 1999–2005, available at http://www.census.gov/hhes/www/povmeas/altmeas05/ 

nas_povmeasures2005.xls 

Kaiser/Kennedy School poll asked what income level would make a family of four 

poor. In that year, when the poverty threshold for four was $17,960, most respondents would use a higher figure, with 64 percent considering a family with earnings 

of $20,000 to be poor, and a substantial group (42 percent) considering a family with 

earnings of $25,000 to be poor.11

Thus, if the goal were to set a line for the level at which families could ‘‘live decently’’ or meet all basic needs, it seems clear that the poverty line would be set 

substantially higher than the current one. The NAS took a far more modest approach. It proposed that the poverty thresholds should represent a budget for food, 

clothing, shelter (including utilities) and a small additional amount for other needs, 

e.g., household supplies, personal care, non-work-related transportation. It then proposed that family resources be defined as the sum of money income from all sources 

and the value of near-money benefits that are available to buy goods and services 

in the budget, minus expenses that cannot be used to buy these good and services. 

Thus, it did not recommend comparing all income to this more modest level—rather, 

it recommended excluding income that that was not available to purchase these 

basic goods and services, e.g., child care and work-related expenses, medical expenses, child support paid, and taxes. 

Given the modest approach taken by the NAS panel, the result is a set of poverty 

thresholds that are somewhat higher than the official ones, but far short of the 

higher figures discussed above. Specifically, in 2005, when the official threshold for 

four was $19,806, the NAS-based threshold calculated by the Census Bureau was 

$20,708 if medical expenses were not counted in the threshold and $22,841 if medical expenses were included in the threshold.12 The threshold with medical expenses 

was based on three years of consumer expenditure data, updated to the threshold 

year, representing about 80 percent of median family expenditures for food, clothing, 

shelter, utilities, and medical care, with an additional allowance for other non-work 

related expenditures. The approximate breakdown for the components of the threshold was $6624 for food, $1370 for clothing, $6395 for shelter, $3198 for utilities, 

$1599 for medical costs, and $3655 for all other non-work-related costs. 

Is the NAS approach a reasonable one? In my view, it is, but only if one recognizes that it does not purport to represent a ‘‘decent’’ living standard. It leaves out 

a considerable amount that most of us take for granted in our daily lives, and allows 

only a modest residual sum for the wide array of living costs that do not fall within 

the identified needs. It leaves out many of the cultural enrichment activities that 

parents would view as essential to healthy child education and development. The 

approach was developed at a time when the Internet was first coming into our 

awareness, so does not include costs for a family to own a computer or have Internet 

access. It does not explicitly provide room in the budget to save for education, or 

retirement, or home ownership, or future needs of children. 

Moreover, the original NAS approach opted to treat medical costs, child care, and 

other work-related costs as deductions, viewing them as not available to meet the 

listed basic needs. An argument can be made that the costs of each should be included as part of the threshold instead and treated as comparable to other basic 

needs—certainly, many Americans would view access to needed child care and 

health care as basic needs. The Census Bureau now calculates NAS-based thresholds with and without medical expenses. Thus, other approaches could be considered, but any approach should ensure that it provides the internal consistency urged 

by the NAS. 

Measuring Poverty Under NAS Measures 

Since the release of the NAS report in early 1995, a considerable amount of research and further study has been undertaken. While there may never be unanimity 

on any complex or controversial issue, many observers have commended the overall 

NAS approach, but there are still a number of questions on which researchers disagree, sometimes for conceptual reasons and sometimes because of data limitations. 

For example, many, though not all, would agree that it would be desirable to build 

geographical variation into the poverty measurement. However, there are sharp disagreements as to whether the data are adequate to do so. Many would agree that 

it would be important to build an adjustment for medical costs into the poverty 

measure, but there are disagreements as to whether it is better to build an allowance for medical costs into the threshold, subtract costs from countable income, or 

do some combination of the two. It is clear that continued work is needed. 


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13See Kathleen Short et al, Experimental Poverty Measures, 1990–1997, P60–205, (June 1999), 

available at http://www.census.gov/prod/99pubs/p60-205.pdf; John Iceland, Poverty Among Working Families: Findings from Experimental Poverty Measures, P20–203, (September 2000), available at http://www.census.gov/prod/2000pubs/p23-203.pdf; Kathleen Short, Experimental Poverty 

Measures 1999, P60–216 (October 2001), available at http://www.census.gov/prod/2001pubs/p60- 

216.pdf; Joe Dalaker, Alternative Poverty Estimates in the United States: 2003, P60–227 (June 

2005), available at http://www.census.gov/prod/2005pubs/p60-227.pdf. 14 U.S. Census Bureau, Alternative Poverty Estimates Based on National Academy of Sciences 

Recommendations, by Geographic and Inflationary Adjustments: 2004 and 2005, available at 

http://www.census.gov/hhes/www/povmeas/altmeas05/nas_measures_2004_2005_comparison.xls. 15 U.S. Census Bureau, Official and National Academy of Sciences (NAS) Based Poverty Rates: 

1999 to 2005, available at http://www.census.gov/hhes/www/povmeas/altmeas05/ nas_measures_historical.xls. 16 U.S. Census Bureau, Alternative Poverty Estimates Based on National Academy of Sciences 

Recommendations, by Selected Demographic Characteristics and by Region: 2005, (2006), available at http://www.census.gov/hhes/www/povmeas/altmeas05/nas_measures_2005_demog 

_and_region.xls. 17 U.S. Census Bureau, The Effects of Government Taxes and Transfers on Income and Poverty: 

2004 (February 14, 2006), available at http://www.census.gov/hhes/www/poverty/effect2004/ 

effectofgovtandt2004.pdf; The Effects of Taxes and Transfers on Income and Poverty in the 

United States: 2005, P60–232 (March 2007) available at http://www.census.gov/prod/2007pubs/ 

p60–232.pdf. 

Since the release of the NAS report, the Census Bureau has issued a set of valuable reports applying and refining NAS recommendations to provide alternative poverty measures.13 The most recent tables, issued for 2005, show that at a time when 

the official poverty rate was 12.6 percent, the rate under NAS measures would have 

been between 12.5 percent and 14.2 percent, depending on how medical expenses 

and geographic adjustments are treated in the measure, and depending on whether 

the thresholds are computed using the Consumer Expenditure Survey (as recommended by the NAS panel) or by updating for inflation using the CPI–U.14 Over 

time, under most NAS measurements, the numbers in poverty are consistently 

above the numbers under the official measures.15

In addition to affecting the numbers in poverty, NAS measures also affect rates 

for particular groups: poverty rates for married couples go up, while they go down 

for female-headed households; they go down for children and up for the elderly; they 

go up for whites, down for African-Americans, and their effect for Hispanics depends 

on which measure is used.16

In earlier years, the Census Bureau issued detailed reports presenting and analyzing the NAS tables. However, the last of these reports was issued June 2005. 

Most recently, the NAS tables for 2004 and 2005 were simply posted without narrative or press release and in a manner such that only specialists were likely to be 

able to interpret them. 

Beginning in 2006, the Census Bureau has begun reporting a new series, in which 

the Census Bureau reports on the effects of various definitions of income: a ‘‘money 

income,’’ ‘‘market income,’’ ‘‘post-social insurance income,’’ and ‘‘disposable income’’ 

definition.17 The broadest of the four, ‘‘disposable income’’ includes money income, 

imputed net realized capital gains, imputed rental income, noncash transfers, and 

subtracts imputed work expenses (but not child care) and taxes. It reports that 

using its disposal income measure, the poverty rate for 2005 is 10.3 percent—a level 

substantially below any of the NAS measures. Essentially, this happens because it 

is imputes income from home equity (even though a prior Census Bureau report had 

cautioned about taking such an approach without a corresponding adjustment to the 

poverty thresholds), and it does not follow other NAS recommendations to modify 

the poverty thresholds, count child care, or consider medical expenses. 

Recommendations for Next Steps 

For at least the past thirty years, there have been discussions about the need to 

develop an improved approach to poverty measurement. While an active research 

and development agenda should continue, it is past time to replace the current 

measure. In my view, the NAS recommendations offer a valuable starting point for 

a better measure. 

First, I recommend that Congress direct the Census Bureau to issue a report to 

Congress, within a specified time period, addressing the following issues: 

• To what extent is it now feasible to replace the current measure of poverty with 

a measure drawn from the recommendations of the National Academy of 

Sciences panel? 

• Are there data limitations that affect the ability to implement the NAS recommendations; if so, to what extent could those data limitations be addressed 


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18 UNICEF Innocenti Research Centre, Child poverty in perspective: An overview of child wellbeing in rich countries, Report Card 7, (2007), available at http://www.unicef-icdc.org/publications/pdf/rc7_eng.pdf. Note that in 2005, 50 percent of median income for a family of four in 

the United States would have been $35,166, as compared with the official poverty threshold of 

$19,157. 19 Robert Haveman and Edward N. Wolff, ‘‘The Concept and Measurement of Asset Poverty: 

Levels, Trends and Composition for the U.S., 1983–2001,’’ Journal of Economic Inequality 2 (2): 

August 2004. 

through improved data collection; and what would such improved data collection cost? 

• In light of the research, experimentation and analysis of the twelve years since 

the NAS report was issued, are there particular recommendations that should 

be reconsidered or additional recommendations that should be considered in developing an improved poverty measure? 

The Census Bureau should be encouraged to consult with members of the original 

NAS Panel and other experts in poverty measurement in the development of its report. 

Second, it is unfortunate that the Census Bureau has seemingly relegated its NAS 

analysis to a set of web-only tables, and has departed from an NAS-based approach 

in its published narratives. I recommend that Congress encourage, and if necessary 

adopt legislation to direct the Census Bureau to resume fully reporting the NAS 

measures. 

Third, at the same time that the poverty measure is improved, it would also be 

valuable for the federal government to begin regularly reporting a set of additional 

measures: 

• Making Ends Meet: It seems clear that the amount of income a family needs 

to ‘‘make ends meet’’ or have a reasonably decent standard of living is an 

amount well above the current poverty line. Family budget research, polling 

data, median income data, and other research all suggest a level roughly twice 

the current poverty line, though with substantial geographic variation. It would 

be valuable to establish an ongoing research program and methodology for 

measuring this concept. 

• Outside the Mainstream: International comparisons routinely rely on measuring the share of people below some percentage of median income, e.g., 50 percent. It is often treated as a measure of ‘‘relative poverty.’’ The virtue of such 

a measure is that it provides insight into the extent to which a share of the 

nation’s residents is living with incomes far outside of the social mainstream. 

In a recent UNICEF report, the United States ranked 24th of 24 nations on a 

measure of the share of children living in families with incomes below 50 percent of median income.18 The federal government should track such a measure, 

and promote research to better understand the consequences of being in and 

growing up in relative poverty. 

• Asset Poverty: In recent years, we have begun to see steadily increasing 

awareness of the importance of assets and asset disparities. One study estimated that in 2001, about 37.5 percent of households were ‘‘asset poor,’’ meaning they did not have enough liquid assets to live above the poverty line for 

three months.19 We would benefit by developing good ongoing measures of assets and asset poverty. 

• Pre- and Post-Tax and Transfer: As the nation moves to a measure of poverty that includes the effects of tax and near-cash benefits, it will be important 

to clearly distinguish pre-tax, pre-transfer poverty from post-tax, post-transfer. 

Drawing that distinction would make explicit the role that tax credits and liabilities and government benefits play in reducing pre-tax, pre-transfer poverty. 

Finally, I want to highlight and underscore one last NAS recommendation. At 

present, a large number of government programs affecting individuals, communities, 

and states, determine eligibility or allocate funds on the basis of federal poverty 

guidelines. For some purposes, applying the revised threshold and measurement 

rules may be appropriate, but in other cases it would not be. For example, with a 

new threshold, a program might wish to adjust eligibility accordingly, or change the 

percentage or multiple of the poverty line at which individuals are eligible. Incomecounting rules that are appropriate and feasible for Census Bureau estimates may 

not be appropriate for program eligibility determinations. Moreover, if adopting a 

new measure of poverty had direct implications affecting program costs and the allocation of billions of dollars in federal funds, it would likely paralyze any effort to 

modify the poverty measure. The NAS panel expressly recommended that agencies 

consider the use of the new measures for purposes of programs they administer, but 

not that the new rules be applied automatically when they do not further program 


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objectives. Such an approach would be essential to efforts to advance a new and improved poverty measure. 

Again, thank you for addressing these important issues. 

f 

Chairman MCDERMOTT. We are going to have to go and vote. 

We will be over there for about 5 minutes on this vote and then 

another 5-minute vote. I think we should be back about 5 minutes 

after eleven, and I would hope that the panel can all stay. 

We will begin with the questions as soon as we come back. We 

thank you all for your participation and you have been a very good 

panel, and I think there are some things we want to get out of you 

before you get away. So, please wait. We’ll see you then. 

Ms. BERKLEY. Mr. Chairman, if I cannot be here, can I submit 

my opening statement? 

Chairman MCDERMOTT. Sure. 

[The opening statement of Rep. Shelley Berkley follows:] 

f 


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Thank you. We will be back in 20 minutes, or so. 

[Recess.] 

Chairman MCDERMOTT. If the speakers will take their chairs 

again, we have 10 minutes before we are going to have to leave 

again. We are in a North Carolina four corners stall in the Congress and so we are going to have to dodge between votes. 

My question, I guess, is this. If we do nothing, what is the problem, or is there a problem? If we are going to do something, what 

is the best way to go about doing it? Now, I listen to Mr. Besharov 

and others talk about the things that we add in. Or even Mr. 

Weller’s idea of taking somebody with $18,000 income and adding 

in costs and that brings them up to $30,000; and, therefore, they 

are no longer in poverty. Then they would not qualify for the things 

that got them out of poverty. 

I mean, that’s kind of a catch-22, so what I am interested in is 

hearing from you, what is the best way for us to proceed with this 

if you think there is some compelling reason why we should do 

something? I know you don’t think we need to or can do it, but we 

are sort of megalomanics in the Congress, so I think we can do 

anything. 

Go ahead. 

Mr. BESHAROV. Well, no. I think you should do things. I think 

that what you cannot do successfully is change ‘‘the official poverty 

line.’’ We are not really talking about the poverty measure used for 

program eligibility. That is an entirely separate decision. I think 

those are key words: ‘‘entirely separate decision′′. The considerations that go into program eligibility, as you just pointed out, are 

very different from trying to keep track of economic or material 

well-being of low-income Americans. 

Quickly, and then I will get off the floor. Here is what I think 

you should do in three easy steps. I don’t think you can affect the 

official poverty measure without having a broad congressional consensus about raising spending across the board for means tested 

programs. Otherwise, you have got to disconnect the official poverty measure from every program that exists. 

Chairman MCDERMOTT. Can I stop you there? Haven’t we disconnected it now by using 200 percent of poverty all over the place? 

Mr. BESHAROV. Yes and no. 

Chairman MCDERMOTT. I mean, that is what I listened to you 

and I thought about my days in the State legislature and how 

Washington State was always pushing above the poverty line and 

no deed goes unpunished. 

Mr. BESHAROV. Here is what I would say about that, but you 

are the pros. Programs are currently at a multiple of the poverty 

lines. You mentioned it is at a few hundred percent of the poverty 

line. 

State and Federal grant programs that are formula driven, are 

often driven by the poverty measure. So, if the poverty measure is 

changed, then every Subcommittee, and then every Committee of 

the Congress has to disconnect, and redo it. Then, both houses of 

Congress have to agree. 


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Chairman MCDERMOTT. I understand the problems of politics. 

Here are some others. How do you think we should do it, because 

he does not basically think we should? 

Now, you’ve got a minute. 

Mr. GREENBERG. I think the key in moving forward is to say 

in doing a revision of the poverty standard and measurements, it 

does not automatically lead to changes affecting program eligibility 

or allocation of Federal resources. Sever the link between them and 

say for each individual program, for each Federal benefit that is allocated on the basis of the poverty line, that it will now be appropriate to make a judgment of how to proceed, but do not do it automatically. 

Chairman MCDERMOTT. Yes? 

Dr. RUGGLES. I would say that the main thing you want a poverty line for in terms of Federal programs is figuring out who you 

need to serve. Who do you need to serve? Who is in need? 

Chairman MCDERMOTT. Okay, yes. 

Dr. RUGGLES. So what you need is the best measure for that 

purpose, and in the long run that is going to help you design better 

programs. Worrying about how it does or does not affect existing 

programs in the short run isn’t the first priority. You really ought 

to be looking at what you are trying to get to, not what is the short 

run effect. 

In terms of the short run effect, we revise all of the other statistics we use for the government. The CPI has gone through a whole 

bunch of revisions done by Committee that have been at least as 

controversial as anything we are talking about for poverty, and it 

effects even more programs than the poverty line does. 

Chairman MCDERMOTT. Are you then suggesting something in 

the Census Bureau? I don’t know where that function is, but someplace that would function continually as an annual update, much 

as we do with the trustees on Medicare and Social Security, that 

same sort of thing. 

Is that what you are talking about? 

Dr. RUGGLES. Yes, something like that could be done; or, you 

could do what the Bureau of Labor Statistics does to update the 

CPI where they have a Committee that meets on a periodic basis, 

comes up with recommendations and then implements them. That 

kind of an approach where you have a built in periodic review, 

come up with recommendations, they get implemented. 

Chairman MCDERMOTT. Does it require that in doing that you 

also say what their goal is? Do we have to set the goal or do we 

let the commissions do that? 

Dr. RUGGLES. I think you can, to some extent, let the commission do that, but over all, I think that for policy-related purposes 

the goal ought to be hearing out who is in need. 

Chairman MCDERMOTT. So, if you are going to deal with children’s poverty, talk about what that is and then adjust the poverty 

line for whatever. 

Dr. RUGGLES. Exactly. 

Chairman MCDERMOTT. Thank you. 

I want to go to my colleague. 

Mr. WELLER. Thank you, Mr. Chairman. 


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First, I would just like to ask unanimous consent for the copy of 

H.R. 3243 along with the introduction statement in the record. 

Chairman MCDERMOTT. Without objection. 

[H.R. 3243 follows:] 


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Mr. WELLER. Thank you, Mr. Chairman, and thank you for this 

hearing. 

Chairman MCDERMOTT. I am glad you put it in, because I 

think we need to have some things on the table to start talking 

about. 

Mr. WELLER. Absolutely, you have got to have ideas to discuss 

them, right? I am sorry. I apologize to our witnesses today for the 

interruptions here. As a member of the minority party, all we are 

asking for is the opportunity to offer amendments, which is normally a part of the legislative process. But we are denied that opportunity on the floor today on the SCHIP legislation. In the Committee on Ways and Means, we did have that opportunity, but the 

Commerce Committee shut them down. So we would like just to 

have the opportunity that, when we were in the majority, we gave 

the minority at that time. 

Mr. Besharov, you are the contrarian today amongst the group. 

I’ve got a copy of a study that was put forward by the Center on 

Budget and Policy Priorities, a left of center group that usually advocates expansion of various government programs. They noted in 

2003 that the earned income tax credit directly lifted 2.4 million 

children in working families above the poverty line. For children, 

before counting the EITC, 12.6 million were in poverty and after 

counting the EITC that number dropped to 10.2 million. In that 

study their measure of poverty counted food, housing, and energy 

assistance benefits as income and subtracted income and payroll 

taxes. 


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As a share of antipoverty benefits, is the portion of antipoverty 

benefits that are currently not included in income when we determine the poverty level rising or falling? 

Mr. BESHAROV. It has risen substantially in the last thirty 

years. It rose a great deal in the last six, and my guess is that it 

will continue to rise. That study, by the way, is typical of what 

many researchers do. They use the current poverty line, left and 

right, and count all these things that we don’t otherwise count. 

This is not to say that material needs no longer exist, but we 

should see whether, against some objective benchmark, we’ve made 

progress over the last five, ten or forty years. 

What the Center on Budget Priorities report did with the Joint 

Economic Committees, Democrats, was show that these Federal 

programs reduced measured poverty. That is an important part of 

a political debate, and that is why I have taken a quick look at 

your bill. I think something like that is tremendously important. 

There are some Census Bureau people here, who have started making that distinction, by just showing the impact of Federal aid to 

low-income people. That is, I think, a central part of understanding 

how well the government is doing and what is left to be done. 

Chairman MCDERMOTT. You know, if we continue to count, not 

count means tested benefits, do you believe the official poverty rate 

would actually be more inaccurate over time? 

Mr. BESHAROV. There are many things that are making the official poverty rate an inaccurate measure of where we were in 

1968. I wanted to make the distinction. I agree with my colleagues 

here that you could do a lot of things to make this measure better. 

But there are many things that make the current measure inaccurate. I don’t think it measures inflation well. It does not deal 

with many forms of income that low-income Americans receive. The 

problem, I think, will fester and get worse, if we do increase, for 

example, the EITC as has been proposed for single people. That 

would have a major impact on their poverty status and official 

measure would never capture it. 

Mr. WELLER. My Chairman slipped me a note that says we 

have 5 minutes before the vote ends on the floor, so go as long as 

you want, he said. So, I guess that is a reminder that I need to 

wrap up. 

You know, the legislation that I have offered, I would note, does 

not determine the eligibility for benefits. It sets in place three formulas for determining the level of poverty that should be part of 

the discussion as we determine how can we be more accurate. 

Since we are out of time, I do want to ask each of the witnesses 

to take a look at the legislation introduced as part of this discussion. I welcome your ideas and my door is open to discuss them. 

So, thank you, Mr. Chairman. 

Chairman MCDERMOTT. Thank you, Mr. Weller. 

I want to thank all of the witnesses. My view of this is there is 

no perfect answer otherwise it would have been done a long time 

ago. So I appreciate that not all the good ideas in the world come 

from the position politically where I am, nor where Mr. Weller is. 

Ultimately, I think in order to have some consensus as described 

here, there has got to be consensus in the Congress and it has got 

to be reached by us working together on this issue. 


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I appreciate all of you coming, giving your ideas. I suspect staff 

will be back from both sides to find out what you think of his bill 

and whatever we put out, and we thank you very much for coming. 

Thank you. 

[Whereupon, at 11:25 a.m., the hearing was adjourned.] 

[Submissions for the record follow:] 


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Æ 


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