BLS WORKING PAPERS 

 

U.S. Department of Labor 

U.S. Bureau of Labor Statistics 

Office of Prices and Living Conditions 

Creating a Consistent Poverty Measure over Time Using NAS Procedures: 1996-

2005 

Thesia I. Garner, U.S. Bureau of Labor Statistics 

Kathleen S. Short, U.S. Census Bureau 

Working Paper 417

April 2008

All views expressed in this paper are those of the authors and do not necessarily reflect the views or policies of the 

U.S. Bureau of Labor Statistics. 
Creating a Consistent Poverty Measure over Time 

Using NAS Procedures: 1996-2005 

by 

Thesia I. Garner 

Senior Research Economist 

Division of Price and Index Number Research 

Bureau of Labor Statistics (BLS) 

U.S. Department of Labor 

Washington, D.C. 20212 

garner.thesia@bls.gov 

(202) 691 - 6576 

Kathleen S. Short 

Senior Research Economist 

Housing and Household Economic Statistics Division 

U.S. Census Bureau 

Washington, D.C. 20233 

kshort@census.gov 

(301) 763 - 8921 

Submitted April 16, 2008 

Edited July 9, 2008 

JEL Classification: I320 (Measurement and Analysis of Poverty) 

_____________________________________________________________________________________________ 

Earlier versions of this research were presented during the following: Conference on Consumption, Income, and the 

Well-being of Families and Children, May 4-5, 2006 in Washington, DC; 2005 Joint Statistical Meetings (JSM) in 

Minneapolis, Minnesota; and at Bureau of Labor Statistics seminars over the years. The comments of conference 

discussants, Gary Burtless and Timothy Smeeding, are appreciated. Ralph Bradley, Rob McClelland, and Uri Kogan 

in the BLS Division of Price and Index Number Research and David Johnson and Charles Nelson in the Housing 

and Household Economics Statistics Division for the Census Bureau also provided useful comments. Appreciation is 

also extended to Rob Cage, Patrick Falwell, and Mary Lynn Schmidt who provided assistance with the U.S. 

Consumer Price Index (CPI), and Laura Paszkiewicz, who provided assistance with the U.S. Consumer Expenditure 

Interview Survey. All comments greatly improved this research. 

The views expressed in this research, including those related to statistical, methodological, technical, or operational 

issues, are solely those of the authors and do not necessarily reflect the official positions or policies of the Census 

Bureau or U.S. Bureau of Labor Statistics, or the views of other staff members within these agencies. The authors 

accept responsibility for all errors. This paper is released to inform interested parties of ongoing research and to 

encourage discussion of work in progress. 
Abstract -- This paper presents an experimental poverty measure and compares it to the current official measure, 

now more than 40 years old. The experimental measure is based on an approach, drawn from work by a National 

Academy of Sciences (NAS) expert Panel, to consistently define basic needs and family resources. The experimental 

thresholds are based on out-of-pocket spending by families on basic goods and services and are based on an 

“outflows” concept. The resource measure is based on an “inflows” concept and reflects money coming into the 

household that is available to meet one’s basic needs. The U.S. Consumer Expenditure Survey serves as the basis for 

the experimental thresholds and the Current Population Survey Annual Social and Economic Supplement serves as 

the basis for the resource measure. Results for 1996 to 2005 are reported with trends examined. An important 

finding is that increases in expenditures for shelter and utilities, captured in the new thresholds, suggest a greater 

increase in the number of families not able to meet basic needs than is reflected by the official poverty statistics. 

Keywords: Consumer Expenditures, Income Measures, Poverty Thresholds, Poverty Measurement 

1 
I. Introduction 

In 1995, the National Academy of Sciences (NAS) Panel on Poverty and Family Assistance, under the 

auspices of the Committee on National Statistics (CNSTAT), published a report, Measuring Poverty, A New 

Approach (Citro and Michael, 1995). This expert Panel argued that the official U.S. poverty measure is outdated, 

given the changes in U.S. society and in government policies (Citro and Michael, 1995; also see Ruggles, 1990). 

They noted that the current measure does not account for the increased labor force participation of mothers and 

working families, nor does it account for changes in health care costs and needs. This Panel agreed that, as living 

standards and notions of minimum needs change, poverty thresholds too should change and that income measures 

that reflect the resources available to families, should take account of government policies that make it easier for 

families to meet those basic needs. 

The current poverty threshold “no longer represents the concept on which it was originally based—namely, 

food times a food share multiplier [the percentage of after-tax money income spent on food]—because that share 

will change (and has changed) with rising living standards. Rather, the poverty threshold reflects in today’s dollars 

the line that was set some 30 [now more than 40] years ago” (Citro and Michael, 1995, p. 25). Total expenditures 

of families have increased in real terms, and spending on nonfood items has risen more rapidly than spending on 

food. While expenditures on food accounted for one-third of the after-tax money income in the 1950s, it is estimated 

that food would account for less than one-sixth of this income today.1

 “If the original approach were used to develop 

the poverty thresholds today, their value would be significantly higher.” (Citro and Michael, 1995, p. 30) 

 

1

 The authors conducted an exercise to determine what the threshold would be if the same procedure were 

used today as was used to derive the official threshold more than 40 years ago. Internal to Bureau of Labor Statistics 

(BLS) Consumer Expenditure Survey quarterly income and expenditure data from 2003Q1 through 2004Q1 were 

used along with the U.S. average value of the U.S. Department of Agriculture (USDA) Thirty Food Plan in January, 

June, and December (USDA, 2003). The Food Plan assumes that all meals and snacks are purchased at stores and 

prepared at home. Since the Food Plan is based on the ages for older children and adults and the gender of family 

members, the value of the Plan for a specific four-person family was used to determine the value of the food 

adequacy standard for this exercise. The family was composed of a husband and wife who are both in the 20-50 year 

age range, one child who is 2 years old, and another who is in the 3-5 year age range. For this time period, when 

income data were missing they were imputed by the BLS. However, missing income taxes were not imputed thus 

after-tax income data were not available for the analysis. Instead, food spending shares were based on before-tax 

money income, total expenditures, and consumption expenditures to provide a range of multipliers to derive new 

food spending-based thresholds. Total before-tax money income includes the cash value of food stamps but not food 

or rent as pay. Total expenditures are defined by the BLS for publication of CE data (USDL, 1997; BLS 2004). 

Consumption expenditures are a subset of total expenditures; they do not include cash contributions, insurance 

premiums for life or other personal insurance, or contributions to retirement accounts or Social Security. The food 

share of before-tax money income for a four-person consumer unit was 10.2 percent, the food share of published CE 

total expenditures was 13.8 percent and the share of consumption expenditures was 16.1 percent. These shares 

translate into multipliers of 9.77, 7.23, and 6.23. Applying these multipliers to the annual value of the Food Plan 

2 
Further, the current measure of family resources that is compared to the official poverty thresholds is also 

outdated and is not consistent with the threshold measure. The measure of resources used for official poverty 

measurement is defined as before-tax money income while the thresholds are based on spending relative to after-tax 

income. When the resource measure was first developed for poverty measurement, few families at the lower end of 

the distribution paid taxes. Now many of these families qualify for the earned income tax credit (EITC) that did not 

exist when the measure was first developed, but is now an important anti-poverty program. 

 Since the NAS Panel’s report was released, research has been conducted on the experimental measure that 

they recommended. Much of this work has been conducted at the Census Bureau and Bureau of Labor Statistics 

(e.g., Garner, 2005; Garner et al., 1998; Iceland et al., 2001; Johnson et al., 1997; Short, 2001, 2005; Short et al., 

1998, 1999; and Short and Garner, 2004). The current research represents a culmination of this previous work, 

taking into account the concerns of the research and policy communities regarding the desirable properties of a 

poverty measure (CNSTAT, 2005; Iceland, 2005). Properties deemed desirable by the Panel include: consistency 

between thresholds and resources in construction, statistical defensibility, understandability, broad acceptance by the 

public and operational feasibility (Citro and Michael, 1995, p. 4). The primary aim of this research is to present a 

poverty measure that is fundamentally based on the NAS recommendations with these desirable properties. The 

Panel emphasized that their purpose was to propose a procedure that could be used to produce a poverty measure 

that is more appropriate for current society. The procedure calculates a poverty threshold that is, by design, updated 

on a continuous basis and reflects changes in levels of basic needs over time. The proposed measure of income or 

family resources reflects the effect of taxes and transfers and takes account of necessary work expenses such as child 

care and commuting to work in a way that is consistent with the threshold concept. 

Just as the Panel recommended in the 1995 Report, the starting threshold is for a reference family with 

particular characteristics and accounts for food, clothing, shelter, and utilities. Participants at a 2004 NAS 

Workshop recommended that medical care be accounted for in the threshold as well (see CNSTAT, 2005 and 

Iceland, 2005); thus, the threshold measure produced and presented in this research accounts for medical care. 

 In this study, spending “outflows” and money “inflows” are the focus. Spending outflows are those for 

basic needs only; food, clothing, shelter, utilities, and medical expenses. If a family’s annual cash inflow, including 

 

($4,893.20) resulted in thresholds of $47,796 using before tax money income, $35,393 using total expenditures, and 

$30,469 using consumption expenditures. The official poverty threshold for a two-adult two-child family ($18,660), 

3 
relevant near-cash benefits and net of necessary expenses, falls below the threshold level of cash outflow, then that 

family is designated as poor. Spending needs and outflows are defined in terms of out-of-pocket expenditures2

 using 

U.S. Consumer Expenditures Survey data (CE). The resource measure includes annual inflows based on after-tax 

money income plus near-cash benefits that are available to meet spending needs defined in the thresholds. This 

measure uses the Current Population Survey Annual Social and Economic supplement (CPS). Consistent with the 

threshold measure, resources include money income from all sources plus the value of near-money benefits that help 

the family meet spending needs, less necessary expenses, like work-related expenses and taxes that must be paid. 

This outflow concept is constructed with the main purpose that it is measured in a consistent way with the 

experimental thresholds. Much care has been taken to thoroughly understand the NAS procedures used to construct 

both sides of the experimental poverty measure and to ensure that the thresholds and resources are consistent. This 

is the first attempt, in the economics literature, to produce a consistent measure of poverty over time using the NAS 

procedure.3

 

The paper begins with a review of the current official measure of poverty followed by a description of the 

threshold and the elements that make up the resource side of the experimental poverty measure proposed in this 

research. Efforts are made to ensure that the threshold and resources are consistent in concept and in measurement. 

The technical and conceptual issues that underlie the NAS-based approach to poverty measure construction are 

highlighted. Results for 1996 through 2005 are presented. The NAS-based thresholds are compared to the current 

official thresholds and examined with regard to underlying concepts and movements in both series over time. 

Poverty rates are calculated that compare the measure presented here with the current official measure to illustrate 

differences in trends. Poverty rates are presented for the total population and for specific subgroups of the 

population that have been most susceptible to hardship historically. 

 

61.2 percent of the least generous of these thresholds. 

2

 Throughout the remainder of this study, spending and expenditures are used interchangeably. The implicit 

cash value of food stamps is included in out-of-pocket spending for food. The cash values of other in-kind programs, 

for example housing subsidies or energy assistance, are not included. 

4 
II. The Current Official Poverty Measure 

The current official measure was developed in the early 1960s as an indicator of the number of people with 

inadequate income to cover the costs of a minimum food diet and to allow for other needed expenses (see 

Orshansky, 1965; Citro and Michael, 1995). The official thresholds are based on the share of food spending in aftertax money income (one-third for families of three or more; other shares were used for smaller families) using data 

from the 1955 Household Food Consumption Survey, and a food adequacy standard based on the same survey. The 

food adequacy standard selected was the USDA Economy Food Plan, issued by the Department for “temporary or 

emergency use when funds are low” (Orshansky 1965, p. 20). The food plan did not allow for meals eaten out or 

other food eaten away from home. Thus, if family members ate at school or on the job, those meals were to be 

prepared at home. Also for this standard it was assumed that “the homemaker is a good manager and has the time 

and skill to shop wisely, she must prepare nutritious, palatable meals on a budget” for herself and her family 

(Orshansky 1965, p. 24). 

 Since the first official thresholds were released, thresholds have been updated by changes in prices, holding 

the multiplier constant at three and the food adequacy standard constant as the Economy Food Plan. In 1969, the 

Bureau of the Budget gave “official” status to the following change in the poverty thresholds: to use the overall 

Consumer Price Index to update the thresholds for price changes instead of the Economy Food Plan that had been 

used earlier. Office of Management and Budget Policy Directive No. 14 (OMB, 1978) specifically states that, “The 

official poverty thresholds do not vary geographically, but they are updated for inflation using [the] Consumer Price 

Index (CPI-U).” The CPI-U represents the change in prices of a fixed market basket of goods and services, with 

relative prices changing while utility remains constant.4

 The updating mechanism for the official poverty measure is 

 

3

 Our first attempt to produce a consistent measure of poverty, using the NAS procedure, was presented 

during the American Statistical Association annual meeting in 2005 during a session focused on the NAS 

recommended procedures (see Garner 2006; Short, 2005). 

4

 The CPI market basket changes on a periodic basis. In addition to this regular change in the market basket, 

other changes have been made in the production of the index over the years (see http://stats.bls.gov/cpi/home.htm 

for references). Shapiro and Wilcox (1996) note that, “The consumer price index is not a static construct” (p. 137) 

with changes having been made over the years to improve the index. The official thresholds are never revised for 

earlier periods so improvements in the CPI are only reflected when new methods are incorporated in the official 

index. For example, in January 1983, the BLS changed the way in which homeownership costs were measured in 

the CPI-U, with a rental equivalence method replacing the asset-price approach to homeownership costs that had 

been used in previous years. The BLS has released a series of price indexes that incorporated this change for earlier 

periods, but these re-estimated indexes do not replace the official CPI’s that were released earlier (USDL, 1997). 

5 
based on the relative change in prices of goods and services purchased by an average consumer unit (using 

plutocratic, not democratic, weights5

). 

The measure of income used in the official poverty measure is before-tax money income although the 

threshold is based on the share of after-tax income available for food spending. Before-tax money income includes 

the following: earnings, unemployment compensation, workers’ compensation, Social Security, Supplemental 

Security Income, public assistance, veterans’ payments, survivor benefits, pension or retirement income, interest, 

dividends, rents, royalties, income from estates, trusts, educational assistance, alimony, child support, assistance 

from outside the household, and other miscellaneous sources received on a regular basis. Non-cash benefits (such as 

food stamps) are not included, nor are capital gains or losses. If a person lives with family members, the family 

member incomes are added together and compared to thresholds that reflect the family size and composition. 

Concerns have been raised regarding the appropriateness of using before-tax income for official poverty 

measurement when thresholds are based on after-tax income and resulting measurement inconsistencies. Citro and 

Michael (1995, p. 9) noted that, “It is important that family resources are defined consistently with the threshold 

concept in any poverty measure. The current [official] measure violates this principle, as has some recent work to 

investigate alternatives.” Referring to the importance of income taxes specifically, Hill and Michael (2001, p. 728) 

state that, “...in the early 1960s, when the measure was first introduced, the amount of taxes paid by families at or 

below the poverty level was so low as to make only a trivial difference. That is decidedly not the case today, 

however.” Hill and Michael further note that, “The inconsistency between the thresholds and the income measure is 

one of the often-cited major flows in the official measure of poverty.” Blank (forthcoming 2008) has also addressed 

this issue, recommending the following: “Explicitly direct the statistical agency to provide a poverty definition that 

produces both a credible and coherent poverty threshold and a consistent and appropriate resource measure.” 

Continuing Blank stated that, 

Too many poverty measurement alternatives have changed only the resource definition side 

of the equation. The NAS Panel was quite clear that both the resource definition and the 

 

5

 Plutocratic weights are based on the value of goods and services across all consumer units for each 

commodity and service represented in the index. For example, the weight for food is total spending on food for all 

consumer units in the CPI-U population sample divided by the value of all goods and services for this population. 

These weights are then combined with prices to produce the index. Democratic weights reflect the distribution of 

consumer units in the population. For example, consumer unit specific price indexes could be created based on the 

value of goods and services consumed or purchased by each consumer unit and the prices that the consumer unit 

faces. To obtain an overall index for the population, the consumer unit specific price indexes would then be 

averaged using demographic population weights to reflect the values of goods and services and price experiences of 

all consumer units. 

6 
thresholds were out-of-date and that a consistent definition of both is necessary for an 

improved poverty measure. Substantially altering how we count resources without 

providing a consistent measure of thresholds will only create long-term incoherence in any 

new poverty statistic. In my opinion, the 1963 poverty thresholds are less defensible than 

the 1963 definition of economic resources as “cash income only.” The thresholds should 

use the latest available data to calculate a reasonable cut-off level, based on a measure that 

is consistent with the definition used to define resources. 

 

A major goal of the current research is to produce consistently defined thresholds and resources. In the next section 

the concepts, methods, and data underlying the thresholds and resources are described. 

III. Concepts, Methods, and Data 

The basic concepts, methods, and data for this study are based on those proposed by the National Academy 

of Sciences (NAS) Panel on Poverty and Family Assistance in their report, Measuring Poverty, A New Approach

(Citro and Michael, 1995). However, since the report was completed, additional work has been conducted to further 

explore issues originally raised by the Panel. Findings and conclusions from this additional work are reflected in the 

thresholds and resource measures produced here. For example, during the 2004 NAS Workshop participants (see 

CNSTAT, 2005 and Iceland, 2005) agreed that medical care be accounted for in the thresholds rather than in 

resources, a change from the original recommendations. Also, a three-parameter equivalence scale was to replace 

the Panel’s original two-parameter scale. 

As noted previously, an issue raised by Panel members and researchers, since the 1995 report was 

published, is the need for consistently defined thresholds and resources. In this study, strict adherence to 

consistency is followed. The result is a resource measure that differs in important ways from the resource measure 

proposed by the Panel. The threshold measure presented in this study is based on expenditures defined as 

expenditure outlays;6

 this is a slightly different from the “processing convenience” definition of expenditures used 

by the Panel (Citro and Michael, 1995, p.148).7

 Given that the thresholds are outlays-based, consistent resources are 

defined in terms of cash and near-cash income, net of income taxes and work related expenses. 

 

6

 For the BLS definition of expenditure outlays, see Rogers and Gray, 1994. 

7

 The basic difference between the definition in this study and the one used by the Panel is that the shelter 

expenditures of owners include mortgage principal payments here while the Panel’s expenditures did not. The Panel 

indicated that their preferred definition of owner shelter expenditures “would include actual outlays for mortgage 

payments, taxes, insurance, and maintenance and repairs, together with an imputed amount for the estimated rental 

value of the home net of such outlays” (Citro and Michael, 1995, p.148). By adding and then subtracting the same 

outlays, only the imputed rental value of owner-occupied homes would be included in the threshold for owners’ 

7 
In addition to consistency, another advantage of the poverty measure produced in this study is that it is well 

documented and described, promoting understandability, just as the Panel’s measure is. This is of particular 

importance with regard to the thresholds. While we can surmise what is contained in the current official thresholds, 

there remains controversy about the exact measurement process used by Orshansky in the construction of the 

thresholds and assumptions regarding the goods and services accounted for in the official thresholds and the value of 

these (For a discussion of this issue, see Betson, 2000 and Bavier, 2001). 

A. NAS-Based Poverty Thresholds 

Poverty is most often defined in terms of one’s ability to meet his/her basic or minimum needs for survival 

or participation in society. In the U.S., the official measure of poverty is concerned with the costs of some minimum 

bundle of goods and services that are necessary to meet one’s most basic needs. A poverty threshold based on costs, 

such as the current official measure, is expressed in terms of the spending necessary to pay for a basic bundle of 

goods and services. For this study, expenditures for a prescribed set of goods and services are used to construct a 

spending-based poverty threshold for a reference family. Equivalence scales are then applied to this initial threshold 

to derive thresholds for other family types. 

An important advantage of following the procedure outlined by the NAS Panel is that the thresholds are 

automatically updated over time by the real growth in spending for basic goods and services that pertain to a concept 

of poverty rather than solely by price changes. 8

 Such a procedure allows for improvements in societal levels of 

spending for a basic bundle of goods and services. 

This research is not the first to produce out-of-pocket spending-based thresholds; although it is the first to 

produce out-of-pocket spending-based thresholds following the NAS Panel procedure. Other researchers have 

constructed spending-based thresholds or standards. For example, Renwick and Bergman (1993; Renwick, 1998) 

constructed spending-based thresholds by building basic needs budgets, specifying adequacy standards for each of 

the major groups of goods and services that families consume and adding an appropriate amount for direct taxes. 

Spending-based self-sufficiency standards have been constructed by building basic family budgets using local prices 

and expenditures, and expert judgment (for example, see Bernstein et al., 2000; Pearce, 2005a and 2005b). Personal 

 

shelter; such a definition would result in a consumption-based threshold measure. For examples of consumptionbased thresholds see Garner, 2006, and Garner and Short, 2001. 

8

 The Panel recommended that the thresholds be updated for real growth in the consumption of basic goods and 

services that pertain to a concept of poverty (Citro and Michael, 1995, p. 103). However, they used consumer 

spending for updating rather than changes in consumption. 

8 
assessments of what is needed financially to provide for minimum levels of living too have been used to produce 

thresholds based on minimum spending needs (for examples, see Garner and Short, 2003 and 2004, and Morissette 

and Poulin, 1991). 

 Producing the threshold has several steps. These include: (1) selecting a reference family; (2) identifying 

the goods and services to be included in the threshold; (3) choosing an appropriate equivalence scale; and (4) 

choosing an updating mechanism. A fifth step in the Panel’s procedure was to adjust for geographic differences 

across areas. In this study, this step is not implemented based on a discussion of the topic during the 2004 NAS 

Workshop (CNSTAT, 2005). Several Workshop participants suggested that further research on approaches to make 

geographic adjustments is necessary, while others said that the methods currently available are sound. However, by 

the end of the discussion, it was decided that research to make geographic adjustments should continue but that such 

adjustments should not be implemented at present.9

 

For this study, the reference family includes two related10 adults and children. The NAS Panel 

recommended that the unit of analysis should be broadened for purposes of measuring poverty to include cohabiting 

couples (Citro and Michael, 1995, p. 13). Some work has been done in this area and suggests that the more inclusive 

the unit of analysis the lower the resulting poverty rates (Short et al., 1999), though the traditional definition of 

family is employed here. The criteria used by the Panel to select the family type was that the reference family would 

“fall near the center of the family size distribution rather than at one of the extremes ... it is preferable for the 

reference family to be one that accounts for a relatively large proportion of the population because its spending 

patterns observed in a sample survey will be the basis for the poverty threshold...” (Citro and Michael, 1995, p. 

101). Using the data that underlie the 2005 thresholds for this study, this type of family represents 8.45 percent of 

household types. Of families with children, those with two adults and two children are the largest group; people in 

these families account for approximately 14 percent of the U.S. population. Since children have historically made up 

a large portion of the poverty population, it is reasonable that the selected reference family would represent spending 

patterns for families with children. 

 

9

 There was also concern about how worthwhile it would be to spend significant resources improving geographic 

adjustment methods due to the “political infeasibility” that geographically adjusted thresholds would ever be 

adopted (CNSTAT, 2005, p.16). 

10 A related adult is either the spouse of the reference person or an adult who is related by blood or other legal 

arrangement. Children are related by blood or legal arrangement. 

9 
 Once the reference family is chosen, median expenditures for a select group of goods and services are 

estimated. The Panel defined this group to include food, clothing, shelter, utilities, and other needs (e.g., household 

supplies, personal care, and non-work-related transportation). 11 As noted earlier, the 2004 NAS Workshop 

participants agreed that medical care be treated as a basic need, along with food, clothing, shelter, and utilities; thus 

medical care are added to the threshold group.12 The threshold is referred to as the “FCSUM” threshold or 

“experimental” threshold in the remainder of this study. 

 The thresholds are based on expenditure outlays. Specifically, the thresholds are based on out-of-pocket 

spending for: 

 Food, at home and away from home 

 Clothing 

 Utilities (including telephone) 

 Medical care 

 For renters, shelter expenditures 

 For homeowners, non-vacation shelter expenditures that include: 

 Mortgage interest payments 

 Payments of mortgage principal13

 Prepayment penalties 

 

11 Expenditures included in the Panel’s measure to derive poverty thresholds, but not in the expenditures 

measure underlying the thresholds produced for this study, are interest on home equity loans and lines of credit on 

primary residences, utilities for vacation homes, and food and rent as pay. Payments for home equity loans are not 

included in the study threshold since these could be used for non-shelter-related spending. Spending on utilities for 

vacation homes was considered to be discretionary and thus we did not include these in the basic needs threshold. 

Food and rent as pay are not included as they are not spending by the family; the resource measure does not include 

the cash value of these, thus maintaining consistency in the definition of the threshold and resource measures. 

Spending using food stamps cannot be separated from other food spending in the Consumer Expenditure Survey so 

the cash value of food stamps is added to resources. With the exception of mortgage principal payments being 

included in the thresholds produced for this study, expenditures for food, clothing, shelter, and utilities are the same 

in this study as in the Census Bureau P60 report (Short, 2001). 

12 Inclusion of medical care in the thresholds represents a deviation from the original recommendation of the 

NAS Panel that medical out-of-pocket expenses be subtracted from income as a necessary expense. For earlier 

research with medical care included in the thresholds, see: Banthin, et al. (2001), Bavier (2000, 2001), Short (2001), 

Short and Garner (2002). See Banthin (2004) for a discussion of medical care in poverty measurement. 

13 Mortgage principal payments are not included in the BLS definition of expenditures because these 

payments represent allocations to savings in the form of increases to home equity for owner-occupied housing. 

However, unlike allocations to other savings accounts or assets that are discretionary, mortgage principal payments 

are not discretionary once a commitment to live in a mortgaged housing unit is made. Such payments are part of 

shelter spending and cannot be used to meet other basic needs of the household or family. 

10 
 Property taxes 

 Maintenance, repairs, insurance and other related expenditures. 

 Percentages of median expenditures, based on their relationship to predetermined percentile values, drive 

the poverty thresholds. The use of these percentages links updates in the threshold to changes in expenditures at the 

median. The Panel selected percentages that correspond to the reference family’s expenditures at the 30th and 35th

percentiles of the distribution of the sum of food, clothing, shelter, and utilities (FCSU) expenditures. Following the 

same procedure for this study, approximately 78 and 83 percent of median expenditures correspond to the 30th and 

35th percentiles of the distribution of FCSUM expenditures for reference families in the U.S. The midpoint of the 

recommended percentage range is used to set the value of the thresholds; the same procedure was followed by the 

Panel and other researchers (e.g., Short et al., 1999). 

 Once the percentages of median expenditures have been determined, multipliers are applied to add a small 

additional amount to allow for other needs. The Panel suggested a range of multipliers to account for expenditures 

for personal care, transportation (one-half of transportation expenditures are considered to be non-work related), 

education, and reading materials. 14 The Panel used multipliers of 1.15 and 1.25 in their derivation of the reference 

family threshold. These multipliers are based on the relationship between the sum of food, clothing, shelter, and 

utilities expenditures and expenditures for smaller and larger other bundles of other needed goods and services (see 

Citro and Michael, 1995). These same multipliers are applied in this study, but only to the non-medical part of the 

threshold. 

The general formula for deriving the reference family threshold, using food, clothing, shelter, utilities, and 

medical care is shown in the equation below. 

Threshold = (1) (1.15* * ) (1.25* * ) ) ) 2

L H

medical

PM P M s +

 

14 Transportation expenditures were defined by the Panel to include vehicle finance charges, expenses for 

gasoline and motor oil, maintenance and repairs, vehicle insurance, public transportation (including air fares), 

vehicle rentals, and licenses and other charges. In addition, transportation included the total purchase price (minus 

the trade-in value) on new and used vehicles. 

 Personal care includes products for hair, oral hygiene, and shaving, cosmetics and bath products, electric 

personal care appliances, other personal care products, and personal care services. 

 Education includes tuition, fees, textbooks, supplies and equipment for public and private nursery schools, 

elementary, and high schools, colleges, and universities, and others schools. 

 Reading materials includes subscriptions for newspapers, magazines, and books through book clubs, 

purchase of single copy newspapers, and magazines, newsletters, books, encyclopedias, and other reference books. 

(1− + ( * )( * ) ( ) 2

L H

medical

PM P M s ) +

11 
where 

 s medical = medical share of threshold value 

 PL = lower percentage of median costs 

 PH = higher percentage of median costs 

 M = median expenditures for reference family. 

 An equivalence scale is applied to the reference family threshold to obtain thresholds for families of other 

sizes and compositions. We use a three-parameter scale that allows for a different adjustment for single parents 

(Betson, 1996). The three-parameter scale has been used in several BLS and Census Bureau studies (Johnson et al., 

1995; Short et al., 1999; Short 2001). The three-parameter equivalence scale is applied to the non-medical part of the 

threshold. This is because the medical care needs of children are not expected to be less than those of adults and 

because there are few inherent scale economies in medical care spending with increasing family size, particularly in 

the presence of health insurance. The three-parameter scale is shown below. 

One and two adults: scale = 0.5 ( ) adults (2a) 

 Single parents: scale = ( )0.7 adults firstchild otherchildren + + 0.8* 0.5* (2b) 

All other families: scale = ( 0.7 adults children + 0.5* )

 

. (2c) 

The economy of scales factor is set at 0.70; the Panel recommended a range of 0.65 to 0.75. 

Medical risk indexes are created to account for variations in family expenditures related to family size, and 

the age and health insurance coverage of family members.15 The medical risk indexes are calculated as the ratio of 

median medical out-of-pocket expenditures for different groups compared to the median expenditures of the 

reference family. Only the medical part of the threshold is adjusted by the medical risk indexes. 

15 One of the goals of the current research was to use the CE Interview Survey data for the production of the 

thresholds without auxiliary data from another survey. In earlier research (Short and Garner, 2002), health status of 

members was also accounted for in the medical risk indexes; these earlier indexes were based on Medical 

Expenditure Panel Survey data. An additional challenge in using the CE to produce the medical risk indexes is that 

the CE does not collect health insurance information for each member; data are collected on whether the consumer 

unit as a whole has various private health insurance policies. However, data are collected concerning the total 

number of people who are covered by Medicaid and Medicare. 

12 
The procedure to calculate the experimental thresholds is repeated each year using the three most recent 

years of CE data. Each year’s expenditures are brought forward (or backward)16 to the threshold year using the U.S. 

Consumer Price Index (CPI-U) for all items. After expenditures are price adjusted to the threshold year, the median 

of the distribution of the sum of food, clothing, shelter, utilities and medical care expenditures is estimated. The 

procedure for annually updating the thresholds is referred to as a quasi-relative approach. By design, the resulting 

experimental thresholds are more reflective of current needs than are the official threshold. As noted by Triest 

(1998) such updating “would allow the poverty thresholds to increase gradually with improvements in the societal 

level of consumption of goods in these basic categories.”17 (p. 102). Citro and Michael (1995) state that this 

approach allows for such changes “in a conservative manner” (p. 154). 

B. NAS-Based Family Resources 

The next step in constructing the experimental poverty measure is to calculate the resources that families 

possess to meet the needs specified in the thresholds. The resource measure presented here represents an attempt to 

construct a poverty measure that is internally consistent with the poverty thresholds, a priority of the Panel’s. The 

main theme in this section is that, while the selection of a poverty threshold is a choice (see Ruggles, 1990), once 

that selection is made, the measure of resources employed for comparison should be consistent (Citro and Michael, 

1995). When the U.S. official poverty measure was first adopted, the Current Population Survey (CPS) was 

identified as the source of the income data to be compared to the poverty thresholds. As noted by Fisher (1997), 

when Orshansky was developing the poverty thresholds, the CPS was the only good source of nationally 

representative income data. However, only before-tax income data were available. Thus, from the start, the resource 

measure has not been consistent with the official thresholds that are based on spending relative to after-tax income. 

Orshansky was aware of the inconsistency of applying after-tax thresholds to before-tax income data. According to 

Fisher (1997), Orshansky decided she had no other alternative; she reasoned that the result would yield "a 

conservative underestimate" of poverty.18

 

16 Expenditures for earlier years than the threshold year are adjusted to reflect threshold year prices. Data, 

collected in the first quarter of the year after the threshold year, are adjusted back to the threshold year. 17 Triest’s comment is in reference to the updating of the thresholds based on the NAS original bundle of 

food, clothing, shelter and utilities plus a little bit more. However, it is expected that increases in medical care 

expenditures would also represent improvements in societal levels of consumption not just increases in the cost of 

medical care. 

18 See Fisher (1997) footnote number 57: "Counting the Poor: Another Look...," p. 10; The Measure of 

Poverty, p. 8; Orshansky, "Statement..." (January 30, 1986), p. 117 in U.S. House of Representatives, Census 

Bureau Measurement of Noncash Benefits[:] Hearings Before the Subcommittee on Census and Population of the 

13 
 Family resources are the sum of money income from all sources plus the value of near-money benefits that 

help the family meet spending needs, less necessary expenses that must be paid. This alternative concept of family 

income is referred to as “discretionary income” -- income that can be used to meet a family’s basic needs 

(specifically for food, clothing, shelter, utilities, and medical care, plus a little bit more) after subtracting necessary 

expenses such as taxes and work-related expenses. 

Constructing the experimental measure of family resources starts with gross money income and adds values 

for near-money transfers from federal programs aimed at helping poor families meet their basic spending needs. 

Experimental poverty thresholds based on CE data include all expenditures for food, including purchases with food 

stamps. Since the thresholds include all food spending, it is appropriate to include food stamps in this measure of 

resources. The values of other benefits are not included in resources since these are not reflected as spending needs 

in the threshold. Important non-cash benefits are often included in resources for poverty measurement such as 

housing subsidies and school lunch and breakfast subsidies.19 However, the experimental thresholds produced for 

this study, and the thresholds produced by the Panel, do not include the value of food paid for by subsidies for 

children’s school meals nor does it include the value of housing subsidies.20 For consistency, the values of these are 

not added to resources. To understand the impact of not accounting for housing subsidies, for example, in the 

experimental poverty measure, let’s assume that a housing program reduces tenants’ rent payments so that the 

payments are a fixed percentage of their income, say 30 percent. If the threshold only reflects that 30 percent of 

income, it is not consistent to add the value of the housing subsidy to income since the subsidy does not help the 

family meet its spending requirement. 

After calculating the income component of the resource measure, the next step is to subtract expenses that 

must be paid before determining how much discretionary income is available to purchase goods and services 

represented by the threshold.21 Before purchasing these basic goods and services, families must first pay taxes and 

 

Committee on Post Office and Civil Service..., Serial No. 99-51, Washington, D.C., U.S. Government Printing 

Office, 1986; discussion between Rep. Robert T. Matsui [D-Cal.] and Orshansky, pp. 15-16 in the May 15, 1984, 

Congressional hearing cited in footnote 10; and "Children of the Poor," p. 8, footnote 7. 

19 See, for example, the Census Bureau’s alternative income definitions (Census, 2006). 20 Earlier studies included imputed values for housing subsidies in the thresholds (Garner and Rozaklis, 1999 

and 2001). 

21 One important necessary expense is child support paid to another household. Child support monies that are 

paid out should be deducted from income since they are included as income by the receiving family. In Census 

Bureau income statistics using the CPS this is not done because data regarding the amount of child support paid by 

one household to another is not collected, while the amount received by another household is collected and added 

14 
expenses related to work. Federal and state income taxes and all payroll taxes paid are accounted for in the resource 

measure (O’Hara, 2004). Earning a wage may entail incurring expenses, such as travel to work and the purchase of 

uniforms or tools as well as care provided for children while parents are at work. These expenses are viewed as 

necessary and are paid by families before expenditures are made on other goods and services (see Short, 2004 for a 

detailed examination). The remaining monies represent the ability of the family to purchase, on an annual basis, 

what they need to spend for basic goods and services, given that they may already be receiving various non-cash 

benefits. 

While borrowing and dissaving are options that may be used to meet spending needs in the short run, the 

Panel’s recommended resource measure suggests an amount that is required over the year to get along. Shortfalls in 

available resources on an annual basis suggest circumstances that are untenable in the longer term (Citro and 

Michael, 1995, p. 214-218). 

C. Data 

This paper uses several surveys to construct the experimental poverty measure. First, the Consumer 

Expenditure Survey (CE) quarterly Interview data, collected from 1994 through 2006 (BLS, 2007a), are used to 

construct thresholds for 1996 through 2005. CE data collected in an interview refer to expenditures made during the 

three months prior to the interview month. It is assumed that data from each reference quarter are independent of the 

data from other quarters; this same assumption is made for official publications of CE data and was also made by the 

Panel in their report. Three years of quarterly data are used to produce each threshold.22 

Second, to measure family income or, as more broadly defined, family resources, the analysis uses the 

Current Population Survey Annual Social and Economic Supplement (CPS ASEC) for the income years from 1996 

to 2005 with data collected in 1997 through 2006 (Census, 2007b). Information from the Survey of Income and 

Program Participation (SIPP) 2004 Panel is used to value work-related expenses. The calculation of resources for an 

experimental poverty measure starts with current money income as defined and measured in the CPS ASEC and 

used to calculate official poverty statistics. This includes cash income received on a regular basis, such as income 

 

into income. The consequence of this is that child support transfers are doubly counted in household income and 

official poverty statistics. These expenses and reported receipts were about $22 billion in 2001. 

22 For example, for the 2005 threshold, 36 months of data from 2003 quarter two through 2006 quarter one 

are used. Data from earlier years in the three-year cycle are updated to the threshold year using the annual All Items 

Consumer Price Index, U.S. City Average (CPI-U); data collected in the post-threshold year are price adjusted to the 

threshold year. 

15 
from earnings, any cash transfers, and property income. It includes money income received in the previous calendar 

year by the family residing together as of February, March, or April of the interview year. Before-tax income, 

regularly received, does not include net realized capital gains, gifts, lump sum inheritances, or insurance payments. 

The CPS collects no information on taxes paid, so a tax calculator is employed. As part of the tax calculator, net 

realized capital gains are simulated and added to income in the computation of adjusted gross income (AGI). 

IV. Results and Discussion 

A. Thresholds 

Experimental and official poverty thresholds for a family with two adults and two children are presented in 

Table 1 and Chart 1. Spending needs-based thresholds are the focus of this study and are estimated using out-ofpocket expenditures for food, clothing, shelter, utilities, and medical care spending; these thresholds are referred to 

as FCSUM in the results. For comparison, the thresholds that do not account for medical care spending (referred to 

as FCSU) are presented as well. Both series of experimental thresholds increase over the 1996 to 2005 period,23 just 

as the official threshold increases. Yet, the rates of increase for the experimental thresholds are greater. The official 

threshold in 1996 is $15,911 and in 2005 it is $19,806, a 24.5 percent increase. In contrast, the FCSUM 

experimental threshold for 1996 is $18,096 and $24,784 by 2005, a 37.0 percent increase. The experimental 

thresholds increase at a faster rate than the official threshold from around 1998. In 1996 the official threshold is 88 

percent of the FCSUM threshold but by 2005 the ratio drops to 80 percent 

Table 2 and Chart 2 compare the official and FCSUM experimental thresholds (the only ones considered in 

the remainder of this research) to published mean Current Population Survey (CPS) before-tax money income 

(Census, 2007b) and published mean Consumer Expenditure Survey (CE) total expenditures (based on integrated 

data from the Diary and Interview Surveys) (BLS, 2007b). From 1996 to 2000, before-tax money income for all 

households increases more rapidly than total expenditures for all consumer units and reference family thresholds. 

From 2001 to 2002, income flattens and then increases, following a similar pattern to that of expenditures. CE total 

expenditures and experimental thresholds increase from 1996 to 2006 at about the same rate (37 percent), while 

income increases only 34.4 percent over this period. The official thresholds rose only 24.5 percent over this time. 

 

23 Threshold levels continue to increase for 2006 as well: the 2006 FCSU threshold is $23,949 and the 

FCSUM threshold is $25,740. 

16 
When comparing the experimental with the official thresholds, it is important to understand the differences 

in the two sets of thresholds. Since movements in the official thresholds are based on the CPI-U,24 expenditure 

shares underlying the index and movements in this index are compared to implicit expenditure shares and 

movements in the experimental thresholds. Expenditure shares for food, clothing,25 shelter, utilities, and medical 

care are presented in Tables 3 and 4. Tables 5 and 6 reflect movements in threshold levels and index values 

respectively. Before beginning this comparison, it is important to bear in mind the differences in expenditure 

definitions26 and populations 27 that underlie the price index and experimental threshold. For example, the CPI-U 

 

24 “The Consumer Price Index is a measure of the average change over time in the prices paid by urban 

consumers for a market basket of consumer goods and services ... it is important to understand that BLS bases the 

market baskets and pricing procedures for the U ... population[s] on the experience of the relevant average 

household, not on any specific family or individual” (BLS, 2008). 

25 We refer to “Apparel” as “Clothing,” as did the Panel in their 1995 report. 26 For the 1996 and 1997 CPI-U, the 1987 CPI market basket item structure was used to create the index. For 

1998 to 2005, the 1998 item structure was used. The primary differences between the 1987 index item structure for 

food, clothing, shelter, utilities and medical care and the structure underlying the thresholds are for shelter. The CPI 

is based on owners’ rental equivalence of their homes while the thresholds are based on mortgage principal and 

interest of primary residence, prepayment penalties, property taxes, and property management for primary 

residences. Shelter in the thresholds does not include expenses associated with lodging away from home or rent as 

pay while the CPI does. The thresholds include expenses for home maintenance and repairs and some materials for 

remodeling; the CPI does not. The 1987 CPI item structure did not include tenants’ insurance in shelter, but this 

insurance is included in shelter under the 1998 item structure. Tenants’ insurance is included in shelter in the 

experimental threshold for all years in the study. The definition of utilities in the CPI changed with the adoption of 

the 1998 CPI item structure. Utilities in the 1987 item structure, and in the thresholds for all years, include fuels, 

electricity, natural gas service, water and sewerage maintenance, telephone services, and community antenna and 

cable television. In the 1998 item structure, telephone and cable television services are no longer part of utilities. 

Utilities in the thresholds do not include those for vacation homes; expenses for vacation homes are included in the 

1987 and 1998 CPI item structures. Other details regarding differences between the CPI-U groupings and the 

experimental threshold groupings follow: the CPI food includes the value of meals as pay while the experimental 

threshold measure for food does not; and the CPI clothing (apparel) 1998 item structure includes clothing for men, 

boys, girls, women, and infants and toddlers, footwear, jewelry and watches while the 1987 CPI item structure and 

the experimental threshold clothing groups include these plus material for making clothes, sewing notions and 

patterns, shoe repair and other shoe service, coin-operated apparel laundry and dry cleaning, alteration and repair of 

apparel and accessories, clothing rental, watch and jewelry repair, apparel laundry and dry cleaning not coinoperated, and clothing storage. Medical care is defined the same in the 1987 item structure and the thresholds. In the 

1998 CPI item structure, adult day care is included in the CPI medical care category. 27 Over the 1996-2005 period of this study, the Consumer Price Index for All Urban Consumers (CPI-U) was 

used to adjust the official poverty thresholds from year to year. The CPI-U is based on the spending and prices 

faced by consumers living in metropolitan statistical areas (MSA’s) and urban places of 2,500 inhabitants or more. 

Non-farm consumers living in rural areas within MSA’s are also included. Military consumer units living off base 

with 50 percent or more of their total family income coming from the armed forces are not included in the CPI-U 

population. In contrast, the experimental thresholds are based on the spending and prices faced by consumers living 

in both urban and rural areas, and include military consumer units living off base. The CPI-U measures the average 

change in prices paid by urban consumer for a fixed market basket of goods and services. As noted in the BLS 

Handbook of Methods (USDL, 1997, p. 170), “The CPI uses a fixed market basket to hold the base-period living 

standard constant. The CPI equals the ratio of the cost of the base-period basket at this month’s prices to the actual 

cost of the base-period basket in the base period. It is an index of price change only and does not reflect changes in 

buying patterns that consumers probably would make to adjust to relative price changes.” The weight of an item in 

17 
includes the value of owner-occupied shelter services (rental equivalence), while shelter in the experimental 

threshold includes out-of-pocket expenditures. The population underlying the expenditures threshold is composed of 

two-adult-two-child families living in both urban and rural areas. In contrast, the population underlying the CPI is 

composed of all consumer units living in urban areas. As we will see, these two groups have somewhat different 

spending patters and, importantly, they differ in the propensity to own or rent their homes. 

 In order to understand why the experimental thresholds increase faster over the period than the official 

thresholds we can examine differences in the components of the experimental threshold compared to the CPI-U. The 

expenditure shares presented in Table 3 are implicit in the thresholds produced for the reference family.28 Shelter 

accounts for the largest percentage of threshold expenditures, followed by food. In contrast to the official poverty 

threshold, the share of food accounts for less than a third (28.3 percent) while shelter accounts for almost a third at 

29.0 percent in 1996. By 2005 the importance of shelter is greater than that of food, with shelter accounting for 32.9 

percent of the experimental threshold and food for 25.9 percent. Among the remaining FCSUM components, 

utilities are between 13.2 percent and 13.9 percent of the total, followed by medical care (6.3 percent to 7.5 percent) 

and clothing (4.5 percent to 7.4 percent). Expenditures for other basic goods and services account for about 15.6 

percent of the experimental threshold from 1996 to 2005. 

For comparison, expenditure shares that underlie the CPI-U, City Average, All Items index are presented in 

Table 4. The shares are based on aggregated annual CE survey expenditure data from four periods: 1982 to 1984, 

1993 to 1995, 1999 to 2000, and 2001 to 2002. . The shares for 1996 and 1997 are created using the 1987 CPI 

market basket structure and the 1998 through 2005 indexes are created using the 1998 market basket structure.29 

 

the CPI is derived from expenditures from the CE. These are known as quantity weights. These weights are used 

along with the prices of goods and services to calculate the index. 28 Following the Panel’s estimation procedure (see Citro and Michael, 1995, p.198, footnote 14), the shares of 

expenditures in the threshold reflect the expenditures for the threshold components at the 30th and 35th percentiles of 

the distribution of the sum of expenditures for food, clothing, shelter, utilities, and medical care (FCSUM) for two 

adult-two child families. Average expenditures for each component of the threshold are calculated using 

expenditures between the 27.5 and 32.5 percentiles and the 32.5 and 37.5 percentiles (representing the 30th and 35th

vingtiles) of the sum of FCSUM expenditures. These shares are converted to share fractions of the FCSUM 

thresholds using multipliers of 1.15 and 1.25. 

29 For distinctions between the 1998 and 1998 market basket structures, see footnote 26. The CPI expenditure 

shares are based on the official production data used for the 1996 through 2005 CPI-U. The data files used to create 

the shares contain aggregate annual expenditure estimates (from the Consumer Expenditure Survey) for the CPI-U 

population for the weight base periods associated with the index years 1996 to 2005. For 1998 to 2005 indexes the 

composite estimated and raked annual expenditure data are those that were used to construct the biennial 

aggregation weights. Weights based on 1993 to 1995 CE data were used to construct the 1998-2001 CPIs. Those 

from 1999-2000 were used to construct the 2002 and 2003 CPIs. Weights based on 2001 and 2002 CE data were 

used to construct the 2004 and 2005 CPIs. The 1996 and 1997 price indexes are based on 1982-8 expenditure data; 

18 
Shelter accounts for approximately the same share of aggregate total CPI-U expenditures as it does in the 

experimental thresholds. In contrast, food accounts for about 15 percent of total CPI-U expenditures, almost half 

that in the experimental threshold. The average expenditure share for utilities in the CPI-U is almost a third of the 

experimental threshold share (4.7 percent versus 13.6 percent). Clothing (4.6 percent) and medical care (5.7 percent) 

account for slightly smaller percentages of total expenditures in the CPI-U. The largest share of expenditures in the 

CPI-U, about 38 percent, is for goods and services not represented by food, clothing, shelter, utilities, and medical 

care as defined officially.30 

By design, the experimental thresholds are comprised of basic necessities. Shelter and utilities together 

account for an average of 44 percent of expenditures in the experimental threshold and only 35 percent of CPI-U 

expenditures. Food, clothing, and medical care account for an additional 41 percent of the threshold expenditures but 

only 26 percent of the CPI-U defined expenditure aggregates. Other goods and services are a much larger 

component of the CPI-U than of the experimental thresholds. 

Movements in the official poverty thresholds are reflected by a combination of expenditure shares and 

commodity and service prices incorporated in the official CPI-U. To compare changes in the CPI-U with changes in 

the experimental thresholds over time, percentage changes in the CPI-U and in annual expenditures implicit in the 

thresholds are calculated. 31, 32 Changes since 1996 in the CPI-U for all items and for food, clothing, shelter, 

utilities, and medical are presented in Table 5. There we see increases in the index for food, shelter, utilities, and 

medical care. The percentage change in the index for each of the components, other than food, rose at a faster rate 

than the overall index. Changes in the price indexes inform changes in the expenditure thresholds and implicit 

 

the BLS did not composite estimate and rake expenditure data annually during these earlier years. Cage (2006) 

noted that composite estimation and raking probably does not have significant effect on the shares. He did state 

however that “the 1996 to 1998 data may have slightly higher variance than the 1999 [and] forward data. But then 

again, the sample size of the CE was increased in 1999 so the difference in variance would be expected.” The 

expenditures shares were produced using lower level aggregations provided by Rob Cage, Patrick Falwell, and Mary 

Lynn Schmidt in the CPI Division at the BLS. 

30 Using the 1998 market basket structure, approximately 17.9 percent of the CPI-U aggregate is for 

transportation, 6.3 percent for recreation, 5.9 percent for education and communications, 5.0 percent for household 

operations, and 4.2 percent for other goods and services (authors’ own calculations using expenditure aggregates 

provided by Cage (2006). Even if all education and communications expenditures were added to CPI-U utilities in 

the 1999 through 2002 weight base periods to account for the fact that the threshold includes telephone 

expenditures, the CPI-U utilities share would still be smaller than the share in the experimental threshold. 

31 According to the CPI web site (BLS, 2008), “Movements of the index from one date to another can be 

expressed as changes in index points, but it is more useful to express the movements [in the CPI] as percent changes. 

This is because index points are affected by the level of the index in relation to its base period, while percent 

changes are not.” 

19 
expenditures for these same commodity and service groups (Table 6). From 1996 to 2005, the experimental 

threshold increased at a faster rate than the all items CPI-U (37.0 percent versus 24.2 percent), and thus rose faster 

than the official poverty threshold because the elements that make up the threshold experienced greater or similar 

price increases as the major components of the CPI-U. The largest increases in the CPI-U were for the categories of 

shelter, utilities, and medical care, a group taken together that comprises over half of the experimental thresholds. 

The largest increase in the implicit threshold expenditures is for shelter (55.6 percent). Other categories rose by 

amounts more similar to the increases in prices. 

Comparing changes in the CPI-U and the experimental thresholds suggest that the major differences in the 

two series from 1996 to 2005 are related to shelter. Recall that out-of-pocket shelter expenditures of the reference 

family consist of such items as mortgage interest, mortgage principal payments, property taxes and insurance for 

homeowners, rent and tenants insurance for renters, and maintenance and repairs for both. The CPI-U for shelter 

reflects changes in space rents for primary residences of renters and owners along with appropriate expenditure 

weights.33 The thresholds represent the spending patterns of and prices faced by four-person families with two 

children, a group with a high rate of homeownership while the CPI-U is based on a population with lower rates of 

homeownership in general. Data from the CE reveal that 74 percent of reference families in 1996 owned their homes 

while 80 percent were homeowners by 2005. In 1996, 86 percent of the owners had mortgages but by 2005, 90 

percent did (BLS, 2007b). 34 These additional results, combined with our study findings, reveal that reference 

families are more likely to be homeowners with greater increases in out-of-pocket expenditures than is the average 

household represented by the CPI-U from 1996 to 2005. It is expected that such an outcome would result from a 

 

32 The implicit threshold expenditures underlying the expenditure percentage changes in Table 6 are derived 

by applying the shares for each year (in Table 3) to the matching year threshold (in Table 1). 33 Reported rents for primary residences are adjusted to omit the cost of utilities in reported rents and thus 

made comparable to owners’ reported rental equivalence. The change in space rents for non-rent-controlled and 

non-subsidized or public rental housing is applied to owner-occupied housing in the same location as the rental 

units. The change in prices is used in combination with the CE rental equivalence weight to produce the CPI-U for 

owners’ equivalent rent for primary residences. Also included in shelter for the CPI-U are housing away from 

school (excluding board) and lodging away from home; these represent 8.5 percent of the total shelter weight in the 

in the CPI-U weight base period 2003-2004. 

34 Comparable results for the CPI-U underlying population, using the CE data, reveal that approximately 

61percent of urban consumer units were owners in 1996; by 2005 the rate increased to 66 percent (BLS, 2007b). A 

ranking all consumer units by the sum of expenditures for food, clothing, shelter, utilities, and medical care reveals 

that shelter expenses at the 30th to 35th percentiles (the percentiles for which changes in expenditures for the 

reference family are estimated) increased 42 percent from 1996 to 2995, compared to a 55.6 percent increase for the 

reference family. From 1996 to 2005, the CPI-Us for space rent of primary residences increased 34 percent while the 

index for owners’ equivalent rent increased only 30 percent (BLS, 2008). 

20 
market where mortgaged home prices are increasing at a faster rate than rents, a phenomenon that occurred over the 

period of interest in this study.

B. Family Resources 

Changes in poverty thresholds would be expected to change trends in poverty statistics over time. However, 

these statistics are also affected by changes in income and other tax and transfer policies. Besides before-tax money 

income, changes in near-cash benefits, taxes, and work-related expenses may change trends in poverty rates. An 

examination of the elements in the family resource measure sheds light on changes in overall family resources from 

1996 to 2005. 

 Table 7 shows the aggregate dollar amounts added to or subtracted from before-tax money income for the 

period 1996 to 2005 to calculate family resources for the experimental poverty measure. Overall, these additions and 

subtractions result in relatively large net subtractions from income. For example, in 1996, additions of food stamps, 

net realized capital gains, and the earned income tax credit (EITC) sum to total additions of $215.2 billion35. For that 

same year, subtractions of all taxes and work expenses totaled $1,178 billion, five times as large as additions to 

income. By 2005, subtractions totaled seven times additions to income. Note that while aggregate income taxes fell 

in 2002 and 2003, payroll taxes and work expenses continued to increase substantially across the period. Since over 

time we are subtracting larger and larger amounts relative to additions, the experimental measures are expected to 

result in higher poverty rates due in part to these calculations. 

 Further comparison across aggregate values for subgroups sheds light on how the additions and 

subtractions may affect poverty statistics. Tables 8 and 9 show family incomes or resources for people who are 

classified as “poor” and those who are classified as “near poor” using the official measure. The “near poor” are 

people with family income just above the official poverty line; family income is between 100 and 125 percent of the 

official poverty thresholds. The additions and subtractions for those classified as poor under the official thresholds 

are in Table 8. The table displays trends over time in the various components of the resource measure. For the 

officially poor the main additions to family resources are from the EITC and food stamps. The major subtractions 

are work expenses and payroll taxes. The additions exceed subtractions for this group and are about two times total 

subtractions in 1996 and in 2005. 

 

35 Note that a large part of additions to income are made up of net realized capital gains and that these values 

vary depending on changes in imputation methodology at the Census Bureau. 

21 
 Finally, a closer look at the “near poor,” a group most likely to be reclassified as poor by the changes to 

income calculations, is provided in Table 9. That table shows additions and subtractions and suggests that at least 

some “near poor” people will be classified as poor under the experimental measure, caused by deductions of 

necessary expenses from income that exceeds additions. The main additions to income for this group are due to the 

EITC. The main subtractions are for payroll taxes and work expenses. For this group subtractions are greater than 

additions. 

C. Experimental Poverty Rates 

To determine poverty status, total family resources are compared to the spending needs thresholds. If the 

“inflow” to family resources is below the amount needed, then all individuals within the family are classified as 

poor. The experimental measure uses poverty thresholds that provide a more current estimate of the cost of an 

explicitly defined set of basic goods and reflects out-of-pocket spending needs. Taking account of spending on basic 

goods, the value of food stamps, net tax liabilities, and work expenses provides information about families who, 

while not poor using the official measure, may have difficulty meeting basic needs because necessary outflows 

exceed inflows. 

 Table 10 and Chart 3 show poverty rates for the years 1996 to 2005. The results show that the official 

poverty rate fell from 1996 to 2000 (13.7 to 11.3 percent.) At this point the official rate begins to increase, reaching 

12.7 percent by 2004 and remaining stable at about the same rate in 2005. The experimental poverty measure 

displays a similar though more pronounced pattern. Differences in trends are due to increases in the experimental 

thresholds as well as increased payroll taxes and work expenses that families face. While the official rate is lower in 

2005 than in 1996, the spending need-based rate is highest in 2005. The increase in taxes and work expenses, and 

the experimental thresholds after 2000 brings the experimental rate back to the 1996 level and beyond to 17.7 

percent. 

 Finally, Table 11 shows trends in poverty measures for demographic groups identified in terms of age and 

race. Children and blacks are of particular interest as these groups have had historically high poverty rates. For both 

children and blacks, poverty rates based on the official and experimental measures are lower in 2005 than in 1996. 

Among the groups considered, poverty is highest among blacks over this time period regardless of the measure used. 

Official child poverty rates are also high. The child poverty rate, based on the experimental measure, is higher than 

the elderly rate in 1996; however, by 2005, elderly poverty surpasses child poverty by 0.4 percentage points. Poverty 

22 
rates for children and blacks are lowest from 1999 to 2001 for both poverty measures while official poverty is lowest 

for the elderly in 1999 and experimental poverty is lowest in 1997 to 1999. 

V. Conclusions 

The experimental poverty measure presented in this research was based on NAS recommended procedures 

with an emphasis on consistency and spending needs. Using the same methods over time, consistently defined 

thresholds and resources were used to produce poverty rates that reflect the spending need outflows and income 

inflows of families. The experimental measures and resulting poverty rates were compared to the official measure 

and rates for 1996 through 2005. Unlike the official poverty thresholds, the experimental thresholds reflect recent 

spending needs in levels and patterns, and changes in living standards over time. Differences in the experimental 

threshold and CPI-U were highlighted to provide insight regarding why the official and experimental thresholds 

move differently. One of the more pronounced findings was that the largest single share of expenditures accounted 

for in the CPI-U is represented by goods and services that are not included in the experimental threshold as basic 

needs. This means that the official poverty threshold is influenced more by the expenditures for and prices of goods 

and services that primarily do not include food, clothing, shelter, utilities, and medical care. Experimental thresholds 

increased more rapidly during the 1996-2005 time period than did the official poverty threshold. A striking result is 

that even though shelter accounted for about the same shares of CPI-U total expenditures and of threshold 

expenditures, implicit shelter expenditures in the thresholds rose almost twice as fast as did the shelter CPI-U. 

The resource measure presented was constructed such that it would be consistent with the threshold 

measure. The Panel emphasized the importance of consistency in their report. However, to date, no other researchers 

have produced or used a NAS-based measure with consistently defined and constructed thresholds and resources. 

The resource measure produced in this study is constructed to represent the ability of a family to meet the needs 

implicit in a particular threshold. In this study, income inflows, net of taxes and work-related expenses, were 

compared to spending need or outflow-based thresholds. Unlike in the Panel’s report, the only non-cash benefits 

included in resources were food stamps; these were included in resources as purchases with food stamps were 

reflected in food expenditures in the threshold measure. The experimental poverty measure, calculated over a tenyear period, showed trends and levels of poverty that differed from the official measure for the overall population 

and for specific demographic groups. An important finding of this work was that increases in the spending for basic 

23 
goods and services resulted in a greater increase in the number of families not able to meet basic needs than is 

reflected by the official poverty statistics. 

Our constant guides, while producing and describing the measure presented in this research, were the 

properties that the Panel deemed desirable for a revised poverty measure for the United States: consistency in the 

construction of thresholds and resources; statistical defensibility; understandability; broad acceptance by the public; 

and operational feasibility. In producing outflows-based thresholds and inflows-based resources, and explaining the 

procedures that underlie these, we hope to have produced a measure that has these important properties. 

24 
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Banthin, Jessica, Thesia I. Garner, and Kathleen Short, “Medical Care Needs in Poverty Thresholds: 

Problems Posed by the Uninsured.” Agency for Healthcare Research and Quality, Presented at the American 

Economic Association Meetings, (January 2001). 

Bavier, Richard, “Medical Out-of-Pocket Spending in Poverty Thresholds,” Poverty Measurement Working 

Paper, Census Bureau, (October 2000). 

Bavier, Richard, “Do the Current Poverty Thresholds Include Any Amount for Health Care?” Poverty 

Measurement Working Paper, Census Bureau, (March 2001). 

Bernstein, Jared, Chauna Brocht and Maggie Spade-Aguilar, How Much Is Enough? Basic Family Budgets 

for Working Families. Economic Policy Institute, Washington, D.C., (2000). 

Betson, David M., “Is Everything Relative? The Role of Equivalence Scales in Poverty Measurement,” 

Working Paper, Census Bureau, (December 1996). 

Betson, David M., “Response to Bavier’s Critique of the NRC Panel’s Recommendations”, Poverty 

Measurements Working Paper, Census Bureau, (November 2000). 

Blank, Rebecca M., “How to Improve Poverty Measurement in the United States,” Journal of Policy 

Analysis and Management, Vol. 27(2), forthcoming Spring 2008. 

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Documentation, Washington, D.C., available at: www.bls.gov/cex/2003/cex/cexintvw.pdf, (February 24, 2004). 

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two through 2007 quarter one, Washington, D.C, (2007a). 

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Bureau of Labor Statistics (BLS), web site: http://stats.bls.gov/cpi/cpifaq.htm, (2008). 

Cage, Rob, Bureau of Labor Statistics, U.S. Department of Labor, personal communications regarding the 

CPI and expenditure weights, (2006). 

Census Bureau (Census), Current Population Survey Annual Social and Economic Supplement (CPS 

ASEC) internal data for the income years from 1996 to 2005 with data collected in 1997 through 2006, (2007a) 

Census Bureau (Census), web site: http://www.census.gov/hhes/www/income/income.htm, (2007b). 

Citro, Constance F., National Academy of Sciences, personal communication regarding the use of shelter 

consumption as opposed to shelter expenditures in deriving the thresholds, (1999). 

Citro, Constance F., and Robert T. Michael (eds.), Measuring Poverty: A New Approach, Washington, 

D.C.: National Academy Press, (1995). 

Committee on National Statistics (CNSTAT), Planning Group for the Workshop to Assess the Current 

Status of Actions Taken in Response to Measuring Poverty: A New Approach (John Iceland, Rapporteur), Division 

of Behavioral and Social Sciences and Education, National Research Council of the National Academies, 

25 
Experimental Poverty Measures: Summary of a Workshop. Washington, D.C.: The National Academies Press, 

(2005). 

Fisher, Gordon, “The Development of the Orshansky Poverty Thresholds and Their Subsequent History as 

the Official U.S. Poverty Measure,” available at http://www.census.gov/hhes/www/povmeas/papers/orshansky.html, 

1992, revised 1997. 

Garner, Thesia I., “Developing Poverty Thresholds,” paper presented during the American Statistical 

Association annual meetings, Minneapolis, Minnesota, (August 10, 2005), 2005 Proceedings of the American 

Statistical Association, Social Statistics Section [CD-ROM], Alexandria, VA: American Statistical Association, 

(revised September 18, 2006) 

Garner, Thesia I. and Patricia Rozaklis, “Accounting for Owner Occupied Housing in Poverty: Focus on 

Thresholds,” American Statistical Association (ASA) Proceedings of the Section on Government Statistics and 

Section on Social Statistic, (1999). 

Garner, Thesia I. and Patricia Rozaklis, “Owner-Occupied Housing: An Input for Experimental Poverty 

Thresholds,” paper presented at session organized by the Society of Government Economists at the annual meeting 

of the Allied Social Sciences Associations, (January 6, 2001). 

Garner, Thesia I., Stephanie Shipp, Geoffrey Paulin, Kathleen S. Short, and Charles Nelson, “Poverty 

Measurement in the 1990s,” Monthly Labor Review, (March 1998), 39-61. 

Garner, Thesia I. and Kathleen S. Short, “Owner-Occupied Shelter in Experimental Poverty Measures,” 

paper presented at the Annual Meeting of the Southern Economic Association, Tampa, Florida, (November 1, 2001). 

Garner, Thesia I. and Kathleen S. Short, “Economic Well-Being Based on Income, Consumer Expenditures 

and Personal Assessments of Minimum Needs” in John A. Bishop and Yoram Amiel, eds., Studies on Economic 

Well-being: Essays in the Honor of John P. Formby , Vol. 12 of the Series Research on Economic Inequality, 

Oxford, UK: Elsevier Science, (2004), 319-361. 

Garner, Thesia I. and Kathleen S. Short, “Personal Assessments of Minimum Income and Expenses: What 

Do They Tell Us about ‘Minimum Living’ Thresholds and Equivalence Scales?” in John A. Bishop and Yoram 

Amiel, eds., Inequality, Welfare and Poverty: Theory and Measurement, Vol. 9 of the Series Research on Economic 

Inequality, Oxford, UK: Elsevier Science, (2003), 191-243. 

Iceland, John. "The CNSTAT Workshop on Experimental Poverty Measures, June 2004." Focus 23(3), 

(2005), 26-30. 

 Iceland, John, Kathleen Short, Thesia Garner, and David Johnson, “Are Children Worse Off? Evaluating 

Well-Being Using the New (and Improved) Measure of Poverty.” Journal of Human Resources 36, 2 (2001), 398-

412. 

Johnson, David, Stephanie Shipp, and Thesia I. Garner, “Developing Poverty Thresholds Using 

Expenditure Data,” in Proceedings of the Government and Social Statistics Section. Alexandria, VA: American 

Statistical Association, (August 1997), 28-37. 

Morissette, R. and Susan Poulin, Income Satisfaction Supplement: Summary of Four Survey Years, Staff 

Reports, Labour and Household Surveys Analysis Division, Statistics Canada, Ottawa, Canada, (1991). 

Office of Management and Budget (OMB), Statistical Policy Directive No. 14, Definition of Poverty for 

Statistical Purposes, (May 1978), http://www.census.gov/hhes/www/povmeas/ombdir14.html. 

O'Hara, Amy, “New Methods for Simulating Taxes,” Census Bureau Working Paper, available at 

http://www.census.gov/hhes/income/papers.html, (2004). 

26 
Orshansky, Mollie, “Counting the Poor: Another Look at the Poverty Profile,” Reprint from the Social 

Security Bulletin, (January 1965), U.S. Department of Health, Education, and Welfare, Social Security 

Administration. 

Pearce, Diana, The Real Cost of Living in 2005: The Self-Sufficiency Standard for Connecticut, prepared 

for the Wider Opportunities for Women, and Office of Workforce Competitiveness, State of Connecticut, available 

at http://www.sixstrategies.org/states/states.cfm, (2005a). 

Pearce, Diana, The Self-Sufficiency Standard for the Washington, D.C. Metropolitan Area 2005, prepared 

for the Wider Opportunities for Women, in conjunction with Wider Opportunities for Women’s Family Economic 

Self-Sufficiency Project, available at http://www.sixstrategies.org/states/states.cfm, (2005b). 

Renwick, T. J., “Basic Needs Budgets Revisited: Does the U.S. Consumer Price Index Overestimate the 

Changes in the Cost of Living for Low-Income Families?” Feminist Economics 4(3), (1998), 129-142. 

Renwick, T. J. and B. R Bergmann, “A Budget-Based Definition of Poverty with an Application to SingleParent Families,” Journal of Human Resources 28(1), (1993), 1-24. 

Rogers, John M. And Maureen B. Gray, “CE Data: Quintiles of Income vs. Quintiles of Outlays,” Monthly 

Labor Review, (December 1994), 32-37. 

Ruggles, Patricia, Drawing the Line: Alternative Poverty Measures and Their Implications for Public 

Policy, Washington, D.C.: The Urban Institute Press, (1990). 

Shapiro, Matthew D. and David W. Wilcox, “Mismeasurement in the Consumer Price Index: An 

Evaluation,” NBER Macroeconomics Annual, Vol. 11 (1996), pp. 93-142. 

Short, Kathleen, “Estimating Resources for Poverty Measurement: 1993-2003,” paper prepared for the 

Joint Statistical Meetings, Social Statistics Section, Minneapolis, Minnesota, (August 10, 2005). 

Short, Kathleen, Experimental Poverty Measures: 1999, U.S. Census Bureau, Current Population Reports, 

Consumer Income, P60-216, U.S. Government Printing Office, Washington, DC, (2001). 

Short, Kathleen, “Work-Related Expenditures in a Measure of Poverty,” available at 

http://www7.nationalacadmeies.org/cnstat/Workshop_on_Experimental_Poverty_Measures.html, (August, 2004). 

Short, Kathleen, and Thesia I. Garner, “A Decade of Experimental Poverty Thresholds: 1990 to 2000,” The 

ICFAI Journal of Public Finance, II (2), (May 2004), 65-89. 

Short, Kathleen and Thesia I. Garner, “Experimental Poverty Measures Under Alternate Treatments of 

Medical Out-of-Pocket Expenditures,” Monthly Labor Review, (August 2002), 3-13. 

Short, Kathleen, Thesia Garner, David Johnson, and Patricia Doyle, Experimental Poverty Measures: 1990 

to 1997, U.S. Census Bureau, Current Population Reports, Consumer Income, P60-205, U.S. Government Printing 

Office, Washington, DC, (1999). 

Short, Kathleen, Martina Shea, David Johnson, Thesia Garner, “Poverty-Measurement Research Using the 

Consumer Expenditure Survey and the Survey of Income and Program Participation,” American Economic Review, 

Volume 88, Number 2, (May 1998). 

Triest, Robert K., “Has Poverty Gotten Worse?” The Journal of Economic Perspectives, Vol. 12, No. 1 

(Winter 1998), pp. 97-114. 

U.S. Department of Labor (USDL), Bureau of Labor Statistics, BLS Handbook of Methods, Bulletin 2490, 

(April 1997). 

U.S. Department of Agriculture (USDA), Official USDA Food Plans: Cost of Food at Home at Four 

Levels, U.S. Average, June 2003, available at www.cnpp.usda.gov, (issued July 2003). 

27 
(Many of the unpublished working papers listed here are available at: 

http://www.census.gov/hhes/www/povmeas/papers.html

28 
Table 1: Official and NAS-Based1

 Poverty Thresholds for the Reference Family: 1996-2006 

Experimental 

Year Official FCSU FCSUM 

1996 $15,911 $16,749 $18,096 

1997 $16,276 $17,109 $18,424 

1998 $16,530 $17,697 $18,994 

1999 $16,895 $18,196 $19,648 

2000 $17,463 $19,097 $20,731 

2001 $17,960 $19,935 $21,640 

2002 $18,244 $20,757 $22,600 

2003 $18,660 $21,218 $23,109 

2004 $19,157 $21,895 $23,738 

2005 $19,806 $22,769 $24,784 

1996 to 2005 

percent change 24.5% 35.9% 37.0% 1

 Based on out-of-pocket expenditures (including repayment of mortgage principal for owned housing). 

Source: Census Bureau and authors’ own calculations using U.S. Consumer Expenditure Interview Survey data 

(BLS, 2007a). 

Chart 1. Offical and Experimental Poverty Thresholds for the 

Reference Family: 1996-2005

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

FCUSM

FCSU

Official

29 
Table 2. Mean Annual CPS Household Income and CE Total Expenditures for All Households and 

Consumer Units Compared to Experimental Poverty Thresholds for the Reference Family: 1996-2005 

 Thresholds 

Year 

Mean Before-Tax 

Money Income 

Consumer Expenditures 

(integrated) FCSUM Official 

1996 $47,123 $33,797 $18,096 $15,911 

1997 $49,692 $34,819 $18,424 $16,276 

1998 $51,855 $35,535 $18,994 $16,530 

1999 $54,842 $36,995 $19,648 $16,895 

2000 $57,047 $38,045 $20,731 $17,463 

2001 $58,208 $39,518 $21,640 $17,960 

2002 $57,852 $40,677 $22,600 $18,244 

2003 $59,067 $40,817 $23,109 $18,660 

2004 $60,528 $43,395 $23,738 $19,157 

2005 $63,344 $46,409 $24,784 $19,806 

1996 to 2005 

percent change 34.4% 37.3% 37.0% 24.5% 

Source: Census Bureau (Census, 2007b) and Bureau of Labor Statistics (BLS, 2007b) web sites for published annual 

averages with CE total expenditures are based on integrated data from the Interview and Diary. Thresholds are based 

on authors’ calculations using internal U.S. Consumer Expenditure Interview Survey data (BLS, 2007a). 

Chart 2. Mean Income, Expenditures, and Thresholds

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Mean Before-Tax Money Income Consumer Expenditures (integrated)

FCSUM Official

30 
Table 3. Shares of Aggregated Annual Expenditures Implicit in the Experimental 

Threshold for the Reference Family: 1996-2005 

Year Food1 Clothing2 Shelter3 Utilities4 Medical5 Other6

1996 0.283 0.068 0.290 0.132 0.072 0.155 

1997 0.285 0.074 0.278 0.135 0.071 0.157 

1998 0.284 0.065 0.293 0.137 0.064 0.157 

1999 0.280 0.064 0.299 0.138 0.063 0.156 

2000 0.280 0.062 0.301 0.134 0.067 0.156 

2001 0.276 0.063 0.297 0.136 0.072 0.156 

2002 0.267 0.061 0.305 0.137 0.075 0.155 

2003 0.262 0.055 0.317 0.139 0.072 0.155 

2004 0.266 0.051 0.318 0.136 0.074 0.155 

2005 0.259 0.045 0.329 0.137 0.075 0.155 

1996 to 2005 

percent change -0.085 -0.337 0.136 0.038 0.038 0.000 

1998 to 2005 

percent change -0.088 -0.312 0.124 -0.001 0.176 -0.013 

Source: Authors’ own calculations using U.S. Consumer Expenditure Interview Survey data (BLS, 2007a). 

1

 Includes food at home and away from home; does not include alcoholic beverages. 

2 Officially referred to as “Apparel” and includes clothing, footwear, and other apparel products and services. 

3

 Includes rent, maintenance and repairs, mortgage interest, principal payments, prepayment penalties, property 

taxes for owned home, and tenants and homeowners insurance. 

4

 Includes natural gas, electricity, other fuels, telephone services, and water and other public services. 

5 Includes health insurance, medical services, prescription drugs, and medical supplies. 6 The difference in total threshold expenditures and expenditures for food, clothing, shelter, utilities and medical 

care. 

31 
Table 4. Shares of Aggregated Annual CE Expenditures Based on CPI Item Structures, U.S. City Average, 

CPI-U Population: 1996-2005 

CPI Item 

Structure 

Weights’ Base 

Period Index Year Food1 Clothing2 Shelter3 Utilities4

Medical 

Care5 Other6

1987 1982-1984 1996 0.163 0.065 0.260 0.085 0.048 0.379 

1997 0.163 0.065 0.260 0.085 0.048 0.379 

1998 1993-1995 1998 0.151 0.054 0.290 0.051 0.054 0.400 

1999 0.151 0.054 0.290 0.051 0.054 0.400 

2000 0.151 0.054 0.290 0.051 0.054 0.400 

2001 0.151 0.054 0.290 0.051 0.054 0.400 

1998 1999-2000 2002 0.144 0.048 0.306 0.044 0.056 0.402 

2003 0.144 0.048 0.306 0.044 0.056 0.402 

2001-2002 2004 0.141 0.043 0.323 0.046 0.058 0.389 

2005 0.141 0.043 0.323 0.046 0.058 0.389 

1996 to 2005 

percent change -0.136 -0.339 0.243 -0.456 0.204 0.026 

1998 to 2005 

percent change -0.069 -0.199 0.114 -0.092 0.063 -0.028 

Source: Basic calculations produced by Rob Cage, Mary Lynn Schmidt, and Patrick Falwell, U.S. Bureau of Labor 

Statistics; upper level aggregations produced by authors. 

1

 Includes food at home and away from home; does not include alcoholic beverages. 

2 Officially referred to as “Apparel” and includes clothing, footwear, jewelry, and watches. For the 1987 structure, 

apparel services and sewing were also included. 

3

 Includes rent, lodging away from home, owners’ equivalent rent, and tenants and homeowners insurance. In the 

1987 structure, tenants’ insurance was not included in shelter. 

4

 Includes natural gas, electricity, other fuels, and water and other public services. The 1987 structure included 

telephone services and community antennae and cable television services. 5 Includes health insurance, professional services, hospital and related services (including adult day care), 

prescription drugs and medical supplies and nonprescription drugs and medical supplies. The 1987 structure did not 

include adult day care. 

6 Based on the difference in CPI defined total expenditures and CPI defined expenditures for food, clothing, shelter, 

utilities, and medical care. 

32 
Table 5. Percent Changes of Annul CPI-U, U.S. City Average for All Items and Selected Categories 

from 1996: 1996-2005 

Year All Items Food Clothing Shelter Utilities 

Medical 

Care 

1996 -- -- -- -- -- -- 

1997 0.023 0.026 0.009 0.031 0.026 0.028 

1998 0.039 0.048 0.010 0.065 0.008 0.061 

1999 0.062 0.070 -0.003 0.095 0.010 0.098 

2000 0.098 0.095 -0.016 0.131 0.082 0.143 

2001 0.129 0.129 -0.033 0.173 0.178 0.195 

2002 0.147 0.149 -0.058 0.217 0.126 0.252 

2003 0.173 0.174 -0.082 0.246 0.212 0.302 

2004 0.204 0.215 -0.086 0.280 0.270 0.359 

2005 0.245 0.244 -0.093 0.312 0.404 0.416 

Source: U.S. Bureau of Labor Statistics web site (BLS, 2008) and authors’ own calculations. 

33 
Table 6. Percent Changes from 1996 of Annual Expenditures Implicit in 

Experimental Thresholds for Reference Families, All U.S.: 1996-2005 

Year Threshold Food Clothing Shelter Utilities 

Medical 

Care 

1996 -- -- -- -- -- -- 

1997 0.018 0.027 0.114 -0.022 0.041 0.009 

1998 0.050 0.053 0.012 0.061 0.091 -0.074 

1999 0.086 0.073 0.023 0.119 0.132 -0.047 

2000 0.146 0.134 0.051 0.190 0.162 0.059 

2001 0.196 0.167 0.116 0.224 0.236 0.196 

2002 0.249 0.177 0.126 0.316 0.295 0.302 

2003 0.277 0.183 0.033 0.396 0.341 0.280 

2004 0.312 0.234 -0.012 0.439 0.348 0.346 

2005 0.370 0.253 -0.092 0.556 0.422 0.421 

Source: Authors’ own calculations using U.S. Consumer Expenditure Interview Survey data 

(BLS, 2007a). 

34 
Table 7. Aggregate Additions and Subtractions to Family Resources ($ billions) for the Total Population: 

1996 to 2005 

Additions Subtractions 

Year 

Food 

stamps1

Net capital 

gains2

Earned 

Income Tax 

Credit3

Federal 

Income 

Tax3

State 

Income 

Tax3

Payroll 

taxes3

Work 

Expenses4 Childcare4

1996 14.2 179.4 21.6 627.0 163.2 266.0 98.0 19.5 

1997 12.3 239.6 21.7 703.0 180.4 285.0 102.0 21.0 

1998 10.8 339.9 22.5 757.0 200.6 304.0 106.0 22.1 

1999 9.6 457.7 23.5 858.0 224.6 328.0 106.0 18.5 

2000 8.7 468.8 22.5 907.5 237.0 343.0 105.0 19.1 

2001 9.7 483.8 23.7 923.0 248.7 357.0 120.0 19.8 

2002 11.2 58.3 25.7 744.0 179.3 386.0 128.0 19.2 

2003 12.9 78.0 26.1 745.0 188.4 396.0 128.0 19.1 

2004 14.7 185.0 27.0 968.0 198.2 409.0 134.0 20.0 

2005 16.2 179.8 29.3 864.0 207.8 431.0 152.0 22.2 

Source: Authors’ own calculations using the 1997-2006 CPS ASEC (Census, 2007a). 

1 Reported face value of food stamps received over the year in CPS ASEC. 2 Capital gains and losses are imputed to the CPS ASEC at the Census Bureau using the IRS Statistics of Income 

(SOI) file. Imputation methods vary for the figures shown in the chart. 

3

 Tax figures are simulated based on reported income amounts and imputed capital gains and losses. 

4

 Work expenses and child care expenses while parents work are based on data collected in the Survey of Income 

and Program Participation. A percentage of median expenses are assigned to individuals and are computed based on 

the number of weeks worked reported in the CPS.

35 
Table 8. Aggregate Additions and Subtractions to Family Resources ($ billions) of Officially Poor Families: 

1996 to 2005 

Additions Subtractions 

Year 

Food 

stamps 

Net capital 

gains 

Earned 

Income Tax 

Credit 

Federal 

Income Tax

State 

Income 

Tax 

Payroll 

taxes 

Work 

Expenses Childcare 

1996 10.7 0.2 8.7 0.2 0.3 3.9 4.7 1.7 

1997 9.5 0.5 8.9 0.1 0.3 3.9 4.7 1.8 

1998 8.1 1.1 9.4 0.2 0.3 3.9 4.7 2.1 

1999 7.0 1.2 9.1 0.2 0.3 4.0 4.5 1.3 

2000 6.3 0.7 8.8 0.1 0.3 3.8 4.2 1.2 

2001 7.2 0.8 9.0 0.2 0.4 4.1 4.9 1.3 

2002 7.8 5.4 9.3 0.6 0.0 4.5 5.4 1.3 

2003 9.4 6.7 9.7 -0.4 0.0 4.6 5.3 1.3 

2004 10.6 0.0 10.5 -1.5 -0.3 5.1 6.0 1.5 

2005 11.7 0.1 11.3 -0.9 -0.2 5.1 6.7 1.4 

Source: Authors’ own calculations using the 1997-2006 CPS ASEC (Census, 2007a).

36 
Table 9: Aggregate Additions and Subtractions to Family Resources ($ billions) of Near Poor Families: 

1996 to 2005 

Additions Subtractions 

Year 

Food 

stamps 

Net capital 

gains 

Earned 

Income 

Tax Credit

Federal 

Income Tax 

State 

Income Tax

Payroll 

taxes 

Work 

Expenses Childcare 

1996 1.3 0.2 3.7 0.6 0.4 3.1 2.8 0.8 

1997 1.1 0.4 3.9 0.6 0.4 3.2 2.8 0.8 

1998 0.9 0.6 3.8 0.5 0.5 3.1 2.7 0.8 

1999 0.9 0.5 4.2 0.5 0.5 3.4 2.7 0.7 

2000 0.8 0.7 4.0 0.6 0.5 3.5 2.7 0.8 

2001 0.9 0.5 4.3 0.0 0.6 3.5 3.0 0.7 

2002 1.1 1.3 4.4 0.0 0.2 3.8 3.2 0.7 

2003 1.2 2.2 4.6 -0.9 0.2 4.0 3.4 0.7 

2004 1.4 0.3 4.4 -1.5 0.2 4.1 3.6 0.7 

2005 1.4 0.2 5.0 -1.3 0.2 4.0 3.8 0.7 

Source: Authors’ own calculations using the 1997-2006 CPS ASEC (Census, 2007a). 

37 
Table 10. Official and Experimental Population Poverty Rates Using Income-Based Resources: 

1996-2005 

Year Official Experimental 

1996 13.7 17.1 

1997 13.3 16.2 

1998 12.7 15.8 

1999 11.9 15.2 

2000 11.3 15.3 

2001 11.7 16.1 

2002 12.1 16.5 

2003 12.5 17.0 

2004 12.7 17.2 

2005 12.6 17.7 

Source: Authors’ own calculations using the 1997-2006 CPS ASEC (Census, 2007a) and thresholds 

based on CE Interview data (BLS, 2007a). 

Chart 3. Official and Experimental Poverty Rates 1996-2005

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Official Experimental

38 
Table11. Official and Experimental Poverty Rates for Specific Demographic Groups: 1996 to 2005 

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Children 

 Official 20.5 19.9 18.9 17.1 16.2 16.3 16.7 17.6 17.8 17.6

 Experimental 22.8 21.8 21.2 19.8 19.6 19.9 20.3 20.7 20.5 21.1

Non-elderly Adults 

 Official 11.4 10.9 10.5 10.1 9.6 10.1 10.6 10.8 11.3 11.1

 Experimental 14.4 13.7 13.3 13.1 12.8 13.9 14.2 14.8 15.3 15.5

Elderly 

 Official 10.8 10.5 10.5 9.7 9.9 10.1 10.5 10.3 9.8 10.2

 Experimental 18.0 16.6 16.4 16.4 18.5 19.2 20.0 20.8 20.2 21.5

White 

 Official 11.2 11.0 10.5 9.8 9.5 9.9 10.2 10.5 10.8 10.6

 Experimental 14.3 13.8 13.3 13.1 13.2 14.0 14.4 14.8 15.0 15.2

Black 

 Official 28.4 26.5 26.1

Source: Authors’ own calculations using the 1997-2006 CPS ASEC (Census, 2007a) and thresholds based on CE 

Interview data (BLS, 2007a). 

23.6 22.5 22.7 23.9 24.3 24.8 24.9

 Experimental 32.8 30.1 30.3 27.5 26.8 28.0 28.7 29.5 30.1 31.9

39