1 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Building a Consumption Measure for Inequality and 

Poverty Analysis

Brett Matsumoto

Division of Price and Index Number Research (DPINR)

Co-authored with Thesia Garner and Jake Schild (DPINR)

Southern Economic Association Conference, November 19, 2022, 5:15 p.m. 

Session Number 01.E.26: Inequality and Poverty in the United States

Fort Lauderdale, FL
2 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Why Produce a Comprehensive Consumption Measure?

◼ Alternative measure of well-being based on outcomes

◼ Need to go beyond expenditures: Period of COVID-19 and consumption of home 

production

◼ Supports work and recommendations 

 Interagency Technical Working Group (ITWG) on Evaluating Alternative Measures of 

Poverty (2020)

 CNSTAT Panel An Integrated System of U.S. Household Income, Wealth, and Consumption 

Data and Statistics to Inform Policy and Research (present)

 OECD expert groups on distributions of income, consumption, and wealth (micro and 

macro groups)

◼ Related academic work: Meyer and Sullivan (2012); Fisher, Johnson, and 

Smeeding (2015)

❖ NOTE: Have presented earlier work on progressions of our measure and used in inequality and 

poverty at various venues during 2022 (e.g., ASSA, APPAM, SGE, OECD, CNSTAT, FESAC,JSM)
3 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

BLS Initiative Focuses on Consumption as a Well-being 

Outcome as A Function of Resources and Processes

For other outcomes: https://www.oecdbetterlifeindex.org/

Processes

Skills (e.g., education, 

financial management, 

efficiency in converting 

inputs to outcomes)

Degree of resource 

allocation (power)

Circumstances (CU 

composition, disability)

Preferences, subjective 

assessments of wellbeing

Available Resources

Income, in-kind 

transfers

Asset (financial)

Asset (nonfinancial)

Debt (access and 

use)

Time

Outcomes (e.g.,)

1. Consumption

2. Health status

3. Material deprivation

4. Life satisfaction

5. Happiness
4 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Outline 

◼ Definitions of consumption expenditures/spending and consumption

 OECD Expert Group on Distribution of Household Income, Consumption and Wealth report (2013) 

 Interagency Technical Working Group (ITWG) on Evaluating Measures of Poverty report (2020)

◼ Our approach

◼ Analysis and results

 Inequality

 Poverty

◼ Summary and future work
5 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Consumption Expenditures vs Consumption: Key differences

◼ Durables – expenditure vs flow of services 

◼ In-kind transfers

◼ Household Production

◼ Gifts and barter

◼ Problem categories (investment vs consumption):

Education

Health
6 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Health in a Consumption Measure

◼ Medical goods and services spending

Investment in future health (eg Grossman model)

◼ Health Insurance

Value of risk protection → current consumption

◼ Valuing HI

 Market value (or cost for gov programs)

 Fungible value 

 Willingness to pay

◼ ITWG recommendations
7 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

ITWG Recommendation: What to Include in Consumption

◼ Expenditures

for own

consumption

◼ In-kind benefits

public and 

private

◼ Flow of services

◼ Health insurance

With and without
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Data Sources

◼ CPS-ASEC (households/members): reported 

receipt of government provided in-kind 

benefits

 School meals (NSLP)

 Women, infants, and children (WIC) 

 LIHEAP (receipt and values)

◼ USDA: food assistance programs

◼ Center for Medicare and Medicaid Services 

(CMS) National Health Expenditure (NHE) 

 Medicare

 Medicaid

For Most Goods and Services: 

U.S. Consumer Expenditure Survey Interview Other In-kind Federal Government Benefits

◼ Time period: 2020Q2-2021Q1 to represent 2020 

◼ Interviewed up to 4 times, 3-month recall 

◼ Consumer unit (CU)

◼ Out-of-pocket spending for most goods and 

services

◼ Rental equivalence for owned shelter

◼ Rent paid & characteristics to impute market rents 

when in-kind rental assistance

◼ Stock of cars and trucks to produce flow of services

In-kind Employer Benefits

◼ Medical Expenditure Panel Survey (MEPS-IC) from 

the Agency for Healthcare Research and Quality: 

employer-provided health insurance
9 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Addition Methodological Notes

◼ Gifts and Barter – exclude spending on housing and utilities for 

non-CU members

◼ Household production – not included in this version

◼ Limits of imputation
10 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Measures Produced for Analysis

Economic Well-being at 

Consumer Unit Level

Consumption

Without 

Health 

Insurance

with Health 

Insurance

with Health 

Insurance 

Capped

NOTE: None of these measures include “Education”

HI_Cap=

min(HI, 0.5*consumption with HI)
11 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Method to Produce Inequality and Poverty Statistics

◼ Apply equivalence scale to adjust for differences in consumer unit size

 3-parameter equivalence scale (same as used for SPM thresholds)

 Assign equivalized value to each person within CU (i.e., population weight=FINLWT21*CUsize) 

◼ Distributional and inequality analysis (consumer units and person population weighted)

 Rank people by equivalized values to derive cutoff points for deciles, weight by persons

 Aggregate inequality measures and results by deciles

◼ Poverty Analysis(population weighted)

 Relative poverty threshold as 60% of median equivalized measure values

 Absolute poverty threshold set as the same for all measures (set to the relative threshold for capped 

health consumption).

 Show “annualized” relative thresholds equivalized to those for 2 adults and 2 children 

 Poverty rates for total U.S. population and for subpopulations of the “poor”
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Results and Analysis

Basic statistics

Inequality and distributions

Poverty
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Moving from Consumption to Consumption with Health 

Insurance: Densities of Quarterly Equivalized Values: 2020

NOTE: Based on quarterly adult equivalized values; population weighted (FINLW21*Cusize); consumption with health only includes health insurance; measures do not include Education; unweighted sample size=20156

Mean Median

Consumption w/o 

Health $7,567 $6,565 

Consumption 

w/Health 

Insurance Only

$10,260 $9,333 

Consumption w/ 

Health Insurance 

Capped

$10,206 $9,275 
14 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Average Consumer Unit Shares for Select Consumption 

Groups: 2020

NOTE: Based on quarterly values for Consumer Units, population weighted as (FINLWT21*CUs); measures do not include Education; unweighted sample size=21270 (10 observations with 0 or negative values dropped)

13.2%

19.2%

8.8% 8.3%

13.1%

26.9%

13.3%

19.2%

8.8% 8.4%

13.1%

26.6%

18.6%

25.7%

11.8% 11.7%

17.9%

0.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

food owner shelter renter shelter utilities transportatio health

with health ins health ins capped without any health
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Inequality and Distributional Analysis
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0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0

Cummulative Shares of Equivalized Consumption with and without 

Health Insurance

Decile of Population based on Separate Rank of Eq. Consumption w/and w/o HI

Perfect Equality

Consumption with Health Insurance

Consumption with Health Ins Capped

Consumption

Lorenz Curves of Equivalized Consumption with and without Health 

Insurance: 2020

Example: 60% of the population accounts for 

43% of Consumption with Health Insurance 

(capped and uncapped)

NOTE: Based on quarterly adult equivalized values;

population weighted (FINLW21*Cusize); consumption with health only includes

health insurance; measures do not include Education; unweighted sample size=20156
17 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Poverty Measurement and Analysis
18 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Annualized 2A+2C Relative Poverty Thresholds and Person 

Poverty Rates: 2020

NOTE: Thresholds based on quarterly adult equivalized values; population weighted (FINLWT21*Cusize); consumption with health insurance not capped and capped at 50% of total; measures do not include Education; 

unweighted consumer unit sample size=20156

$33,995

$48,330 $48,027

14.1%

10.8% 11.1%

35.8%

10.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

$0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

Consumption with no

health

Consumption with

Health Insurance

Consumption with

Health Insurance

Capped

Relative Annualized 2A+2C Equivalized Thresholds

Poverty Rates -Relative

Poverty Rates - Anchored

NOTE: Anchored poverty rates based on 

Comparison to relative thresholds based on 

With health insurance capped
19 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Demographic Characteristics of the U.S. Population 

Compared to Study-defined “Poor”: 2020

Characteristic of Consumer 

Unit U.S. Population

Below Consumption 

without Health 

Threshold

Below Consumption 

with Health Insurance 

Threshold

Below Consumption 

with Health Insurance 

Capped Threshold

Presence of Members >=65

Yes 24.6% 24.0% 13.8% 15.6%

No 75.4% 76.0% 86.2% 84.4%

Presence of Children <18

Yes 50.3% 63.3% 65.5% 64.7%

No 49.7% 36.7% 34.5% 35.3%

In-kind

LIHEAP 2.6% 8.5% 4.8% 5.4%

NSLP 20.3% 23.0% 28.0% 26.3%

WIC (including infant 

formula rebate) 3.6% 9.9% 6.5% 7.4%

Rental assistance 1.0% 2.3% 1.7% 2.0%

NOTE: Thresholds based on quarterly adult equivalized values; population weighted (FINLWT21*Cusize); consumption with health insurance not capped and capped at 50% of total; measures do not include Education; 

unweighted consumer unit sample size=20156
20 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Public Assistance and Health Imputations of the U.S. 

Population Compared to “Poor”: 2020

Characteristic of Consumer Unit U.S. 

Population

Below Consumption 

without Health Insurance 

Threshold

Below Consumption 

with Health Insurance 

Threshold

Below Consumption 

with Health Insurance 

Capped Threshold

With Health Insurance Imputation 

by Type

Employer provided only 44.0% 19.5% 24.0% 22.6%

Individual ACA only 1.6% 1.1% 1.6% 1.5%

Medicare only 12.4% 9.6% 6.2% 6.5%

Medicaid only 11.2% 31.8% 19.6% 21.3%

CHIP only 0.7% 1.5% 2.7% 2.7%

Other only 1.2% 0.8% 1.7% 1.6%

NOTE: Thresholds based on quarterly adult equivalized values; population weighted (FINLWT21*Cusize); consumption with health insurance not capped and capped at 50% of total; measures do not include Education; 

unweighted consumer unit sample size=20156
21 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Summary

◼ Consumption with health insurance capped follows ITWG recommendations for 

poverty measurement

◼ Progress in defining consumption measure

 Added imputed rents for CUs living rent-free

 Added proxy for rental expenses for college students

 Limited to consumption of members within the consumer units ( UCCs as “nogift”) for shelter and 

utilities

◼ As move from consumption without to consumption with health insurance

 More equal distributions

 Lower poverty rate based on consumption with health insurance when using a relative threshold 

 Result when capped versus not
22 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Future Work

◼ Improve Imputations

◼ Address underreporting

◼ Refine the cap

◼ Evaluate options to include education

◼ Add value of home production for own consumption

◼ Continue with inequality and poverty analyses

◼ Add more years to our analysis

◼ Progress will be posted on https://www.bls.gov/cex/consumption-home.htm
23 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Contact

Brett Matsumoto

Research Economist, Division of Price and Index Number Research 

(DPINR)

Bureau of Labor Statistics

Washington, DC 20212

Matsumoto.Brett@BLS.gov
24 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Additional Results
25 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Aggregate Inequality Indices for Consumption with and without 

Health Insurance: 2020

Consumption

No Health Health Insurance Health Insurance Capped

Gini 0.285 0.240 0.243 

Thiel 0.145 0.101 0.104

Mean log deviation 0.139 0.097 0.100

CV 0.191 0.125 0.128

90/10 ratio 3.480 2.867 2.919

NOTE: Based on quarterly adult equivalized values; population weighted (FINLW21*Cusize); consumption with health only includes health insurance; measures do not include Education; unweighted sample size=20154; restricted so all based on

Same sample, dropped 4 observations due to consumption_4=0..20
26 — U.S. BUREAU OF LABOR STATISTICS • bls.gov

Distribution of CUs by Presence of Member >=65 within Deciles 

of Eq. Consumption with and without Health Insurance: 2020

Consumption with Cap Health Insurance Deciles Consumption without Health Insurance Deciles

NOTE: Based on quarterly consumer unit; deciles based on population weighted (FINLW21*Cusize); consumption includes health insurance; measures do not include Education; unweighted sample size=20158

69%

73%

72%

73%

70%

71%

69%

68%

68%

62%

31%

27%

28%

27%

30%

29%

31%

32%

32%

38%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1

2

3

4

5

6

7

8

9

10

81%

83%

81%

78%

76%

72%

69%

60%

56%

50%

19%

17%

19%

22%

24%

28%

31%

40%

44%

50%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

1

2

3

4

5

6

7

8

9

10

if no members 65+

if members 65+