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

Consumption as a Measure to Assess Poverty

Thesia I. Garner

Chief Researcher, Office of Prices and Living Conditions

Bureau of Labor Statistics (BLS)

Association for Public Policy and Analysis (APPAM) Conference

Super Session - Live Stream - A Discussion of the Interagency Technical Working Group on Evaluating 

Alternative Measures of Poverty

(Poverty and Income Policy)

Tuesday, March 29, 2022; 10:15 AM - 11:45 PM; 3rd Floor – Room Lone Star D
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My Remarks Today Motivated by...

◼ITWG on Evaluating Alternative Measures of Poverty 

recommendations: report and discussions

◼Our work at BLS to develop a consumption measure
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Outline

◼ Consumption as a well-being measure

◼ Consumption as a measure for poverty assessment

◼ Defining consumption

◼ ITWG recommendations and discussions

Stakeholders

Challenging components (i.e., education, health, non-financial assets)

Other

Topics discussed but no recommendations

◼ Implementation issues and ongoing research

◼ Initial results
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Consumption as a Well-being Outcome: A Function 

of Resources and Processes

Available Resources

Income, in-kind 

transfers

Asset (financial)

Asset (nonfinancial)

Debt (access and 

use)

Time

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

Outcomes (e.g.,)

1. Consumption

2. Health status

3. Material deprivation

4. Life satisfaction

5. Happiness

For other outcomes: https://www.oecdbetterlifeindex.org/
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Consumption as a Measure for Poverty

➢Focus on not how we could live, but how we do live...

◼ Consumption reflects what is achieved, not what could be achieved

◼ Conceptually, such a measure reflects access to resources and one’s ability to achieve a 

certain level of consumption (e.g., defined as a some line that may or may not 

represent minimum needs – this is a threshold issue)

◼ I, personally, do not consider consumption as a better measure than income or wealth 

to ascertain “poverty” status; instead I consider consumption a complementary 

measure

◼ Examples of pros and cons

Pro: good measure to identify who is “poor” or less well-off based on material deprivation

Con: may not be a good measure if concerned with indebtedness as a resource to support 

consumption
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ITWG: Include in Consumption

◼ Expenditures

for own

consumption

◼ In-kind benefits

public and 

private

◼ Flow of services ◼ Health insurance

Measure with

Measure without
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ITWG Recommendations
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Recommendation Regarding Stakeholder Engagement

◼ Recommendation 1. The Working Group recommends that the Census Bureau and the Bureau of Labor 

Statistics engage with stakeholders and other experts throughout the development of the recommended 

measures...

Current status

▪ In response to ITWG Report 

▪ Federal Committee on Statistical Methodology (FCSM) Research and Policy Conference November 2021

▪ Southern Economics Association Annual Meeting (SEA) November 2021

▪ American Economics Association (AEA) Annual Meeting January 2022 

▪ Society of Government Economists (SGE) April 2022

▪ Joint Statistical Meetings (JSM) August 2022

▪ International Association for Research on Income and Wealth (IARIW) August 2022

▪ Related BLS research initiative to develop a consumption measure of economic well-being

▪ Consumption Symposium, virtual in September 2021 (see https://stats.bls.gov/cex/consump_symposium.htm )

▪ Federal Statistics Advisory Committee (FESAC) meeting December 2021
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Recommendations Regarding Health 

◼ Recommendations regarding the treatment of health are in 5, 13, 14, 15, 16 

◼ Focus on Recommendation 5. The Working Group recommends that the Bureau of Labor Statistics 

develop and publish two new sets of research measures of consumption-based resources

1. Includes a value of health insurance 

2. Does not include a value of health insurance

◼ Further research needed on how to treat non-premium medical out-of- pocket expenditures not 

covered by insurance, e.g., co-pays, deductibles, prescription drugs, and over the counter items

➢ Current status

▪ Related: BLS research initiative to develop a consumption measure of economic well-being

▪ In response to report: initial results presented at ASSA/AEA January 2022
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Recommendations Regarding Education

◼ Recommendation 17. The Working Group recommends that expenditures on education be excluded 

from the recommended extended income-based and consumption-based resource measures because 

education is generally considered an investment in human capital.

◼ Recommendation 19. The Working Group recommends continued research and additional stakeholder 

and expert engagement on whether and how to treat education within resource measures.

➢ Current status

▪ Related: BLS research initiative to develop a consumption measure of economic well-being

▪ In response to report: initial results presented at ASSA/AEA January 2022
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Recommendation Regarding Service Flows from Non-financial Assets 

◼ 27. The Working Group recommends that the value of service flows from owner-occupied shelter and 

the value of the service flows from owned vehicles be included in the consumption resource measures.

➢ Current status

▪ Related: BLS research to produce flow of services cars and trucks for consumption measure

▪ In response to report: initial results presented at ASSA/AEA January 2022
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Consumption: Options to Impute Service Flows

◼ Costs of producing (using) the service: ...user cost approach 

Attempts to measure the changes in the cost to owner of using one’s dwelling, vehicle, or 

durable

User costs account for both recurring costs and the opportunity cost of having money tied up in 

the dwelling, vehicle, or durable rather than being used for some other purpose

◼ Selling price of the service: ...rental equivalence approach 

Attempts to measure the change in the price of the housing, vehicle, or durable services 

consumed by owners 

Based on estimating the market value of those services

Adapted from ILO 2004, pp. 179-180
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Other ITWG Recommendations for 

Consumption Poverty Measure and BLS

◼ Data and methods to produce

Consumer Expenditure Survey Interview (#26)

Use administrative data when available to supplement or replace survey data (#6) and advisory 

structure to support (#23)

Improve quality of estimates through model-based approaches for imputation (#22)

◼ Additional research: improve data quality and reduce respondent burden (#24)

◼ Support funding for BLS to produce the measure (#25)

◼ Produce estimates at state level using CE data (#28)

◼ As interim, produce at Census Division level (#29)
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ITWG Discussions Related to Poverty Measurement but No 

Specific Recommendations

◼ Thresholds (the “line”)

Determine how best to set based on research, and input from stakeholders and experts 

May or may not reflect basic needs 

◼ Price indexes for updating thresholds 

Conduct a study regarding appropriate index

◼ Geographic adjustment of thresholds 

Consult experts on whether and, if so, how to implement

◼ Equivalence scales 

Conduct a study that will provide a recommendation regarding which are most appropriate

Could differ for a consumption versus income measure 
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Implementation Issues and Continuing Research

◼ Implementation

Consumer Expenditure Survey

– Interview, Diary, both

– Sample size, geography

– No to little data collected on in-kind transfers (public, private) 

– Misreporting and under-estimates

– Redesign efforts could complicate production of a consistent measure of consumption over time

Administrative data (e.g., public in-kind benefits)

– Availability, coverage, quality, timeliness

– Permission to use

– Alignment with survey concepts

– Disagreement between administrative and survey sources

Imputation methods

◼ Continuing research 

Support BLS initiative

Consumption-based poverty measure
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Initial Results
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Construction of Consumption Measure

Measure Base Not Include Addition

Consumption 

(consumption_4) 

Total 

expenditures

(tot_exp)

Cash contributions; allocations to and 

purchases of life insurance, endowments, 

annuities, and other personal insurance; 

retirement, pensions, and Social Security

Owner expenses for primary residence; 

purchases of stoves, refrigerator/freezer, 

dishwasher, clothes washer/dryer AC window 

units for owners and renters; shelter expenses 

associated with vacation homes 

Expenditures for: health; education; housing 

while away at school; daycare centers, nursery, 

pre-school

Vehicle purchases in transportation, motorized 

vehicles for entertainment; vehicle finance 

charges

Rental equivalence of primary 

residence

Rental equivalence of vacation homes 

(but not time shares)

User costs or flow of services from cars 

and trucks

LIHEAP, NSLP, WIC, rental assistance inkind transfers
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Construction of Comparison Measures

Measure

Variable 

Name Base Not Included Addition

Total 

Expenditures

tot_exp

Total Expenditures CE 

Publication Definition

Consumption 

Expenditures

spending_consump tot_exp

Cash contributions; allocations to and 

purchases of life insurance, 

endowments, annuities, and other 

personal insurance; retirement, 

pensions, and Social Security

Income

CE defined after tax 

income with in-kind 

benefits

CE defined after tax 

income

LIHEAP, NSLP, WIC, 

rental assistance in-kind 

transfers
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Annualized Medians in Real 2015 Dollars for All Consumers Units 

Equivalized to CUs with 2 Adults+2 Children (2A+2C)

$45,000

$47,000

$49,000

$51,000

$53,000

$55,000

$57,000

$59,000

$61,000

$63,000

$65,000

2015 2016 2017 2018 2019 2020

After tax income with inkind benefits

Tot_exp

Spending_consump

Consumption_4
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Annualized Medians in Real 2015 Dollars for All Consumers Units 

Equivalized to CUs with 2 Adults+2 Children (2A+2C)

$45,000

$47,000

$49,000

$51,000

$53,000

$55,000

$57,000

$59,000

$61,000

$63,000

$65,000

2015 2016 2017 2018 2019 2020

After tax income with inkind benefits

Tot_exp

Spending_consump

Consumption_4
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Thresholds and Population Estimates

◼ Thresholds defined in 2 different ways

1. Purely relative as 60% of median (i.e., threshold is a function of the same “resource”)

2. Absolute thresholds for all measures set at values such that poverty rates for all measures 

anchored to be the same in 2015 as rate for consumption_4 poor (i.e., 16.8% in 2015) with 

2015 thresholds adjusted by Chained Consumer Price Index for All Urban 

Consumers (CPI-U) to derive thresholds up to 2020 

◼ Thresholds used not designed to represent “minimum” or “basic needs”

◼ Thresholds are not geographically adjusted

◼ To produce thresholds and poverty estimates use a 3-parameter equivalence scale 

(accounting for differences in needs for adults, children, single parents, economies of scale)

◼ All poverty rates are for populations (CU weight*CU size)

◼ Consumption based on CE quarterly data; annual income/4 
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Poverty Rates 

Based on Purely Relative Thresholds: 2015-2020

22.5% 22.5%

21.5%

19.3% 19.2%

16.8% 16.8%

14.2%

13.0%

15.0%

17.0%

19.0%

21.0%

23.0%

25.0%

2015 2016 2017 2018 2019 2020

After tax income with inkind benefits

Tot_exp

Spending_consump

Consumption_4

Consumption_4: 16.8% to 14.2% -2.6 pp 
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Poverty Rates Based on Absolute Thresholds for 2015 Set to 

Values that Result in Poverty Rates of 16.8% in 2015: 2015-2020

13.6%

12.4%

12.5%

11.5%

11.0%

12.0%

13.0%

14.0%

15.0%

16.0%

17.0%

18.0%

2015 2016 2017 2018 2019 2020

After tax income with inkind benefits

Tot_exp

Spending_consump

Consumption_4

Consumption_4: 16.8% to 11.5% -5.3 pp 
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Income Poor, Consumption Poor, or Both? 

Rates Based on Thresholds Set to Levels that Result in Same Rates 

as 2015 Consumption_4 Rate (16.8%)

2015

2015

After Tax Income 

Poor

Yes No Consumption Poverty Rate 

Consumption_4 

Poor

Yes 7.9% 8.9% 16.8%

No 8.9% 74.3%

Income Poverty Rate 16.7%

2020

2020 After Tax Income 

Poor

Yes No Consumption Poverty Rate 

Consumption_4 

Poor

Yes 4.7% 6.8% 11.5%

No 8.9% 79.6%

Income Poverty Rate 13.6%
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Summary

◼ Using ITWG recommendations in combination with BLS work to build a consumption 

measure of economic well-being: research only

CE Interview

Imputed rents for less than market rents

Imputed user costs or flow of services from cars and trucks

◼ Challenges for research

Treatment of health insurance (private, employer provided, Medicaid, Medicare)

Valuing additional private in-kind transfers

Thresholds

Equivalence scales

Geographic adjustment

Treatment of education

Role of assets and liabilities

◼ Challenge for production: resources/funding
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Contact

Thesia I. Garner

Chief Researcher, Office of Prices and Living Conditions

Bureau of Labor Statistics

Washington, DC 20212

Garner.Thesia@BLS.gov

Office telephone: (202) 691 6576