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Discussion of Final Report of the Interagency Technical Working 

Group (ITWG) on Evaluating Alternative Measures of Poverty:

Consumption as a Resource Measure

Thesia I. Garner

Bureau of Labor Statistics (BLS)

Division of Price and Index Number Research (DPINR)

FCSM 2021 Research and Policy Conference

November 4, 2021

(revised October 30, 2021)
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Outline

Why a consumption-based measure of resources?

What to include? How to define?

Recommendations and comments 

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

Data quality including administrative data

Data source

Funding

Implementation and future direction
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Why a Consumption-Based Measure of Resources?

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

 Consumption-based measure may more directly capture the resources available to a family if it records the 

consumption that was actually achieved

 Conceptually, such a measure reflects long-run “resources” and one’s ability to smooth consumption over 

life cycle

 Depends on

Current income; public and private transfers/in-kind benefits; assets (financial and non-financial); access to credit

Stage in one’s life-cycle, changes in family composition

Expectations/uncertainty about future income, employment, inflation, bequest motives, preferences

Time

 Examples of pros and cons

Good measure to identify who is poor based on material deprivation

Empirical studies suggest that people may report more accurately expenditures (a component of consumption) than income

May not be a good if interested in short-term impacts of temporary fluctuations income
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Life Cycle Theory of Consumption

suggests that individuals plan their consumption and savings behavior over the course of their lives

Image address: https://www.oecd-ilibrary.org/sites/9789264281288-12-en/images/images/graphics/g9-1.png

Working years Retirement

Youth years

years

Loans

Transfers from family

from assets

including pensions
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Consumption—What to Include? How to Define?

 Expenditures

 In-kind benefits

 Flow of services  Exclude expenditures

 Allocations to pensions and life insurance

are assumed to enhance future consumption

 Owned shelter and vehicle purchases

 To include or exclude?

 Health expenses 

 Education expenditures
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Consumption: Service Flows from Non-financial Assets

 Why account for service flows? 

Because we do not “consume” the house or car, instead we “consume” the flows of services (market or 

consumption value) from these

 Primarily two main valuation approaches used internationally

User costs 

Rental equivalence 

 Both to measure change over time in the value for the flow of services consumed by owner-occupants 

or vehicle owners 

 In theory, both approaches should produce equivalent values, but rarely do empirically

 Literature 

Focuses on owner-occupied housing 

Implication that the same or similar methods can be used for durables or non-financial assets like vehicles (see 

ILO 2003, paragraph 292)
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Consumption: Service Flows Defined in Terms of User Costs

 Costs of producing (using) the service: “...user cost approach attempts to measure the 

changes in the cost to owner-occupiers of using the dwelling; user costs account for 

both recurring costs and the opportunity cost of having money tied up in the dwelling 

rather than being used for some other purpose” (ILO 2004, p. 179).

 Components of user costs

Recurring costs like mortgage interest payments, property taxes, property insurance, and routine 

maintenance and repairs (including those for major appliances included in the shelter unit when 

covered by the rental contract) 

Opportunity costs of investing in this shelter property as opposed to another asset or for another 

purpose

Depreciation rate

Expected appreciation rate 

Income tax rate (advantages of owning: lowers user costs)
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Consumption: Service Flows Defined in Terms of Rental Equivalence

 Selling price of the service: “...rental equivalence approach attempts to measure the 

change in the price of the housing service consumed by owner-occupants by 

estimating the market value of those services” (ILO 2004, p. 180)

 Market rent that landlord would charge for a unit (selling price of the service provided by the housing 

structure)

 The rent an owner occupant would pay to rent her own home

 In the U.S., service flows from major appliances (e.g., refrigerators, stoves) are included in comparable 

rental units, unlike in many European countries, and thus are implicitly included in rental equivalence

 Most often used valuation approaches

Imputed rents (e.g., from regression models) + “premium”

Reported rental equivalence (asked in CE Interview)
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Rental Equivalence and Adjustments for Renter-like Expenditures

 Rental equivalence question in CE Interview

If someone were to rent this “dwelling” how much do you think it would rent for monthly, 

unfurnished and without utilities?

 Optional treatments for owner shelter-related expenses (those not implicitly included in 

rental equivalence)

1. Exclude all

2. Ratio adjust as is done for Consumer Price Index to make them “renter-like”, for example

 Adjust expenditure for homeowners’ insurance premium by a factor is 0.41 to reflect the share that 

only covers “contents and personal items” (tenants’ insurance) 

 Adjust expenditures for homeowners’ landscape maintenance by a factor of 0.061 to reflect share not 

covered by rental equivalence (rental contracts that require renter to maintains the yard at their own 

expense)
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Recommendations
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Accounting for Health in Consumption 

 Recommendations #5, 13, 14, 15, 16 

 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 (e.g., market value, willingness to pay, fungible value)

2. Does not include a value of health insurance

 Treatment of non-premium medical out-of- pocket expenditures not covered by insurance, e.g., copays, deductibles, prescription drugs, and over the counter items requires further research 

 Current status

 No plans in response to ITWG Report

 Related: BLS research initiative to develop a consumption measure of economic well-being, and 

measure of consumption expenditures for distributional accounts (CE-PCE project)
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Recommendations #17, 19: Education

 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.

 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

 No plans in response to ITWG Report
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Recommendation # 27: 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

 CE Interview already includes rental equivalence for owner-occupied housing

 Related: BLS research to produce flow of services cars and trucks
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Recommendations #6, 23: Administrative Data

 6. The Working Group recommends that the Census Bureau and the Bureau of Labor Statistics use, where 

available and when appropriate, administrative data to supplement or replace the use of survey data 

for developing the recommended measures.

 23. The Working Group recommends that the advisory structure recommended previously should vet 

decisions about data sources, adjustment strategies, and other assumptions. This advisory structure 

should consider and discuss continued research into availability and applicability of administrative 

data sources.

 Current status

 No plans in response to ITWG Report

 Related: regular CE work to improve data quality

 Proof of concept project: match of CE Interview and HUD administrative data for 2013 to 2017 for voucher 

recipients and consumer units living in public housing (under revision)
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Recommendation #22 (in part): Model-Based Approaches

 ... Regression-based modeling (with or without individual-level or aggregate administrative data) can 

also improve the quality of estimates of income, expenditures, and program participation...

 Current status

 No plans in response to ITWG Report

 Related: research for Supplemental Poverty Measure (SPM) thresholds could be adapted for 

production of consumption-based resource

 Imputation of non-collected in-kind benefits in the CE for NSLP, WIC, home energy assistance using CPS ASEC 

in combination with CE, and NSLP and WIC benefits data from USDA

 Imputation of “market” rents, using CE Interview data for renters paying “market” rents and renters 

living in public housing, rent-controlled units, receiving financial assistance with rent (e.g., voucher), 

rent as pay
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Recommendation #24: Data Quality

 24. The Working Group recommends that the Census Bureau and the Bureau of Labor Statistics continue 

to research, and possibly implement, ways to reduce survey burden and improve the quality of resulting 

data through increased access and use of administrative data in surveys, including the ... CE.

Current status

 No plans in response to ITWG Report

 Related: regular CE work to improve data quality

 Developing streamlined Interview questionnaire (some on progress, others first phase April 2023)

Reduce the level of detail started April 2021 (e.g., for apparel, can no longer distinguish 

between men and women, or boys and girls, or infants; only by age group: 18 years and older; 

0-17 years of age)

Facilitate the use of records

Some changes to the order and section organization

 Developing Consumer Assisted Recorded Interview (CARI) for Interview to be implement in July 2022; goal to 

improve data collection and question wording
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Recommendation # 26: Data Source

 26. The Working Group recommends that the Bureau of Labor Statistics use the CE Interview Survey 

data to research and develop a consumption-based resource measure.

 Current status

 Response to ITWG Recommendation #26: planned presentation on consumption resource poverty 

during ASSA/AEA Annual Meetings 2022 

 Related: BLS research initiative to develop a consumption measure of economic well-being
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Recommendations # 28, 29: Geographic Area for Estimates 

 28. The Working Group recommends that the CE Interview serve as the primary data source for the 

production of the consumption resource measures, with estimates produced at the state level.

 29. The Working Group recommends that the current CE Interview Survey serve as the interim data 

source for the production of the consumption resource measures, with estimates produced at the Census 

Division level.

 Current status

 No plans in response to ITWG Recommendations
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Recommendation # 25: Funding 

 25. The Working Group recommends funding support of the work to develop the new recommended measures, 

including funding to support BLS to research the nature and construction of a potential consumption-based poverty 

measure and improve the CE program in support of improved poverty measurement. A proposal requesting $7.1 

million was included in the fiscal year 2021 President’s Budget.

 $7.1 million included in President’s FY2021 Budget request to Congress for BLS

 Conduct research on potential consumption-based poverty measure

 Improvement in CE program in support of production-quality SPM thresholds

 Funds not included in the final FY2021 appropriation from Congress

 Current status

 No additional plans in response to ITWG Report (request made in 2020 during ITWG meetings)

 Continues to be much interest within BLS supporting this work

 Related: BLS research initiative to develop a consumption measure of economic well-being
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Recommendation #1: Engage with Stakeholders

 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

 No plans in response to ITWG Report

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

 Consumption Symposium, virtual in September 22-23, 2021 (see https://stats.bls.gov/cex/consump_symposium.htm )

 Federal Statistics Advisory Committee (FESAC) meeting, December 10, 2021

 Research presentation during ASSA/AEA 2022
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Challenges for a Consumption Resource Measure: 

Implementation Issues and Future Direction

 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

 Future Direction: integrate ITWG Recommendations with BLS initiative to produce a 

consumption measure of economic well-being
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Contact

Thesia I. Garner, Ph.D.

Chief, Division of Price and Index Number Research

Office of Prices and Living Condition

Bureau of Labor Statistics

Washington, DC 20212

Garner.Thesia@BLS.gov

Office telephone: (202) 691 6576
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Current CE Design

Consumer Expenditure Survey 

Estimates

- 4 waves of personal interviews

- 3-month recall

- Large or recurring expenditures

- 2 one-week household paper* diaries

- Contemporaneous recall

- Small, frequently purchased items

Slide from presentation by Laura Erhard, CE Division, Survey Methods Symposium, July 20, 2021
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CE Design 

 CE Diary and Interview

 CE Interview

 Current design: 4 interviews, 3- month reference period

 No requirement that consumer units remain in 4 quarters (quarterly data assumed independent; no longitudinal weights)

 Consumer units (CUs) enter the sample on a rolling, not calendar-year, basis (data collection period, for example, first interview in 

June 2020 reference period of March, April, and May 2020; and last interview in February 2021 with reference period of December 

2020 through February 2021) 

 Relevant data for consumption measure: expenditures, rental equivalence of owned home, stock of owned vehicles, presence of 

health insurance (private-self, employer-provided, Medicaid, Medicare, other government), CU demographic variables
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Gemini Redesign Plan

2013: 

Redesign Plan 

approved

2015: 

Proof of 

Concept 

Test 

complete

2016: 

Incentives 

Test 

complete

2020: Large 

Scale 

Feasibility 

Online Diary 

Test (LSF) 

complete

2022:

Online Diary 

Implementation

2023 onwards: 

Phased 

Implementation of 

Streamlined 

Questionnaire

You are 

here!

Slide from presentation by Laura Erhard, CE Division, Survey Methods Symposium, July 20, 2021
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BLS Production of a Consumption Measure

 Who?

Researchers and staff in Divisions of Price and Index Number Research (DPINR) and Consumer 

Expenditure Surveys (DCES) with assistance from OEUS and outside research community

Support from Commissioner Beach (April 2021)

 What?

 OECD 2013 Framework definition

 Consumption expenditure - value of consumption goods and services used or paid for by a household to directly meet its needs

– purchase of goods and services in the market

– consumption flows from owner-occupied housing, vehicles, and durables

– in-kind transfers from employers

– barter of goods and services 

– household’s own production of goods and services consumed

– transfers in-kind from other households (e.g., gifts) and from businesses

 GOAL: Actual final consumption - sum of 

– consumption expenditure 

– value of social transfers in kind provided by government and non-profit institutions 

Source: OECD (2013), OECD Framework for Statistics on the Distribution of Household Income, Consumption and Wealth, OECD Publishing, Paris, Chapter 5. Household Consumption, p.104. 
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Activities at BLS: Consumption Symposium and Beyond

 Consumption Symposium

Topics

– Theory, concepts

– Non-traditional views/measures of consumption (e.g., time in consumption, within household sharing/allocation, 

as part of multidimensional measures)

– In-kind benefits and use of administrative data

– Durables

– Health insurance

– Home production

 Next steps

Internal/external document (past, present, future) 

Building on earlier CE framework (2000)

– Follow international standards/guidelines

– Moving from CE publication definition of expenditures to consumption measure of economic well-being

– Developing measures for uses (e.g., CE to PCE distributional accounts, poverty measurement)