An Introduction to Poverty Measurement
Released: 2017-03-09T00:00:00

Introduction

Poverty estimates—the number and percentage of persons living in poverty—have been of interest to Congress not only to gauge the nation's economic health, but also because they are used to determine funding allocations for a variety of programs. Understanding how poverty is defined, how it is measured, and what information is used to compute poverty estimates can help congressional policymakers more adeptly consider how proposed legislation might affect the low-income population. To that end, this report provides a synopsis of poverty measurement in the United States, focusing on the following:

the official measure of poverty, which is used to obtain official counts and percentages of the poor; the Supplemental Poverty Measure, which is used for research purposes only and was developed to improve upon some limitations of the official measure; and the Health and Human Services (HHS) poverty guidelines, which are used in administering programs for low-income persons but not to measure the poor population.

This report discusses poverty measures developed for official, research, and administrative uses in the United States. It does not address international poverty measures, current poverty estimates, or policy responses for alleviating poverty.

What Is Meant by "Poverty?"

The American Heritage Dictionary of the English Language defines poverty as "the state of being poor; lack of the means of providing material needs or comforts." "Poor" in turn is defined as "having insufficient wealth to meet the necessities or comforts of life or to live in a manner considered acceptable in a society." Central to these definitions are "needs," "comforts," and living "in a manner considered acceptable in a society." Taken together, they characterize poverty as an economic concept that refers to limited resources: being in poverty indicates a level of hardship or deprivation because resources are insufficient to meet a level of material well-being. In the United States, economic resources often are expressed in monetary terms, and that expression makes poverty a financial concept. Persons living in poverty lack the financial resources to meet a basic level of material well-being.

How Is Poverty Measured?

Poverty measures convey the number or percentage of people falling below given income amounts, which are intended to represent a level of economic privation and are computed using some factually based measurement of basic needs. The poverty measures discussed in this report focus on financial resources. A family's income is compared against a dollar amount representing some measure of need, called a threshold , which typically varies by a family's size and composition. Those with family income less than the threshold are considered to be "in poverty," or poor; those with incomes greater than or equal to the threshold are not considered to be in poverty. All members of the same family have the same poverty status.

Poverty Measures as Financial Measures Distinct from Other Measures of Well-Being

The poverty measures discussed in this report focus entirely on economic needs and resources. This is only one way to assess a person's level of well-being, and other characteristics are also important to consider.

Some extended measures of well-being have been gauged through surveys. These include the following:

material well-being, which can be measured by the possession of amenities or access to public services; access to quality housing; neighborhood conditions and community services, such as public safety and quality local schools; and "the expectation of help, should need arise, from family, friends, or the community."

Other indicators of well-being include economic mobility (the degree to which persons at the low end of the income distribution can move higher in it), health outcomes and risk factors, or access to opportunities for high paying jobs and geographic access to those jobs.

These indicators of well-being tend to be inversely related to poverty, but the poverty measures discussed here were not designed to address them directly. They are financial measures, and do not directly capture the physical, mental, or social effects of being poor. That said, financial resources are nevertheless integral to well-being, and to the extent that poverty represents an inability to purchase or provide for a basic level of needs, these poverty measures do illustrate economic privation.

Poverty Measures Are Not the Same as Sufficiency Measures

Even within their focus on financial resources, the purpose of these poverty measures when they were developed was to accurately measure economic privation rather than to describe the full complement of resources a person or family needs to be self-sufficient. Mollie Orshansky, the researcher whose work formed the basis of the official poverty measure, characterized the distinction this way: "if it is not possible to state unequivocally 'how much is enough,' it should be possible to assert with confidence how much, on an average, is too little."

Poverty Measures Focus on Income, Not Assets or Debt

While the American Heritage Dictionary's entry for "poor" referred to an absence of wealth, the poverty measures used in the United States focus on the flow of financial resources (income) received by families and individuals, rather than on assets or debt (which are the typical measures of wealth), as the relevant resources for meeting their needs. The focus on income rather than assets was driven at first by the available data when the official poverty measure was developed—the best data source available for poverty measurement did not ask about assets or debt. Furthermore, not all assets (assuming a person or family has any) can be readily liquidated in order to provide for basic needs, and the ones that are (e.g., savings or credit) tend to be short-term. The poverty measures discussed in this report are annual measures, which were not designed to focus on families and individuals that experience a short-term loss of income.

Poverty Measures Are Estimates Based on Survey Data

Poverty data are obtained from surveys, and are therefore estimates that have margins of error. Poverty estimates derived from different data sources—even those using the same definition of poverty—will almost always differ.

The Official Poverty Measure

Poverty estimates are obtained using household surveys. The Census Bureau releases data from the official poverty measure every September for the previous full calendar year, based on the Current Population Survey Annual Social and Economic Supplement (CPS ASEC). "Resources" in this measure are defined as money income before taxes, and they do not include the valuation of noncash benefits like the Supplemental Nutrition Assistance Program (SNAP) and housing subsidies. As its measure of need, it uses 48 dollar amounts, called poverty thresholds , which vary by family size and the members' ages. These thresholds are updated for inflation using the Consumer Price Index for All Urban Consumers (CPI-U), but are not adjusted geographically—the same thresholds are used throughout all 50 states. Both income and the thresholds in the official measure refer to the previous full calendar year. Table 1 displays the poverty thresholds for 2015.

As shown above, the thresholds do not increase by the same dollar amount between each family size. Similarly, within each family size, the thresholds do not increase or decrease by the same amount as the number of children increases and the number of adults decreases. The manner in which the threshold dollar amounts vary across family types and compositions is called the equivalence scale . Equivalence scales capture economies of scale in maintaining families. Some costs needed to maintain a family are fixed and do not change with family size, while others are directly affected by the number of family members. The official measure's equivalence scale was not computed directly, but rather came about implicitly because the thresholds were based on food costs and data on family expenditures.

Development of the Official Poverty Thresholds

With the launch of the War on Poverty during the Johnson Administration, the federal government devoted attention toward poverty measurement. The 1964 Economic Report of the President, in Chapter 2, "The Problem of Poverty in America," used a flat figure of $3,000 for families, and $1,500 for individuals not in families, to represent the poverty line. However, research on poverty measurement using a more detailed measure of need began before the Johnson Administration announced the War on Poverty. In the early 1960s, Mollie Orshansky, an analyst at the Social Security Administration, had been conducting her own analysis of poverty using food costs. Rather than attempting to compute the costs of all major goods and services a family would need to live, the Orshansky thresholds were based on the Economy Food Plan, developed by the U.S. Department of Agriculture (USDA). The Economy Food Plan indicated the money that a family under economic stress would need to spend on food for "temporary or emergency use when funds are low." The food plan used different amounts of food (and in turn, different costs of food) for males and females by age group, based on recommended dietary allowances. Orshansky condensed the full detail by specific age groups and for males and females into amounts that varied by family size, number of children under 18, and whether the family head was older than 65. Having obtained the cost of food by family size and composition, Orshansky then derived the amounts of total family income by finding the average percentage of it that families spent on food. According to the USDA's 1955 Household Food Consumption Survey, families spent an average of one-third of their income on food; therefore, multiplying the family food costs by three provided figures for total family income. For two-person families, a factor of 3.7, rather than 3, was used in order to capture the higher fixed costs faced by smaller families. Income amounts for individuals not in families were set at 80% of the amounts for two-person families.

Apart from three minor methodological revisions, the above methodology undergirds the official poverty thresholds as they are used today. They are updated for inflation annually using the Consumer Price Index for All Urban Consumers (CPI-U).

How the Official Measure Applies Poverty Measurement Concepts

Poverty measurement, in general, involves a comparison of resources to a measure of need. Differences among poverty measures involve variations in the definitions of resources or needs, or both. "Resources" and "needs" typically refer to a family unit—the resources of all family members (however the members are identified) and the level of need applicable to that family and all its members. The definition of "family" also differs across measures, in terms of who counts as being "related" to whom.

Comparing Resources and Needs: the Income-to-Poverty Ratio

The comparison between resources and needs is usually expressed as a ratio: resources / needs. A ratio of less than one—meaning resources are less than needs—indicates the person or family is in poverty; a ratio greater than or equal to one indicates the person or family is not in poverty. This same ratio, when expressed as a percentage, conveys a measure of the severity of poverty. A ratio of exactly one is the same as "100% of the poverty level," and is the minimum amount to be considered "not in poverty." A ratio of less than 50% (or 0.5) has been characterized as "severe poverty" or "deep poverty" and indicates that resources are less than half the measure of need. Other ratios, such as 200% of poverty (twice the poverty level), have been used for measuring the low-income population intended to be the target beneficiaries of some programs, such as the State Children's Health Insurance Program (CHIP). The higher the ratio is, the higher the income amount will be, and therefore more people will fall below that amount. These ratios, called "income-to-poverty ratios," convey the sense that economic well-being is not binary (poor versus not poor), but rather it falls along a spectrum.

Whose Resources and Needs? Defining the Family Unit

In the poverty measures discussed in this report, resources and needs are defined for family units. The information used to identify family relationships comes from household surveys, and varies from survey to survey. The CPS ASEC, which is used for the official poverty estimates for the nation as a whole, uses a detailed questionnaire administered by trained representatives, and asks about the relationships among all household members.

Because the information comes from household surveys, there are limitations to which populations can be measured. The CPS ASEC is conducted primarily for households, but also includes some noninstitutional group quarters, such as emergency shelters and group homes. Persons who are homeless are only included in the poverty estimates if they are living in shelters. Institutional group quarters, such as prisons and nursing homes, are not included, and therefore neither the incarcerated population nor those in other institutions are included in poverty estimates. College students living in dormitories are only included in poverty estimates if information about them is reported in an interview at their parents' home. Students living in households off-campus, however, are included. Military personnel are included only if they live in a household with at least one civilian adult.

In the official poverty measure, people related to each other by birth, marriage, or adoption are considered to be related. Foster children under age 15 who have not been legally adopted are excluded. In the CPS ASEC, children under age 15 are not asked questions about income; thus, income is unknown for any child under 15 whose family relationship is not tied to an older relative in the household whose income is known. The unrelated individuals under age 15 (mostly foster children) are not considered to be "poor" or "nonpoor," and their removal from the total prevents them from having an effect on poverty rates (the percentage of the total that is poor). Unmarried domestic partners are regarded as belonging to separate family units in the official definition of poverty, and their poverty statuses are computed accordingly.

It is therefore important in measuring poverty that the data source provide information to identify family relationships—who is related, and who is not—and can provide a means to match income amounts with specific family units. The family relationship data available through the survey can thus affect how individuals' poverty status is determined, as does the definition of poverty used.

Limitations of the Official Poverty Measure

The official poverty measure represented an improvement from the flat amounts used in the 1964 Economic Report of the President, but it has nonetheless received criticism for decades:

1. The poverty thresholds are not adjusted to reflect geographic variations in costs. 2. Owing to the limitations of the source data available at the time the official measure was developed, its resource measure is based on money income before taxes, while most individuals pay for their basic necessities using after-tax income. This represents an important disconnection between the way needs were specified in the thresholds and the definition of resources available for meeting those needs. 3. The official measure captures the effects of some but not all government programs intended to provide relief for the poor. The programs that are captured are those based on money income before taxes: Social Security, Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), and any state or local relief programs based on money income. The programs that are not captured are the Earned Income Tax Credit (EITC), which, despite its large effects for low-income workers, is not captured because it is a tax credit and is only reflected in after-tax income; and a host of noncash benefits such as SNAP, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), public housing subsidies, and subsidized medical care. 4. The official measure does not capture the needs incurred, nor the resources brought in, by household members who are not related by birth, marriage, or adoption; these include unmarried partners and their children (if any are present), and foster children not legally adopted. 5. While the official measure is adjusted for overall inflation, it does not adequately consider the extent to which the prices of basic necessities have shifted in relation to all goods and services. Therefore, it can be argued that the inflation adjustment used in the official measure does not accurately reflect the purchasing power needed, in a practical sense, to remain comparable with those at the poverty line in previous decades.

The Supplemental Poverty Measure

There has been broad agreement among poverty scholars that the limitations noted above represent serious drawbacks to the official poverty measure, and also that fixing them has not been a straightforward task. Experts within the federal government, in universities, and in private research institutions have spent decades developing approaches to address these shortcomings, and evaluating the effectiveness of those approaches. In 2009, the Office of Management and Budget (OMB) convened an Interagency Technical Working Group (ITWG) to consolidate the research and propose a single Supplemental Poverty Measure, which would be used for research purposes only. The ITWG did not recommend supplanting the official poverty measure, nor did it recommend using the Supplemental Poverty Measure for administrative purposes. Comments on the Supplemental Poverty Measure were solicited through a Federal Register notice. Pursuant to research recommendations, the Supplemental Poverty Measure focused on ensuring that the definition of need specified in the thresholds, and the resources available to meet those needs, were consistent with each other. Additionally, the measure's methodology was designed to be practical to implement, with the understanding that its methods would continue to be refined periodically, as new data source availability and research findings warranted.

Thresholds

Following recommendations made by a National Academy of Sciences (NAS) panel, the thresholds were defined by costs of food, clothing, shelter, and utilities, and a bit extra (20% of the other costs) to cover miscellaneous expenses, as measured by the Consumer Expenditure Survey (CE). Three sets of thresholds were developed—those for renters, homeowners with a mortgage, and homeowners without a mortgage—to take account of housing costs, given that it can vary widely between these groups. The thresholds are geographically adjusted using housing data from the American Community Survey (ACS), because its large sample size enables it to provide detail for areas smaller than states. The equivalence scale for the new thresholds uses three factors to adjust for family size: (1) children on average consume less than adults; (2) as family size increases, some expenses like food or clothing increase additively with each person but other fixed expenses like housing do not; and (3) the first child in a single-parent family represents a greater increase in costs than the first child in a two-adult family. The Bureau of Labor Statistics (BLS) computes the base thresholds using CE data; ACS data are used in geographic adjustment. Table 2 illustrates a few of these thresholds from each census region of the nation (South, Northeast, Midwest, and West).

Resources

Income in the Supplemental Poverty Measure was defined to represent resources available to meet basic needs. It was based on after-tax income, and includes the effects of EITC. The values of noncash benefits were estimated, to reflect resources available for meeting the food and housing costs specified in the thresholds and to capture the effect of government programs intended to help the poor meet those needs. Additionally, work-related expenses were subtracted from income, as the money that a person applies toward his or her job cannot be used to meet the needs in the threshold. These expenses include transportation to and from work, child care (capped at the amount earned by working), and any miscellaneous costs that workers are required to pay as part of their job. Medical out-of-pocket expenses were also subtracted from income, such as co-pays at doctor's offices, insurance premiums, and deductibles. This approach was intended to capture that medical costs in many cases are not optional and must be paid in order for basic needs to be met—and therefore money applied toward those costs is not available for meeting other basic needs—but also that a person who incurs a large amount of health care costs that are paid for by government or private insurance should not be viewed as wealthier than a healthy person with otherwise identical needs and resources. As a result, the Supplemental Poverty Measure does not capture the full effects of Medicare and Medicaid on the poor population, because the health care needs that those programs address are not the same as the economic needs that are incurred on a recurring and predictable basis specified in the thresholds (i.e., food, clothing, shelter, and utilities). The resource definition used in the Supplemental Poverty Measure was developed to be consistent with the measure of need as it was specified in the thresholds.

Comparison with the Official Measure

Annual reports and data files using the Supplemental Poverty Measure are produced by the Census Bureau, using income data from the CPS ASEC and the poverty thresholds provided by BLS. The Supplemental Poverty Measure's overall effect on the poverty rate (i.e., the percentage of people with income below the thresholds) made it approximately 0.6 percentage points higher than the official rate in 2015. However, the profile of the population in poverty is different between the supplemental and official measures, as evidenced by noticeably higher poverty rates for some groups (such as working-age adults and people 65 and older) and lower rates for others (such as children).

Legal Authority for Poverty Measurement

Neither the official poverty measure nor the Supplemental Poverty Measure was established in statute. The official measure gained its status through the Bureau of the Budget's Circular A-46, issued in 1969. OMB, the successor agency to the Bureau of the Budget, issued Statistical Policy Directive 14 in 1978, reconfirming the measure as official and directing federal agencies to use it for statistical purposes. The directive explicitly stated that the measure was not developed for administrative purposes, and allowed for other measures of poverty to be developed, as long as the data for those measures were distinguished from the official series.

Given that federal agencies, such as the Census Bureau, were directed to use the official measure for statistical purposes (such as obtaining the number of people in poverty), any legislation that requires a count of the number of people in poverty (or a count below some other ratio of income to poverty) in order to determine formula grants makes use of the official poverty measure, even if the text of the legislation does not name the measure explicitly. Two examples are the state formula grant for the State Children's Health Insurance Program (CHIP), and Title I-A funding allocation formulas for school districts. A more complete list of programs is available in Appendix D of CRS Report R43863, Federal Benefits and Services for People with Low Income: Programs and Spending, FY2008-FY2013 , by Karen Spar and Gene Falk .

Like the official poverty measure, the research Supplemental Poverty Measure was not established in statute. It was developed after decades of research both within and outside the federal government. Leading up to that effort, dozens of alternative poverty measures had been developed, some as early as the 1980s. OMB provided the auspices for an ITWG that recommended the methodology for the Supplemental Poverty Measure, and solicited public feedback through a Federal Register notice.

Data Sources Used in Poverty Measurement

Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC)

The CPS ASEC is the official source of annual estimates of poverty for the nation, and the Census Bureau continues to release poverty data every September from the ASEC for the prior full calendar year. The CPS is a survey sponsored by BLS and collected by the Census Bureau, and is used by BLS to report the monthly unemployment rate. At the end of the basic monthly labor force survey, an additional set of questions is asked (a supplement). Each month's supplement focuses on a different topic, so as to obtain additional information without having to conduct an entirely separate survey with its own costs of sample design, collection, and data processing. Every March, the extra questions focus on income in the previous year, with detail on 19 different income sources, as well as other topics such as health insurance coverage in the previous year, and receipt of noncash benefits (collectively these extra questions make up the ASEC). Because the CPS is administered using professional interviewers with computerized questionnaires, the CPS ASEC is able to gather more detail from respondents with greater accuracy than other surveys that rely on the respondents to fill out paper questionnaires. At the same time, using professional interviewers means that the cost per response is greater than with questionnaires filled out by the respondents, and thus the sample size is not as large—which in turn means that while the CPS ASEC offers greater detail at the national level, estimates for states and smaller areas are not as statistically reliable.

The official poverty measure, as described in OMB's Statistical Policy Directive 14, is based on data from the CPS ASEC. Compared with other data sources available in the 1960s, when the official poverty measure was first computed, the CPS offered several advantages that made it the only reasonable choice for poverty measurement. First, it is an annual survey that asks detailed questions about income in the previous calendar year. This frequency of data collection meant that national poverty estimates could be released annually as opposed to once every 10 years, as was the case for the decennial census. Second, while there were other sources of annual data on consumer income, the CPS was the only nationally representative source with sufficient detail on both income and family characteristics that could feasibly work with Mollie Orshansky's approach to poverty measurement —computing family income using some empirical basis of need—which was eventually adopted as the official approach.

While the CPS ASEC is the source of official poverty data for the nation, its relatively small sample size (approximately 100,000 addresses nationally) means that the margins of error are wide for state poverty estimates, and, with the exception of the largest metropolitan areas, too wide to produce meaningful estimates for counties and other small geographic areas—in fact, not every county or city is in the sample every year. Since the 1960s, however, other datasets have been used to compute poverty status.

Decennial Census Long Form

The Decennial Census of Population and Housing was, for decades, the only available data source that could provide information on poverty for small geographic areas, such as cities and counties, and could even provide poverty data for areas as small as school districts and census tracts. The decennial census poverty data were obtained from information collected on the "long form," a detailed questionnaire that was sent to one out of every six households. While technically still a sample, the long form sample size collected enough responses from small areas that the estimates from the sample were meaningful. Except for some differences in the data collection methods, the amount of income detail collected, and the ways families were defined, the same overall definition of poverty was used in the decennial census as was used in the CPS. The same dollar amounts were used as poverty thresholds, and income was generally defined the same way. However, poverty data from the decennial census were only available every 10 years, for the full calendar year preceding the census: 1959, 1969, 1979, 1989, and 1999.

American Community Survey (ACS)

The long form was discontinued in Census 2010. In its place, the ACS collects information similar to what was collected on the long form, but instead of surveying one-sixth of all households every 10 years, the ACS collects information every month. By combining five years' worth of data, the ACS provides a sample size similar to the long form, with the same detail for small geographic areas, but on a recurring basis. The Census Bureau produces poverty estimates from the ACS each year, using both one-year estimates (for places with populations of 65,000 or more) and five-year estimates (which include all geographic areas, including those with populations below 65,000). While the ACS was designed to be filled out by the respondent on his or her own, and therefore asks about fewer income sources than does the CPS, its much larger sample size, coupled with the wide array of topics covered by the questionnaire, means that it currently provides more detail on demographic characteristics for small areas than any other data source.

Respondents are asked to provide each person's relationship to the householder in the ACS. As a result, it does not capture information on people who may be related to each other but not to the householder. The ACS treats these persons as unrelated individuals, and their poverty status may be computed differently than if their relationship to each other were known.

Small Area Income and Poverty Estimates (SAIPE)

Title I-A of the Elementary and Secondary Education Act (ESEA) establishes formula grants for local education agencies based, in part, on the number of school-age children in poverty within the school district. Because the formula relies on the count of the poor population for an area, the official poverty measure based on the Census Bureau thresholds is used, not the HHS poverty guidelines (discussed below). Before the advent of the SAIPE program, local officials had to wait 10 years before they could get meaningful poverty estimates for their area. The SAIPE program was undertaken in the 1990s (the first dataset, for 1993, was released in 1997) to provide poverty estimates for counties, and estimates of the number of school-age children in poverty for school districts, in between the decennial census data releases.

The SAIPE data are model-based, meaning that they are not simply a reflection of survey responses, but are adjusted using a combination of administrative data in addition to survey data. The modeling enables the Census Bureau to produce estimates for small areas with less variability—and thus greater precision—than it could using survey data alone.

Initially, SAIPE estimates were based on CPS data in addition to administrative data. Since 2005, the first year that the ACS estimates were available at its full sample size of over 3 million addresses per year, ACS data have been used as input into the model, along with anonymous IRS tax returns, SNAP administrative data, and the Census Bureau's own annual population estimates.

While small area estimates are produced annually from the ACS using five consecutive years' worth of data, the SAIPE model-based estimates reflect the prior year alone. Because SAIPE estimates are modeled to reflect a single year, they represent current economic conditions at the local level more accurately than the ACS five-year estimates. The SAIPE estimates, however, are limited in focus—they provide counts and percentages (poverty rates) for the total population and for children, and estimates of median income, but are not designed to provide highly detailed profiles of the population for small areas.

Small Area Health Insurance Estimates (SAHIE)

Like SAIPE, SAHIE data are also model-based estimates for small areas; however, they have a different target population: the low-income uninsured. The SAHIE estimates are broken down by income-to-poverty ratio, uninsured status, sex, age group, and, for state-level estimates, selected racial and Hispanic origin groups. One of the uses of SAHIE data is to estimate the target population for the National Breast and Cervical Cancer Early Detection Program, coordinated by the Centers for Disease Control and Prevention (CDC). In that program, uninsured women under selected income-to-poverty ratios and age groups qualify for subsidized mammograms and Papanicolaou tests. To be able to effectively monitor take-up rates of the program, the CDC provides the Census Bureau with some funding to support SAHIE. The SAHIE estimates also have been used to estimate the eligible population that would qualify for certain assistance under the Affordable Care Act: namely, in states that participate in the Medicaid expansion, the population with income below 138% of the poverty level; additionally, SAHIE provides estimates of uninsured children below 400% of poverty.

The Survey of Income and Program Participation (SIPP) and the Survey of Program Dynamics (SPD)

The data sources discussed thus far can be thought of as snapshots illustrating the poverty population in a given year. While they are used to observe changes in the poverty population at an aggregate level, they usually do not interview the same respondents in consecutive years. As a result, they are not well-suited to measure the changes in a particular respondent's poverty status over time—or for that matter, changes to other social or economic conditions that he or she may experience such as changes in marital status, changes in the number of children in his or her family, obtaining or losing work, changes in his or her health insurance coverage or health status, receiving or no longer receiving government assistance, changing residence, etc.

A longitudinal survey is one that follows the same respondents over a series of interviews. Longitudinal poverty data have been available from the SIPP since 1984. The length of the time over which respondents have been interviewed has varied through the years, and has usually lasted from two to four years. By using SIPP longitudinal data, researchers have been able to identify characteristics of both the short-term and long-term poverty populations, the percentage of people who enter or leave poverty, and the average number of months a person stays in poverty.

In order to measure the initial effects of welfare reform under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA), longitudinal data were needed for the same respondents from both before and after welfare reform took effect. The SPD was created by selecting households from the 1992 and 1993 SIPP Panels for an additional five years of interviews, from 1997 to 2002.

The households that were in sample before the passage of PRWORA in 1996 and chosen for the SPD are no longer being interviewed, and in that sense the SPD has concluded. However, interest in the dynamics of poverty and program participation and in evaluating welfare reform continues, and is funded through mandatory spending in the Health and Human Services budget. Since the end of the original SPD panel, these dynamics have been and continue to be measured in the SIPP.

Department of Health and Human Services (HHS) Poverty Guidelines

Shown in Table 3 are sets of dollar amounts, called poverty guidelines , that are computed and published annually by the Department of Health and Human Services. These are different from the Census Bureau's poverty thresholds shown in Table 1 . Unlike the measures discussed in this report, the poverty guidelines are not used to count the number of people or families in poverty. Rather, they are used for administrative purposes, such as determining whether an individual or a family qualifies for programmatic assistance.

Programs sometimes use different multiples of the poverty guidelines for determining eligibility. For instance, under the National School Lunch Program, a child qualifies for free lunch if his or her household's income is less than 130% of (that is, 1.3 times) the poverty guidelines, and qualifies for a reduced-price lunch if his or her household income is 185% of (that is, 1.85 times) the poverty guidelines. These poverty guidelines are referenced in the Omnibus Budget Reconciliation Act of 1981.

The HHS poverty guidelines are not used to measure the poverty population, and therefore this report does not refer to them as a poverty "measure." Because both the poverty guidelines and the poverty thresholds are issued by federal agencies, either set of dollar amounts could conceivably be called the "federal poverty level" (FPL), and thus that term is ambiguous. Which dollar amounts are to be used depends on the context: thresholds for obtaining counts of the population in poverty; or guidelines for administrative use, particularly with regard to an individual's or family's program eligibility. To clarify, the official poverty measure discussed in this report is based on the poverty thresholds that are computed and published by the Census Bureau, and are used for statistical purposes.

Simplification of the Poverty Thresholds for Administrative Use

As explained earlier, the official poverty thresholds were based on empirical measures of dietary need, the amount that a family in economic distress might need to spend on food in order to attempt to meet its dietary needs, and the spending patterns of families across the income distribution (to determine what percentage of an average family's budget was spent on food). However, this method yielded dozens of thresholds that were not evenly stepped by family size. As the War on Poverty developed, a set of dollar amounts was needed for practical administrative use. The HHS poverty guidelines serve that purpose.

Development of the Guidelines

The HHS poverty guidelines do not directly reflect family needs as measured by food cost and family spending data because they were simplified for administrative use. Beginning in 1965, the Office of Economic Opportunity (OEO) began to issue poverty guidelines that were based on the poverty thresholds, but with one dollar amount per family size (and at that time, farm/non-farm status). These earliest OEO dollar amounts, which were the predecessors of the HHS poverty guidelines, were averages of the poverty thresholds that Orshansky developed. To obtain one dollar amount per family size, OEO averaged the thresholds that had the same family size but different compositions, weighted the average to reflect that not all family compositions occurred with equal frequency, and rounded to the nearest $5. A 1967 OEO memo introduced guidelines that were rounded to the nearest $100 and adjusted so that family size increments were evenly spaced by the same dollar amount. Like that of OEO, current HHS practice also applies rounding, but instead of rounding to the nearest $100, the difference between family sizes is computed first, rounded to the nearest $20, and then used to compute the guidelines for each family size, starting from a rounded figure for a four-person family as the base.

Early Release of Inflation-Adjustment of the Guidelines to Support Programmatic Use

The HHS poverty guidelines are published every winter, typically in late January or early February. They are computed using the weighted average thresholds published by the Census Bureau in its annual poverty release the previous fall, inflated forward to the current year using the Consumer Price Index. The steps to even out the differences between family sizes, and apply rounding, are performed after the inflation adjustment. By applying the inflation adjustment to the poverty thresholds from the previous year, HHS is able to publish the guidelines for the current year six to eight months before the Census Bureau releases that year's survey estimates, and thus they can be used by program administrators that much sooner. Table 3 provides the 2017 poverty guidelines.