Good morning.
Friday in Whitewater will be sunny with a high of 86. Sunrise is 5:17 AM and sunset 8:37 PM for 15h 20m 08s of daytime. The moon is a waxing crescent with 25.6% of its visible disk illuminated.
On this day in 1962, Telstar relays the first publicly transmitted, live trans-Atlantic television program, featuring Walter Cronkite.
Maya Srikrishnan reports Why the way we measure poverty matters (‘A national panel is recommending changes to a key poverty measurement. It might sound technical, but the stakes are high’):
Some of the debate boils down to which of the Census Bureau’s two poverty yardsticks is more appropriate for determining who qualifies for government aid: the Official Poverty Measure or the Supplemental Poverty Measure.
The country’s Official Poverty Measure was developed in the 1960s, based solely on a family’s ability to purchase food. The supplemental, with data first released in 2011, uses a standard of living based on expenditures that include food, clothing, shelter and utilities, compared against a household’s post-tax income, which accounts for government aid and the Earned Income Tax Credit.
It’s rare for the two measures to go in different directions — but recently they have.
The poverty rate under the Official Poverty Measure grew from an estimated 10.5% to 11.6% of the population between 2019 and 2021, the Census Bureau reported last year. In contrast, the rate under the Supplemental Poverty Measure decreased from 11.8% to 7.8%.
One of the main reasons: stimulus payments from the government to households during the COVID-19 pandemic, which helped raise many households’ incomes temporarily.
That’s the backdrop to a new National Academy of Sciences panel report, requested by the Census Bureau, that recommends the agency make the Supplemental Poverty Measure its official yardstick and incorporate several updates to it.
Unlike the Official Poverty Measure, whose methodology has remained largely unchanged since its inception, the Supplemental Poverty Measure was designed to evolve with the changing demands of society.
The panel was tasked by the Census Bureau to see if the supplemental measure, or SPM, “was adequately measuring the economic needs of disadvantaged households in the country,” said James Ziliak, professor of economics and director of the Center for Poverty Research at the University of Kentucky, who chaired the panel.
A press release from the National Academies of Sciences, Engineering, and Medicine offers additional detail:
The report recommends renaming the SPM which, as currently conceived, fails to convey that it often serves as the primary measure of poverty because, among other things, it allows researchers and policymakers to evaluate the effectiveness of programs designed to reduce poverty. The report proposes Principal Poverty Measure (PPM) as a more apt name. The report also recommends that the PPM replace the Official Poverty Measure as the primary statistical measure of poverty.
Medical Care
Most people consider medical care a basic need. However, because medical care is accounted for based on expenditures reported by households, the SPM does not capture unmet needs for people who are uninsured or underinsured. The estimate implicitly assumes that a family’s basic need is equal to whatever the family spends out of pocket on insurance and medical care, which is often not the case.
The report recommends that:
- The proposed PPM should include the need for a basic health insurance plan in estimates of the measure’s threshold and include health insurance benefits provided by employers or the government in estimates of resources. The report notes that the Census Bureau has already begun considering the practical implications of moving toward a health inclusive poverty measure.
- For those under 65, the PPM should adopt an Affordable Care Act benchmark health insurance plan to represent the basic health care need for a typical American household.
- For those aged 65 and older, and for those under 65 covered by Medicare (e.g., some individuals with disabilities), the basic need level should be set based on the full cost of a Medicare Advantage plan.
Child Care
Among families that pay for it, child care accounts for around 16 percent of direct expenditures, which makes it the third-largest budget component after housing and transportation. Comprehensive accounting of child care needs is essential to understanding families’ economic well-being. The committee proposed that, ideally, child care should become an element of the basic needs threshold in the PPM, similar to medical care. The committee acknowledged additional research is required to implement this approach, as there is currently little consensus on how to value child care provided by parents, family, or friends.
The report recommends that:
- In households with children under the age of 13 (or up to age 18 if a child is disabled), the poverty measure should treat parents pursuing education the same as parents who are employed.
- Ideally, child care should be included in the PPM threshold, with estimated costs allowed to vary by age and number of children and geographic location (costs could be derived based on federal child care subsidy programs).
- For a balanced accounting, financial assistance received for child care should be added to estimates of a household’s resources. Since unpaid child care also has value, it could also be accounted for in the resource estimation.
Housing
Housing is often the largest component of a household’s spending, with about a third of U.S. households paying more than 30 percent of their income on it in 2020. The budget share is even higher for renters and households with lower incomes. Rental housing is typically a more attainable goal than purchasing a home. In this sense, the report says, renting represents the baseline housing need.
The report recommends that:
- The PPM housing threshold should be set based on costs for renters only, and rental levels should be estimated using the U.S. Department of Housing and Urban Development’s annual Fair Market Rent estimates.
- The proposed PPM should discontinue the current practice of maintaining three separate thresholds based on housing tenure status (homeowners with a mortgage, homeowners without a mortgage, and renters). While owners without mortgages have lower monthly housing costs, these differences can be accounted for in the estimate of households’ resources.
- PPM thresholds should continue to reflect geographic differences in housing costs as captured in official Fair Market Rent calculations.
Given the report’s recommendations to re-specify components of the SPM threshold, the current 20 percent adjustment to capture additional basic needs would also need to be updated by the Census Bureau and the Bureau of Labor Statistics to align with these changes.
The study — undertaken by the Committee on Evaluation and Improvements to the Supplemental Poverty Measure — was sponsored by the U.S. Department of Commerce.
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