Measuring Poverty: Advances to the Supplemental Poverty Measure

• Published date: 01 January 2024
• DOI: http://doi.org/10.1177/00027162241288362
• Author: David S. Johnson,Helen levy,Jordan matsudaira,Barbara L. Wolfe,James P. Ziliak
• Date: 01 January 2024
• Subject Matter: Poverty and Antipoverty Programs

20 ANNALS, AAPSS, 711, January 2024

DOI: 10.1177/00027162241288362

Measuring

Poverty:

Advances to the

Supplemental

Poverty

Measure

By

DAVID S. JOHNSON,

HELEN LEVY,

JORDAN MATSUDAIRA,

BARBARA L. WOLFE,

and

JAMES P. ZILIAK

1288362ANN THE ANNALS OF THE AMERICAN ACADEMYMEASURING POVERTY

research-article2024

Measuring poverty is a complex undertaking. It requires

extensive research, expert judgment of how to define

resources and needs, and a data infrastructure that

enables accurate measurement. In this article, we

briefly summarize the evolution of poverty measure-

ment in the U.S. and discuss the recommended changes

to the Supplemental Poverty Measure that were

recently proposed by an expert panel of the National

Academies of Sciences, Engineering, and Medicine

(NASEM). We emphasize how the costs of medical

care, child care, and housing can be better accounted

for in the measurement of poverty, and the need to

incorporate administrative data records with survey

data.

Keywords: Principal Poverty Measure; medical care;

child care; housing; administrative data

At the dawn of the War on Poverty 60 years

ago, among the first tasks facing policymak-

ers were defining poverty and measuring its

scale and composition. The task of counting the

Correspondence: jziliak@uky.edu

David S. Johnson is a senior program officer at the

Committee on National Statistics in the National

Academies of Sciences, Engineering, and Medicine

(NASEM) and an adjunct faculty at Georgetown

University’s McCourt School of Public Policy.

Helen Levy is a research professor at the University of

Michigan’s Ford School of Public Policy, School of

Public Health, and Institute for Social Research.

Jordan Matsudaira is a professor at the School of Public

Affairs at American University.

Barbara L. Wolfe is Richard A. Easterlin Emerita

Professor of Economics and Public Affairs at the

University of Wisconsin–Madison, where she is a for-

mer director of the Institute for Research on Poverty

and of the La Follette School of Public Affairs. She is a

member of the National Academy of Medicine.

James P. Ziliak is Gatton Endowed Chair of

Microeconomics in the department of economics at the

University of Kentucky, where he is also founding

director of the Center for Poverty Research.

MEASURING POVERTY 21

number of poor people fell to the Social Security Administration and, in particu-

lar, to a statistician named Mollie Orshansky, who proposed a measure of poverty

that compared a family’s before-tax cash income to a poverty line or basic-needs

budget. In particular, her proposal defined the poverty line as three times the

minimally necessary food budget (Orshansky 1963). By the end of the decade, a

variant of the Orshansky measure was adopted as the nation’s Official Poverty

Measure (OPM) and subsequently has been used extensively by social scientists

and policymakers to monitor the well-being of the poor and to evaluate the effec-

tiveness of programs in alleviating poverty. Today, this same OPM, updated only

for inflation, is used not only to track the economic status of low-income families

over time but also to determine, in whole or in part, funding amounts and/or

eligibility for scores of transfer programs costing hundreds of billions of dollars

annually.

The composition of the social safety net has substantially changed since the

1960s, and the inflation-adjusted safety net spending on families has grown dra-

matically. So, the importance of accurate poverty measurement has, if anything,

increased since the invention of the OPM. The OPM considers only cash, so it

misses the explosion of spending on in-kind transfers, such as health insurance

from Medicaid and Medicare and food assistance from the Supplemental

Nutrition Assistance Program (SNAP). Since it is calculated before taxes, it also

misses the emergence of social assistance administered through the tax code via

refundable credits, such as the Earned Income Tax Credit (EITC) and Child Tax

Credit (CTC). In addition, while the poverty line is adjusted annually for changes

in the cost of living, the basis of the scale factor of three to inflate food budgets

hinges on a 70-year-old survey that was conducted at a time when Americans

spent much more of their budget on food.

It was with these considerations in mind that, in 2011, the U.S. Census Bureau

began to produce and disseminate an alternative measure of poverty known as

the Supplemental Poverty Measure (SPM). The SPM differs from the OPM in

how both resources and basic needs are measured. These changes grew out of a

report from a 1995 National Research Council (NRC) panel (NRC 1995) that

recommended expanding the definition of needs to include clothing, shelter, and

utilities in addition to food, as well as adopting a new method for calculating the

threshold as a function of the actual spending patterns in the past year.1 On the

resource side, the panel recommended using a post–tax-and-transfer measure of

resources, as well as subtracting from resources certain out-of-pocket expendi-

tures that were deemed nondiscretionary, including spending on medical care

and child care. As depicted in Figure 1, in most years, the poverty rate under the

SPM has exceeded the OPM rate, with the notable exception of 2020 and 2021,

when extraordinary outlays were made in response to the COVID-19 pandemic.

These outlays, many of which flowed through the U.S. Treasury via the tax sys-

tem, were captured by the SPM but not the OPM. Not only does the rate change,

but the composition of who is living in poverty changes as well (see Bahk, Moffitt,

and Smeeding, this volume). This divergence underscores the importance of

measurement for a proper understanding of the impact of government policy.