WASHINGTON - A new report from the National Academies of Sciences, Engineering, and Medicine recommends updating the methodology used by the Census Bureau to calculate the Supplemental Poverty Measure (SPM) - a more comprehensive measure than the Official Poverty Measure - to reflect households' basic needs and resources available to meet those needs more accurately.
“As our society and economy change, the way we measure the financial reality that families face must adapt as well,” said committee chair James P. Ziliak, who holds the Gatton Endowed Chair in Microeconomics and is director of the Center for Poverty Research in the Department of Economics.
An Updated Measure of Poverty, (Re)Drawing the Line
An accurate measure of poverty is necessary to fully understand how the economy is performing across all segments of the population, and to assess the effects of government policies on communities and families. Thus, poverty measures produced by the federal statistical system are critical to meeting the nation’s research, policy, and public information needs.
The report recommends updating the methodology used by the Census Bureau to calculate the Supplemental Poverty Measure (SPM) — a more comprehensive measure than the Official Poverty Measure (OPM) — to more accurately reflect households’ basic needs and resources available to meet those needs.
To calculate the current SPM, the Census Bureau adds up private cash incomes plus cash and noncash benefits (such as those received from social safety net programs) and subtract some nondiscretionary expenses to estimate households’ resources. Independently, poverty “thresholds” are calculated based on costs of food, shelter (regionally adjusted), clothing, utilities, telephone, and internet, with 20% added for additional needs. If a family’s resources fall below the basic needs threshold, it is considered poor under the SPM.
The report calls for expanding the threshold categories to explicitly recognize that minimum basic needs for American families include health care and child care. It also recommends that the shelter need be based on the regional cost of renting basic housing.
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 policy makers 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 OPM as the primary statistical measure of poverty.