Alternative Measures will Improve our Understanding of Poverty in the U.S.

Author: Staff

On January 13, 2021, the Interagency Technical Working Group on Evaluating Alternative Measures of Poverty released its final report. Formed in 2019 by the Chief Statistician of the United States, the Working Group—made up of members from 11 federal agencies—was tasked with evaluating possible alternatives to the federal government’s Official Poverty Measure (OPM), which contains broadly-recognized flaws and has undergone no substantive changes since it was created in the 1960’s.

The Working Group recommends that the U.S. Census Bureau and the Bureau of Labor Statistics produce consumption measures and expanded income measures to supplement the OPM. The new poverty measures will give a more accurate picture of poverty in America and will help researchers build evidence on how well-being has changed over time and the effects of programs and policies aimed to help people in poverty. 

The Working Group’s recommendations include:

  • Extending the federal government’s current income measure—which takes only pre-tax cash income into account—to include some in-kind benefits and account for taxes and tax credits, and to integrate administrative and survey data to improve the accuracy of income measures.
  • Introducing a consumption-based resource measure by tracking real household spending on goods and services, which may more directly reflect all the resources available to a family.
  • Seeking additional expert input and research to further improve poverty measurement and to appropriately determine poverty thresholds.

Some of the Working Group’s main recommendations build on research by LEO co-founder Jim Sullivan (Gilbert F. Schaefer College Professor of Economics at the University of Notre Dame) and LEO Faculty Affiliate Bruce Meyer (McCormick Foundation Professor of Economics at the University of Chicago), who have conducted research on consumption- and income-based poverty for more than 15 years. This research has led to new measures of poverty that rely on household spending data, which families tend to report more accurately than income and which better reflects their material circumstances. Meyer was co-chair of the Working Group.   

Sullivan and Meyer’s research shows that improved measures of poverty indicate considerable progress over the past four decades (prior to the start of the Covid-19 pandemic). They estimate that poverty declined sharply between 1980 and 2019, which contrasts with Census Bureau statistics that show scant progress.

“LEO exists to build rigorous evidence on the impact of anti-poverty programs,” says Sullivan. “We need accurate information about people in poverty to understand the true effect of these programs on their well-being—what’s working, for whom, and by how much. The new poverty measures recommended by the Working Group will give us this clearer picture of domestic poverty so programs and policies designed to combat it can direct their resources for maximum impact.    

These recommended measures will help us identify those in America who are struggling most. They will also help us better identify poverty trends overall, as well as the impact that public policies and broad social and economic trends have on poverty.”