Accurately Measuring the Trend in Poverty In the United States Using The Panel Study of Income Dynamics

We describe how to accurately estimate poverty rates using data from the Panel Study of Income Dynamics (PSID) because changes in the PSID over its 40-year history have created confusion for researchers. We benchmark a new PSID poverty estimate with published rates from the U.S. Census Bureau's Current Population Surveys (CPS). We demonstrate that our PSID poverty estimates comprise a consistent time series that is similar to the Census Bureau's official time series. For example, the correlation between the PSID and Census poverty rates using one of the two currently available PSID thresholds is only 0.46 over the 1967-2004 period, and 0.73 when made comparable to the Census following PSID guidelines. Our new PSID threshold has a correlation of 0.83 over this period. The second PSID threshold is only available from 1989 onwards; it yields poverty rates that have a correlation of 0.96 with Census rates, about the same as the correlation when our new methods are used for these years.