The Effect of Living Arrangements and Disability on Poverty among the Elderly

This paper is concerned with issues of measurement of poverty rates among the elderly population and with the alleviation of that poverty by means of shared living arrangements. Specifically, we estimate effects of taking account of assets as well as income, of including in income government subsidies on food, rent, and household energy, and of setting higher poverty thresholds. The effects of shared living arrangements on alleviating poverty are estimated by computing for elderly persons who live with others a hypothetical "living-alone" poverty status. The estimates are made for the U.S. elderly population in late 1984, using Wave 4 of the 1984 Panel of the Survey of Income and Program Participation. We find substantial poverty alleviation through shared living arrangements. An extra 1.3 million, or 5.2 percent of the noninstitutionalized elderly, might be added to the ranks of those living below 125 percent of the official poverty threshold in the absence of shared living arrangements. Older, disabled, and minority elderly are most likely to be so saved from poverty. The estimated biases due to omission of asset dissaving, due to omission of subsidies, and due to the unreasonably low poverty threshold, are individually large but mutually offsetting. The net effect of correcting for all three sources of bias is slightly to decrease the poverty rate of the elderly population in late 1984, from 11.9 percent to 9.9 percent. The effect of failure to correct for omission of asset dissaving is to downwardly bias the poverty rates of minority elderly, and upwardly bias the poverty rates for the oldest old.