Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure

F ew economic indicators are more closely watched or more important for policy than the official poverty rate. It is used to gauge the extent of deprivation in the United States and to determine how economic well-being has changed over time. The poverty rate is often cited by policymakers, researchers, and advocates who are evaluating social programs that account for more than half a trillion dollars in government spending. Eligibility for some means-tested transfer programs is determined based on the poverty thresholds, and local poverty rates affect the allocation of billions of dollars in federal funds. The methods for calculating the current poverty measure, largely unchanged since the 1960s, have been criticized by many researchers. In response, the Census Bureau has led a two-decade process of research and discussion of poverty measurement with an eye to revising the official measure. The process has involved hundreds of papers, dozens of official Census Bureau publications (U.S. Census 2010), and two National Academy of Sciences reports (Citro and Michael 1995; Iceland 2005). We will not summarize this vast literature here. Rather, we will examine the properties of three measures of poverty: the official U.S. poverty rate; the new Supplemental Poverty Measure first released by the U.S. Census Bureau in fall 2011; and a consumption-based measure of poverty. We will focus on two fundamental goals of these measures: to identify the most disadvantaged and to assess changes Identifying the Disadvantaged: Official Poverty, Consumption Poverty, and the New Supplemental Poverty Measure