1 defining income in an absolute poverty measure by charles nelson u.s. census bureau for...
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Defining Income in an Absolute Poverty Measure
ByCharles Nelson
U.S. Census BureauFor Presentation at Rio Group Meeting
August 24-25, 2006
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Common Goals for Absolute Poverty Measures
• Needs and Resources Should be Conceptually Consistent
• To the Extent Possible, Different Types of Families/Individuals Should be on an Equal Footing with Regard to Defining Who is Poor—A Challenging Proposition in Any Diverse Country
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How Are Different Families/Individuals Placed on an
Equal Footing?
• Through Equivalence Scales
• Through Defining Poverty Thresholds
• Through Defining Resources: Focus of Today’s Presentation
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Census Bureau Attempts to Broaden the Definition of Income
1. Research and Development Series: began in the1980’s
2. NAS Series: followed the publication of the National Academy of Sciences report on measuring poverty in 1995
3. 2006 Report of effects of taxes and transfers on income/poverty
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Research and Development Series
Most comprehensive definition of income:
• Included money income, value of govt. noncash food, housing, and medical benefits, capital gains/losses, employer contributions to health insurance, net return on home equity
• Excluded Federal and State income taxes, payroll taxes, property taxes
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NAS Series
• Included money income, value of govt. food and housing noncash benefits, capital gains/losses
• Excluded Federal/State income taxes, payroll taxes, out-of-pocket medical expenses, work-related expenses (including child care expenses), and child support paid
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2006 Report on Effects of Benefits and Taxes
• Included money income, value of food and housing noncash benefits, net return on home equity
• Excluded Federal/State income taxes, payroll taxes, property taxes, and work-related expenses
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Effect of Using a Broader Income Definition
• Reduction in income inequality
• Government transfers play a larger role in reducing income inequality than taxes
• Year-to-year trends are often quite similar, and overall poverty rates may or may not be different
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Effects of Using a Broader Income Definition (Cont.)
Then Why Do it?
• Can have an impact on trends
• Most importantly, has a definite impact on our understanding of who is most in need
• A better understanding of the composition of the poverty population helps inform policymakers and improve the potential to target programs to those in need
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Future Research
• Improve methods of assessing the economic benefits of homeownership
• Improve methods of assigning dollar values to those on government housing assistance programs
• Assessing the impact of health needs and/or benefits
• Simulate other taxes, including sales taxes
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For More Information:
See:http://www.census.gov/hhes/www/povmeas/povmeas.html
http://www.census.gov/hhes/www/povmeas/nas.html
http://www.census.gov/hhes/www/povmeas/papers/define.pdf
Questions/Comments: [email protected]