Formal measurement of poverty in the United States is less than three decades old. Not since the adoption of official poverty thresholds by the Federal government in the late 1960's has there been such a great interest as now in examining and possibly respecifying the thresholds and the income compared with them. The official poverty thresholds in use today by the U.S. Bureau of the Census to measure poverty have their basis in work by Orshansky (1963, 1965). Orshansky started with a set of minimally adequate food budgets calculated for families of various sizes and composition by the U.S. Department of Agriculture for 1961. Based on evidence from the 1955 Household Food Consumption Survey, she determined that expenditures on food represented about one-third of after-tax income for the typical family. This relationship yielded a "multiplier" of three, that is, the minimally adequate food budgets were multiplied by a factor of three to obtain 124 poverty thresholds that differed by family size, number of children, age and sex of head, and farm or nonfarm residence (ad hoc adjustments were made for families of size one and two).

In 1969, the U.S. Bureau of the Budget (now the U.S. Office of Management and Budget -- OMB) adopted the Orshansky measure using pre-tax income as the standard government poverty measure, mandating that thresholds be adjusted for inflation using the Consumer Price Index (CPI) published by the U.S. Bureau of Labor Statistics. With only minor modifications since then (mostly reducing the number of categories, now 48), the Orshansky thresholds still form the basis for the official poverty statistics.

When considering the adequacy of the official poverty thresholds, it is critical to realize that one cannot separate the issue of income measurement from poverty definition. When one defines the level of resources needed to be non-poor, one must also determine which resources are to be counted. Therefore, the discussion below covers both income measurement and poverty definition issues; income measurement is discussed first.

Whatever poverty thresholds are chosen should be the result of a carefully specified process that cannot be changed arbitrarily from year-to-year, and should be capable of being updated at reasonable intervals as the economic circumstances of the society and the behavior of its demographic and economic components change.