Since the publication of the first official U.S. poverty estimates in 1964, there has been a continuing debate about the best approach to measure income and poverty in the United States. An interagency technical working group recognized that alternative estimates of income and poverty can provide useful information to the public as well as to the federal government. Therefore, in 2009, it asked the Census Bureau, in cooperation with the U.S. Bureau of Labor Statistics, to develop a new measure that will allow for an improved understanding of the economic well-being of American families and how federal policies affect those living in poverty. In November 2011, the Census Bureau released the first set of estimates for the research supplemental poverty measure, pertaining to 2010. The estimates for 2011 will be released next week.

The current official poverty measure was developed in the early 1960s, and only a few minor changes have been implemented since it was first adopted in 1969. The measure compares a family’s or individual’s before-tax cash income to a set of thresholds that vary by the size and ages of the family members. These official poverty calculations do not take into account the value of in-kind benefits, such as those provided by the Supplemental Nutrition Assistance Program, and housing and energy assistance.

The technical design of the supplemental poverty measure draws on the recommendations of a 1995 National Academy of Sciences report and the extensive research on poverty measurement conducted over the past 15 years. The new measure creates a more complex statistical picture incorporating additional items, such as tax payments, work expenses and in-kind benefits in its family resource estimates.

Thresholds used in the new measure are derived from Consumer Expenditure Survey expenditure data on basic necessities (food, shelter, clothing and utilities) and are adjusted for geographic differences in the cost of housing. The new thresholds are not intended to assess eligibility for government assistance.

Supplemental poverty measure family resources are defined as the value of cash income from all sources, plus the value of in-kind benefits that are available to buy the basic bundle of goods, minus necessary expenses for critical goods and services not included in the thresholds. In-kind benefits include nutritional assistance, subsidized housing, and home energy assistance. Necessary expenses that must be subtracted include income taxes, social security payroll taxes, child care and other work-related expenses, child support payments to another household, and contributions toward the cost of medical care and health insurance premiums.

Next week’s report will compare 2011 supplemental poverty estimates with 2011 official poverty estimates for numerous demographic groups. It will also provide state level supplemental poverty estimates using three years of Current Population Survey Annual Social and Economic Supplement data and compare 2010 supplemental poverty estimates with 2011 estimates. In addition, the report will examine the effect of excluding individual resource or expenditure elements on supplemental poverty rates.

For more details on the new measure, please see the technical appendix of the November 2011 report or the technical webinar presented prior to last year’s release.