There has been continued debate about the best way to measure income and poverty in the United States since the first official U.S. poverty statistics were published in the mid-1960s. At the U.S. Census Bureau, we measure poverty two ways every year. The first, called the official poverty measure, is based on cash resources. The second measure, the Supplemental Poverty Measure (SPM), includes both cash and noncash benefits and subtracts necessary expenses (such as taxes and medical expenses). The official poverty measure has remained mostly unchanged since it was introduced in the mid-1960s. In contrast, the SPM was designed to improve as new data, methods and research become available. This blog discusses the development of the SPM and differences between the two measures.

In 2010, an interagency technical working group asked the Census Bureau and the U.S. Bureau of Labor Statistics to develop a new measure designed to improve our understanding of the economic well-being of American families and enhance our ability to measure the effect of federal policies on those living in poverty. The result: the SPM, which draws on the recommendations of a 1995 National Academy of Sciences report and research conducted over the following decades. (Refer to the history of poverty measures in the United States infographic for more details.)

In 2016, a new interagency technical working group was formed to review and implement potential SPM methodological improvements. The working group prioritized consistency between threshold and resource definitions, data availability, simplicity in estimation, stability of the measure over time and ease in explaining the methodology in considering potential changes to the SPM. In September 2020, this working group voted to implement various changes, the details of which can be found at <www.census.gov/topics/income-poverty/supplemental-poverty-measure/library/working-papers/topics/potential-changes.html> and <www.census.gov/library/working-papers/2021/demo/SEHSD-WP2021-17.html>. A panel of the National Academies of Sciences, Engineering and Medicine’s Committee on National Statistics, which provides independent reviews of federal statistical activities, has also been asked to review further changes to the SPM.

On September 13, the Census Bureau is set to release the report, Poverty in the United States: 2021. This marks the first time both poverty measures are integrated into a single report, rather than two separate reports. The report will include 2020 and 2021 estimates, both using population controls based on the 2020 Census. Estimates for 2020 in this report will not match those published last year due to the implementation of the 2020 Census-based population controls. More details regarding population controls are available in the report. The report presents estimates of both the official poverty estimates and SPM and outlines differences between them. For a detailed comparison of major concepts, refer to the table below and this infographic.
 

The official poverty measure compares an individual’s or family’s pretax cash income to a set of thresholds that vary by the size of the family and the ages of family members. These official poverty calculations do not take into account the value of in-kind benefits such as nutrition assistance, subsidized housing and energy programs or tax credits like the earned income tax credit or stimulus payments. They also do not consider regional differences in living costs or expenses such as housing.

The SPM does take into account family resources and expenses not included in the official measure as well as geographic variation. First, it adds the value of in-kind benefits available to buy basic goods to cash income. (In-kind benefits include nutritional assistance, subsidized housing and home energy assistance.) Then, it subtracts necessary expenses for critical goods and services not included in the thresholds from resources. Necessary expenses 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.

Thresholds used in the SPM are produced by the Bureau of Labor Statistics’ Division of Price and Index Number Research using Consumer Expenditure Survey data that show how much people spend on basic necessities (food, clothing, shelter, utilities, telephone and internet) and are adjusted for geographic differences in the cost of housing. The SPM thresholds are not intended to assess eligibility for government assistance.

The report will compare 2020 poverty estimates to 2021 poverty estimates for numerous demographic groups. It will also provide state-level poverty statistics using three years of Current Population Survey Annual Social and Economic Supplement data and compare official poverty and SPM estimates. In addition, the report will examine the effect on supplemental poverty rates of excluding specific resource or expenditure elements such as noncash benefits, tax credits, stimulus payments and medical expenses.