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Comparing Poverty Measures: Development of the Supplemental Poverty Measure and Differences with the Official Poverty Measure
Comparing Poverty Measures: Development of the Supplemental Poverty Measure and Differences with the Official Poverty Measure
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There has been continued debate about the best way to measure poverty in the United States since the first official U.S. poverty statistics were published in the mid-1960s. The U.S. Census Bureau releases two poverty measures each September. The first, called the official poverty measure, is based on cash resources. The second, 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 and methods become available. This blog discusses the development of the SPM and differences between the two measures.
In 2010, an interagency technical working group (ITWG) asked the Census Bureau and the U.S. Bureau of Labor Statistics (BLS) 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 was 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 ITWG 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 when considering potential improvements to the SPM. In September 2020, this working group voted to implement several improvements. Details regarding these improvements are available at Improvements to the Census Bureau’s Supplemental Poverty Measure for 2021.
In 2020, the Census Bureau commissioned the National Academies’ Committee on National Statistics to convene a panel to evaluate the SPM and offer recommendations to improve the measure. The expert panel produced a consensus report, “An Updated Measure of Poverty: (Re) Drawing the Line,” in April 2023 that outlined key areas for the Census Bureau and BLS to research in the coming years. The Census Bureau will continue to work with BLS and the current ITWG on the SPM to determine the feasibility and timeline of any potential improvements to the SPM in the future.
On September 10, the Census Bureau is set to release the report, Poverty in the United States: 2023. The report will include data for 2022 and 2023, and present estimates of both the official poverty measure and SPM and outlines differences between them. For a detailed comparison of major concepts, refer to the table below and the “How the Census Bureau Measures Poverty” infographic.
Differences in Poverty Measures
| Official Poverty Measure | Supplemental Poverty Measure | |
|---|---|---|
| Measurement Units | Families (individuals related by birth, marriage or adoption) or unrelated individuals. | Resource units (official family definition plus any co-resident unrelated children, foster children, and unmarried partners and their relatives) or unrelated individuals (not otherwise included in the family definition). |
| Poverty Threshold | Three times the cost of a minimum food diet in 1963. | Based on recent expenditures of food, clothing, shelter, utilities, telephone and internet (FCSUti). |
| Threshold Adjustments | Vary by family size, composition and age of householder. | Vary by family size, composition and tenure, with geographic adjustments for differences in housing costs. |
| Updating Thresholds | Consumer Price Index for All Urban Consumers: all items. | Most recent five-year moving average of expenditures on FCSUti, lagged by one year. |
| Resource Measure | Gross before-tax cash income. | Cash income, plus noncash benefits that resource units can use to meet their FCSUti needs, minus taxes (or plus tax credits), work expenses, medical expenses, and child support paid to another household. |
| Universe | Civilian, noninstitutionalized population, excluding unrelated individuals under age 15 for whom poverty status cannot be determined. | Official poverty universe, plus unrelated individuals under age 15. |
| Time Series | 1959-present. | 2009-present. |
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, energy and broadband internet assistance programs, or tax credits like the Earned Income Tax Credit or the Child Tax Credit. They also do not consider regional differences in living costs or expenses such as housing.
The SPM does consider 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. 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 housing costs. The SPM thresholds are not intended to assess eligibility for government assistance or funding distribution.
The report will compare 2022 poverty estimates to 2023 poverty estimates for numerous demographic groups. Using data from the Current Population Survey Annual Social and Economic Supplement, the report will also compare official poverty and SPM estimates. In addition, the report will examine the effect on SPM rates of excluding specific resource or expenditure elements such as noncash benefits, tax credits and medical expenses.
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Page Last Revised - September 4, 2024
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