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Measuring Poverty: A NewApproach. Edited by Constance F.Citro and Robert T. Michael.National Academy Press, 1995.

Experimental PovertyMeasurement for the 1990s.Thesia I. Garner et al. in MonthlyLabor Review, Vol. 121, No. 3;March 1998. (http://stats.bls.gov/opub/ml/mlrhome.htm)

Asset Poverty in the UnitedStates, 1984–1999: Evidencefrom the Panel Study of IncomeDynamics. Asena Caner andEdward N. Wolff. Levy Economics Institute, WorkingPaper No. 356; 2002.(www.levy.org)

United States Poverty Studiesand Poverty Measurement: ThePast Twenty-Five Years. HowardGlennerster in Social ServicesReview, Vol. 76, No. 1; March 2002.

MORE TOEXPLORE

The poverty threshold—the level of in-come that separates the poor from thenot poor—was the brainchild of econo-

mist Mollie Orshanksy of the Social SecurityAdministration, who developed it in the ear-ly 1960s. Orshanksy did not have the exten-sive data on the income and consumptionhabits of Americans needed to fashion a com-pletely satisfactory formula; as a result, it hadcertain built-in inequities, such as an under-estimation of the cost of nonfood items.

After a time other problems became ap-parent. The formula did not allow for chang-ing demographics, including the substantialrise in the number of working mothers,whose costs for child care were not factoredinto the formula. Nor did it take into accounthigher Social Security payroll and other tax-es levied on the working poor. Nor did it ad-just for geographic variations in the cost ofliving, such as the two-to-one differential be-tween San Francisco and Houston. The onlysignificant adjustment made was for cost-of-living increases.

To remedy these and other shortcomings,economists tried to devise a better formula.One, constructed by Thesia I. Garner of the

Bureau of Labor Statistics and her colleagues,builds on the more extensive statistics nowavailable. The results, depicted by the purpleline in the chart, yield an improved threshold,55 percent higher than the official level.

Another approach is to base the thresholdon purely subjective perceptions. In 1992 theGallup Organization asked Americans, “Whatis the smallest amount of money a family . . .needs each week to get along in this commu-nity?” The average of their answers is the ba-sis of the subjective threshold calculation, in-dicated by the dark blue line. On average therespondents named a figure 76 percent high-er than the official poverty level.

Still another method focuses on assetsrather than income. Economists Asena Canerof the Jerome Levy Economics Institute atBard College and Edward N. Wolff of NewYork University have calculated several mea-sures of asset poverty. In one, indicated by thegreen line, they define asset poverty as a networth insufficient to cover minimal living ex-penses for three months. In a similar measure,indicated by the light blue line, they define theterm as insufficient liquid wealth to cover theseexpenses. (Liquid wealth is cash and othereasily monetized assets.) Under the latter def-inition, a significant proportion of middle-class people would be considered at risk forpoverty. Both the asset poverty lines show adifferent trend than the income poverty lines,possibly because of changes in savings ratesover time.

The official threshold data were highlyuseful in the 1960s, but now they are outdat-ed and, according to some, greatly understatethe problem. Since at least 1995, when a pan-el of experts under the aegis of the NationalResearch Council recommended new guide-lines, a growing consensus has emerged thatthe official measure is inadequate. Most econ-omists argue that it should be discontinuedand replaced by a revised measure or perhapseven several measures, including at least oneindicator of asset poverty.

Rodger Doyle can be reached atrdoyle2@adelphia.net

Defining PovertyOFFICIAL POVERTY STATISTICS MAY BE MISLEADING BY RODGER DOYLE

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Asset poverty threshold(liquid wealth)

Asset poverty threshold (net worth)

Subjective threshold

1980

SOURCES: U.S. Census Bureau; Thesia I. Garner et al.; Asena Caner and Edward N. Wolff; Gallup Organization

1985 1990Year

1995 2000 2005

Official poverty threshold

“Improved” threshold

50

45

40

35

30

25

20

15

10

5

0

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