The Sequential Costs of Poverty: What Traditional Measures Overlook

Article excerpt

This research note proposes an addition to the poverty measurement debate. Motivated by dissatisfaction with the official poverty measure, which many scholars and practitioners share, we propose the use of sequential costs of poverty to enrich the poverty measure so that it might capture more closely the life-experiences of low-income families. After presenting some background on poverty measurement, this research note explores the conceptual framework that surrounds the notion of sequential costs. Drawing on our past research, we propose ways in which these sequential costs surface, with illustrative examples from health, employment, housing, and income maintenance.

Keywords: poverty measurement, low-income, latent and sequential costs of poverty

Background on Poverty Measurement

Devised by the Social Security Administration in the mid-1960s, the U.S. poverty threshold is computed as three times the USDA thrifty food budget. Families whose income falls below that threshold are considered to be poor. The threshold includes adjustments for family size but otherwise is essentially the same for all families across the U.S. This official poverty line was never intended to be a long-standing measure of poverty. Even creator Mollie Orshansky assumed that it would be updated (Orshansky, 1965). Some of the most common criticisms associated with the official poverty measure are that:

* It does not account for geographic variation in cost of living. The poverty line in New York is the same as in Mississippi despite the observation that a dollar goes much further in Mississippi.

* It was based on 1950s consumption patterns, which have changed substantially, such that food may no longer account for one-third of a family's expenditures (Bernstein, Brocht, and Spade-Aguilar, 2000).

* Although the poverty measure adjusts for inflation, it does not account "for the increases in real family income and consumption by children" (Lichter, 1997, p. 124).

* It does not account for in-kind (non-cash) public assistance, such as food stamps, housing or health assistance, which have grown markedly in the past four decades. The implication is that those who receive these sources of assistance may be less poor than they appear by a cash income measure alone.

* It does not account for the costs associated with working, such as child care, which, when considered, would make working families more often appear poor.

* It does not account for taxes, both payments and receipts (credits), which have wide state variation.

In addition to these common critiques, other problems with the measure also have been identified. According to some (e.g., Licther, 1997), the official poverty measure does not equivalize adequately for family size despite existing variation in the poverty line by family size and structure. For instance, it does not account for the growing share of children being raised by single parents with cohabitating partners whose incomes are not included in the official measure (Manning and Lichter, 1996). Although these sources of income might make some families appear less poor, there is no guarantee that resources from cohabiters will be used to benefit children. In other words, the official poverty measure "implicitly assumes that parents' resources are invested in children--biological, step, noncustodial--in an equitable or altruistic way (i.e., equally according to need)" (Lichter, 1997, p. 124). Recent work of ours has argued that, even more so than work expenses or payroll taxes, there are other, yet unmeasured costs associated with being low-income (Peck and Segal, 2006). If these "latent" and "sequential" costs would be accounted for, then more low-income families would be considered poor and we would have a better understanding of their true needs. We assert that, for several reasons, the official poverty measure underrepresents the proportion of families experiencing income hardship. …