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Supplemental Measures of Material Well-Being: Expenditures, Consumption, and Poverty 1998 and 2001

Report Number P23-201


This report, which is being issued as a companion piece to Poverty in the United States: 2002 (P60-222), describes some possible next steps in the Census Bureau’s decades-long tradition of investigation into the measurement of poverty. The current official poverty measure, described in the text box, is based on an examination of the adequacy of an individual’s or family’s income relative to poverty thresholds. The Census Bureau also publishes two series of alternative poverty estimates (see text box on page 2). These are described more fully in Poverty in the United States: 2002.

This report describes a third new avenue for research — consumption-based measures using expenditures and other indicators of material well-being — that is intended to complement the official income-based measures and the two existing series of alternative poverty estimates to expand our understanding of the nature of poverty in the United States.

In 1995, the National Academy of Sciences (NAS) issued a report entitled Measuring Poverty: A New Approach.1 That report recommended revision of the official poverty measure that would consist of a poverty threshold representing the cost of basic needs and a measure of resources available to families to meet those needs. If resources fall below the poverty threshold, then that family would be classified as in poverty. The report spelled out in detail the characteristics of an improved poverty measure.2

In the course of their consideration of the measurement of poverty, the NAS panel examined many other alternatives. While they chose an income-based poverty measure, the panel of experts also supported the investigation of other approaches. They encouraged the development of other types of indicators to monitor trends over time and for different population subgroups across different dimensions of deprivation. They also encouraged work that examined relationships among various indicators of well-being. In their words, “For fuller understanding and to inform policy, a breadth of information and analysis is needed on the well-being of the population, including and going beyond the economic dimension.”3

One of the alternate approaches to measure economic well-being was to use direct indicators of material well-being (such as deprivation indexes).4 These measures focus on indicators that show a household has a shortfall in particular material needs.

In their discussion of the calculation of a family resource measure, the NAS panel presented an alternative to using income. This was to use actual consumption of goods and services. As noted by the panel, many researchers suggest that it is preferable to construct a measure of poverty based on what families actually consume, rather than on their income.5 The underlying notion of this approach is that families and individuals derive well-being from the actual consumption of goods and services rather than from the receipt of income.8

Following the release of the NAS panel’s report on poverty measurement, the General Accounting Office (GAO) assessed their conclusions. In general, they concurred with the recommendations that the revised measure should be based on income as the measure of family resources. However, they too discussed some of the alternatives to income-based measures. They reiterated the fact that, while low levels of consumption or material deprivation reflect the core concept underlying poverty, there are serious measurement difficulties.9

This report is an attempt to provide some basic information on supplemental measures of material well-being. The purpose is to initiate an active discussion of the issues involved with supplementing income-based poverty measures with other measures that focus more heavily on consumption and material well-being. It is by no means a comprehensive document; the Census Bureau and involved statistical agencies will be seeking public input to provide direction for future research.

Section II provides some background on the underlying concepts of defining and measuring consumption, including a discussion of some of the research and data requirements for calculating expenditure-based poverty measures. Section III includes currently available information on some direct indicators of material well-being from three surveys: the Survey of Income and Program Participation, the Consumer Expenditure Survey, and the Residential Energy Consumption Survey. Section IV describes research that is relevant to formulating all of these supplemental measures. The final section of the report is an extensive bibliography, including some relevant references not cited in this report. This presentation illustrates some of the information that could be used, along with income, to examine the economic well-being of families in the United States.

1 Citro and Michael, 1995.
2 Ibid., p. 39.
3 Ibid., pp. 19-20.
4 Some other measures discussed by the NAS panel but not addressed in this report included subjective measures such as minimum income and minimum spending (Vaughan, 1993; Garner and Short, 2003), and family budgets (Johnson et al., 2001).
5 For example, Jorgenson and Slesnick, 1987; Cutler and Katz, 1991; Slesnick, 1993,1994.
8 Ibid., p. 210.
9 U.S. General Accounting Office, 1997, p. 6.


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