Evaluation of Alternative Measures of Poverty Income and Recommendations

Discussion of Final Report of the ITWG on Evaluating Alternative Measures of Poverty Income Measure Liana E. Fox U.S. Census Bureau FCSM 2021 Research and Policy Conference November 4, 2021 The views expressed in this research, including those related to statistical, methodological, technical, or operational issues, are solely those of the author and do not necessarily reflect the official positions or policies of the U.S. Census Bureau. The author accepts responsibility for all errors. This presentation is released to inform interested parties of ongoing research and to encourage discussion of work in progress. This presentation has undergone more limited review than official publications.

Income MeasureMajor Components ITWG s mission was to examine alternative poverty measures not replace existing official or supplemental poverty (SPM) measures Main components: Need to account for in-kind transfers and taxes Need to correct for survey misreporting Need to adequately capture resource sharing unit Important note: Did not come to consensus on thresholds 2

Recommendations For Income-based Poverty Measure(s) 3

Child Support (Rec. 8) The Working Group recommends subtracting child support payments from resource totals for income-based measures. Current status: Census currently collects this information in CPS ASEC and subtracts in SPM. 4

Work and Childcare Expenditures (Rec. 9-10) The Working Group recommends that expenditures needed to work including childcare expenditures be subtracted from family resources for any new recommended poverty measures and that total childcare expenditures be capped because it is difficult to distinguish between childcare necessary to work versus other childcare. The Working Group recommends continued work to improve measurement of childcare and other work-related expenditures and methods to cap them. Current status: Census currently collects/estimates this information in CPS ASEC and subtracts in SPM. Research is ongoing on improvements. 5

Post-tax income (Rec. 11) The Working Group recommends that income be adjusted, as feasible, for federal, state and local income and payroll taxes and credits in a new income-based resource measure. Current status: Census currently models state and federal income and payroll taxes in CPS ASEC and subtracts in SPM. 6

Health Insurance (Rec. 13-16) The value of health insurance should not depend on the disability or health status of individuals. The value of health insurance should ideally depend on a person s resources but the precise method to implement this should be the subject of further research. In the interim, the market value of health insurance (with values that do not depend on the health status of the recipient) should be capped at some share of total resources. The value of health insurance should ideally not constitute a majority of resources for people near the poverty threshold. 7

Health Insurance (cont.) Two sets of income resource measures and two sets of consumption resource measures should be produced. For each type of resource measure, one set should not include a value of health insurance, and the other set should include some value of health insurance. Current status: Census currently asks about out-of-pocket medical expenditures in CPS ASEC and subtracts in SPM. We are currently exploring the feasibility of implementing a health-inclusive poverty measure. 8

Education (Rec. 17-19) The Working Group recommends that expenditures on education be excluded from the recommended extended income-based and consumption-based resource measures because education is generally considered an investment in human capital. The Working Group recommends that, at this juncture, personal educational expenses not be subtracted from the extended income-based resource measure. However, the Working Group recommends a future advisory structure revisit the issue of deducting out-of-pocket education expenditures on tuition and other educational items if the data quality makes it feasible. The Working Group recommends continued research and additional stakeholder and expert engagement on whether and how to treat education within resource measures. 9

Service Flows from Housing and Vehicle (Rec. 20) The Working Group recommends that further research be undertaken to evaluate alternative methods to estimate the net value of service flows from owner-occupied shelter and the net value of the service flows from owned vehicles to be included in the income resource measures, including the possibility of imputing such values using statistical methods and data from the CE Survey. Such research should consider the availability of data from the CPS ASEC and ACS. Current status: The CPS ASEC does not currently ask adequate questions to estimate service flows from vehicles. Research on potential ways to impute from other sources is needed. 10

Implementation Issues For Income-based Poverty Measure(s) 11

Choice of Survey (Rec. 21) The Working Group recommends that the Census Bureau use CPS ASEC for an alternative income-based resource measure. 12

Correcting for missing/misreported data (Rec. 22) The Working Group recommends, taking into consideration the following three approaches: Methods that combine administrative data with survey data are the preferred approach for adjusting survey data to correct for misreporting and missing data. When survey reports conflict with administrative records for particular individuals, research should examine criteria to determine which source to use for the poverty estimates. Regression-based modeling (with or without individual-level or aggregate administrative data) can also improve the quality of estimates of income, expenditures, and program participation. 13

Administrative Data Use Considerations Availability and permission to use administrative records in production Administrative record quality and other issues Trade-offs between timeliness and accuracy of estimates 14

National Experimental Well-being Statistics (NEWS) GOALS: Rethink how we can produce income and resource statistics What is the best possible estimate given all the data currently available at Census for a given income/resource statistic? Expand the set of income statistics we produce Move beyond work characterizing measurement error or correcting specific sources of error toward estimates that address as many measurement issues as possible, simultaneously (with complete geographic coverage) 15

NEWS (cont.) Experimental Updated regularly with additional data and better methods Longer term move to regular production Transparent and replicable Decisions about how to use survey and administrative income are well-documented, supported, and apolitical Create linked microdata and code database that is accessible through the RDC system Long term create a set of synthetic data sets (akin to the SIPP Synthetic Beta) for public release? 16

Future directions (Rec 23 & 24) The Working Group recommends that the advisory structure recommended previously should vet decisions about data sources, adjustment strategies, and other assumptions. This advisory structure should consider and discuss continued research into availability and applicability of administrative data sources. The Working Group recommends that the Census Bureau and the Bureau of Labor Statistics continue to research, and possibly implement, ways to reduce survey burden and improve the quality of resulting data through increased access and use of administrative data in surveys, including the CPS ASEC, ACS, and CE. 17

Contact Contact Liana E. Fox Social, Economic & Housing Division U.S. Census Bureau liana.e.fox@census.gov 18