March 4, 2009: POOR MEASUREMENT Series: Measuring Poverty in New York City, By Mark Levitan, Ph.D., Director of Poverty Research, New York City Center for Economic Opportunity

The federal government bases its poverty measure on a formula that was established in the 1960s and has not been updated since. Many experts and elected officials alike have made repeated calls for the measure to be changed, especially in light of a changed economy that has altered substantially in the nearly half-century that has passed since the federal poverty measure was first set.

Spotlight on Poverty and Opportunity is pleased to announce a series of commentaries entitled “Poor Measurement” to discuss this issue. Over the next several months, Spotlight will bring together experts, advocates and policy makers to address how, why, and whether to update the federal poverty measure.

Rebecca M. Blank and Mark H. Greenberg previously introduced the series with the piece “Poor Measurement.” Shawn Fremstad added a second piece, “A Truly New Approach to Measuring Economic Inclusion.”

If policymakers are to design and implement effective strategies to combat poverty, they need a measure of how changes in the economy, demographic trends, and public policies affect the lives of low-income Americans. Forty years after its adoption as the official method, the way we count the poor has little relevance to this all-important task. Researchers and advocates who want to see a better measure have focused their energies on Washington, working to improve the method by which the federal statistical agencies calculate the poverty rate. The City of New York has joined the effort and we are hopeful that the new Congress and President will enact the needed legislation later this year.

But we have taken a step that no other state or municipality has made; rather than wait for federal action, we have created an alternative measure of poverty that addresses many of the shortcomings of the official methodology. The impetus for this work was practical need. In 2006, New York City Mayor Michael Bloomberg convened a Commission for Economic Opportunity and charged it with the task of providing new ideas for fighting poverty. The Commission members were soon confronted by the shortcomings of the conceptual tools at their disposal. They found them inadequate guides for understanding the current level of economic deprivation in New York, assessing the effect of existing public policy, or forecasting the potential impact of new initiatives on the City۪s low-income population. The Commission concluded that, along with programmatic innovations to reduce poverty, the City needed to improve its method of measuring poverty. Mayor Bloomberg embraced this recommendation and poverty measurement became one of the new projects initiated by the organization created to implement the Commission۪s recommendations, the New York City Center for Economic Opportunity (CEO).

CEO۪s work began with a review of alternative approaches to measuring poverty. Our thinking was guided by several criteria.

1. The new measure should be easily understood by the “non-expert” public. This suggested that rather than a radical departure from the familiar, if flawed, official measure, a new approach should maintain its structure (economic resources measured against a set of thresholds that are derived from expenditures on necessities), but seek to improve its component parts. Specifically, the new measure should:

A. Provide a more complete measure of resources.

B. Employ thresholds that reflect differences in living costs across the country and are updated in a manner that takes account of the long-term rise in the American standard of living.

2. The new measure should be grounded in a substantial body of research and should be supported by experts in the field. Poverty measurement is a controversial topic. The credibility of a “CEO poverty measure” would rest, in part, on the degree to which it is based on research by, and consensus among, expert analysts.

3. The new measure should be a better tool for policymaking. The call for new measures of poverty came out of the frustrations experienced by people who wanted to design policies that address it. CEO put a premium on the extent to which a new measure could capture the impact of public policy.

4. A new measure should be practicable, that is, the City must be able to turn a better idea into an annual measure and do so at a reasonable cost.

CEO concluded that it should base its alternative poverty measure on a set of recommendations that, at the request of Congress, had been developed by the National Academy of Sciences۪ (NAS) Panel on Poverty and Family Assistance. Two important features of the NAS method were key to our decision. First, the Panel۪s recommendations provided us with an intellectually coherent way to establish a poverty threshold that made sense in light of the high cost of living in New York City and second, the NAS method offered a conceptually consistent measure of a family۪s resources. Table One provides a comparison of the current poverty measure to the National Academy of Sciences۪ recommendations.

TABLE ONE: COMPARISON OF POVERTY MEASURES
	CURRENT POVERTY MEASURE	NATIONAL ACADEMY OF SCIENCES RECOMMENDATION
THRESHOLD	Established in the mid-1960s at three times the cost of “Economy Food Plan.”	Equal to roughly 80% of median family expenditures on food, clothing, shelter and utilities, plus “a little more” for misc. items.
	Adjust annually by change in Consumer Price Index.	Adjust annually by change in median family expenditures for the items in the threshold.
	No geographic adjustment.	Adjust geographically using differences in housing costs.
RESOURCES	Total family pre-tax cash income.	Total family after-tax income.
		Include the value of near-cash, in-kind benefits such as Food Stamps.
		Subtract work-related expenses such as child care and transportation costs.
		Subtract medical out-of-pocket expenses.

CEO then set about adopting the NAS recommendations to our principal data source, the Census Bureau۪s American Community Survey. Our initial report, The CEO Poverty Measure: A Working Paper by the New York City Center for Economic Opportunity, was issued in August, 2008 (available at www.nyc.gov/ceo). It provides a comparative picture of poverty in New York for 2006 using the official and NAS methodologies (the most recent year for which data were available at the time of our analysis).

Using a geographically adjusted threshold that equals $26,318 for a family of two adults and two children and a more comprehensive definition of income, we find that the New York City poverty rate for 2006 is 23.0 percent. The corresponding rate using the official methodology is 18.9 percent. That is an attention-getting difference, but it becomes more meaningful and useful as we sift through the details to locate how the change in methodology affects specific groups within the City. (See Table Two).

TABLE TWO: COMPARISON OF POVERTY RATES
(Rates are percent of group in poverty)
(Differences are percentage point differences)
	CEO	OFFICIAL	DIFFERENCE
NYC Total	23.0	18.9	4.1
By Age Group
Under 18	26.6	27.2	-0.6
18 thru 64	20.0	14.5	5.5
65 & up	32.0	18.1	13.9
Children (under 18), by Family Type
Two parent	17.2	16.5	0.7
One Parent	41.6	44.4	-2.8
Source: CEO tabulations from the American Community Survey, 2006

One of the most striking results from o

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