fedgazette

Poverty by another definition

Ronald A. Wirtz - Editor, fedgazette

Published November 1, 2006  |  November 2006 issue

The official poverty rate is referred to as the "money-income" rate. It equals the annual amount of money from (among other things) work earnings, interest and dividends, workers' and unemployment compensation, Social Security, pension or other retirement income, survivor and disability benefits, alimony or child support, and financial assistance from outside the home.

Using the money income (MI) definition as a baseline, the Census Bureau has tabulated alternative poverty rates by adding and subtracting various other financial items. Here are four from a 2005 Census report:

MI - Tx is money-income plus realized capital gains (losses), less federal and state income taxes and less payroll taxes.

MI - Tx + EIC is money-income; plus capital gains or losses, less federal and state income taxes and payroll taxes; plus the Earned Income Credit.

MI - Tx + NC is money-income plus realized capital gains (losses), less federal and state income taxes, less payroll taxes, plus the value of employer-provided health benefits and noncash, means-tested government transfers including Medicare, Medicaid, food stamps, rent subsidies, and free and reduced-price school lunches.

MI - Tx + NC - MM is money-income plus realized capital gains (losses), less federal and state income taxes, less payroll taxes, plus the value of employer-provided health benefits and the value of noncash transfers except Medicare and Medicaid.

MI based on CPI-U-RS is money-income adjusted for the so-called Consumer Price Index Research Series, which includes all improvements made to the CPI since 1978. The official poverty rate, on the other hand, is tabulated using CPI for all urban consumers. Dollar figures in the RS index tend to be lower, and the Bureau of Labor Statistics has stated that the RS index is the most detailed and systematic index available.

Chart: Poverty Rates Using Alternative Income Definitions


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