Impressionistic Realism European Measures of Income, Poverty and Social Exclusion David S. Johnson U.S. Census Bureau November 4, 2009.

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Presentation transcript:

Impressionistic Realism European Measures of Income, Poverty and Social Exclusion David S. Johnson U.S. Census Bureau November 4, 2009

The who, what, where, when, why and how? What:Which resource measure is used? Money income, disposable income Who:Whose resource is measured? Unit of analysis; equivalence scale When:What time period is used? And how to adjust for inflation Where:Do the measures differ by location? Why:What is the purpose of the measures? Well-being, effects of government policy How:Which summary measure? Which data set is used?

Sources of “Disposable” Income Regular (Or Predictable) Cash Income A. Regular cash income from employment (wages, salaries, self-employment) B. Regular cash income from investment (interest, dividends) C. Regular cash income from government (social security, SSI) D. Regular cash income from outside household (alimony, child support) Irregular Cash Income E. Realized capital gains F. Other lump sum cash from outside household In-Kind Income G. Regular in-kind income from employers (health insurance) H. Regular in-kind income from government (food stamps, housing vouchers) I.Other in-kind income (food banks or gifts) J.In-kind income from Household members J1: imputed rent J2: home production Income from Financial Tools K. Unrealized capital gains, transfers of non-monetary assets L. Realized income through decrease in net worth (savings withdrawals) Less taxes paid 1. Income taxes (net of tax credits) 2. Sales taxes 3. Social insurance payments (employee and employer) 4. Cash transfers and charitable giving Plus Social Benefits (STIK)

Canberra Group Adjusted Disposable Income Regular (Or Predictable) Cash Income A. Regular cash income from employment (wages, salaries, self-employment) B. Regular cash income from investment (interest, dividends) C. Regular cash income from government (social security, SSI) D. Regular cash income from outside household (alimony, child support) Irregular Cash Income E. Realized capital gains F. Other lump sum cash from outside household In-Kind Income G. Regular in-kind income from employers (health insurance) H. Regular in-kind income from government (food stamps, housing vouchers) I.Other in-kind income (food banks or gifts) J.In-kind income from Household members J1: imputed rent J2: home production Income from Financial Tools K. Unrealized capital gains, transfers of non-monetary assets L. Realized income through decrease in net worth (savings withdrawals) Less taxes paid 1. Income taxes (net of tax credits) 2. Sales taxes 3. Social insurance payments (employee and employer) 4. Cash transfers and charitable giving Plus Social Benefits (STIK)

Money Income Regular (Or Predictable) Cash Income A. Regular cash income from employment (wages, salaries, self-employment) B. Regular cash income from investment (interest, dividends) C. Regular cash income from government (social security, SSI) D. Regular cash income from outside household (alimony, child support) Irregular Cash Income E. Realized capital gains F. Other lump sum cash from outside household In-Kind Income G. Regular in-kind income from employers (health insurance) H. Regular in-kind income from government (food stamps, housing vouchers) I.Other in-kind income (food banks or gifts) J.In-kind income from Household members J1: imputed rent J2: home production Income from Financial Tools K. Unrealized capital gains, transfers of non-monetary assets L. Realized income through decrease in net worth (savings withdrawals) Less taxes paid 1. Income taxes (net of tax credits) 2. Sales taxes 3. Social insurance payments (employee and employer) 4. Cash transfers and charitable giving Plus Social Benefits (STIK)

6 NAS “Poverty” Income Regular (Or Predictable) Cash Income A. Regular cash income from employment (wages, salaries, self-employment) B. Regular cash income from investment (interest, dividends) C. Regular cash income from government (social security, SSI) D. Regular cash income from outside household (alimony, child support) Irregular Cash Income E. Realized capital gains F. Other lump sum cash from outside household In-Kind Income G. Regular in-kind income from employers (health insurance) H. Regular in-kind income from government (food stamps, housing, school lunch, energy) I. Other in-kind income (food banks or gifts) J. In-kind income from Household members J1: imputed rent J2: home production Income from Financial Tools K. Unrealized capital gains, transfers of non-monetary assets L. Realized income through decrease in net worth (savings withdrawals) Less taxes paid (and necessary expenses) 1. Income taxes (net of tax credits) 2. Sales taxes 3. Social insurance payments (employee and employer) 4. Cash transfers (child support) and charitable giving 5. (and work expenses, Medical care expenses - MOOP)

7 Census NAS Measure (MSI-GA-CE) Uses after-tax and transfer definition of income that includes: –Additions: food stamps, school lunches, subsidized housing, energy assistance –Subtractions: federal, state, payroll taxes, work-related expenses including child care, Medical Out-of-Pocket (MOOP) expenses New estimates of taxes do not adjust for capital gains Threshold based on a percentage of median costs for food, clothing, shelter and “a little bit more” from Consumer Expenditure Survey (CE) data Update the thresholds over time as median expenditures rise Uses original “family unit” definition and three-parameter equivalence scale. Geographic cost-of-living adjustments (GA) are accounted for (based on shelter cost differentials using HUD Fair Market Rent)

8 Official and MSI-GA-CE Poverty, 2008

9 Official and MSI-GA-CE: Threshold Updated with CE vs CPI

10 Current Issues with U.S. poverty measurement “Family” Unit – including cohabs Determination of thresholds –Initial and updating mechanism MOOP imputation Treatment of Homeownership in Thresholds or Resources Geographic Adjustment Under-reporting of Benefits and Income Improving imputation of in-kind benefits (e.g., housing subsidies) Improve Tax modeling

11 NAS Poverty with and without MOOP, 2008

12 NAS Poverty without and with Return on Home Equity (for Homeowners), 2008

13 Official vs NAS Poverty, 2008 (Changes in Composition)

Concluding Thoughts We need to pay attention to the Who What Where When Why and How The purpose of the study matters Issue with Relative poverty measures The key is the effect on the composition of the poor. Should there be multiple measures for multiple purposes? Is there a sufficient statistic that provides sufficient information?

15 Correlation across State Poverty rates NAS and Official poverty measure, WITHOUT Geographic Adjustment

16 Correlation across State Poverty rates NAS and Official poverty measure, WITH Geographic Adjustment

17 Census Alternative Poverty Measures NAS-type Alternative Measures –MOOP subtracted from income or included in thresholds –Geographic adjustments or not –Update Thresholds with CE or CPI R&D measures Poverty Table Creator II –