The Official Poverty Measure (OPM) only includes cash income in its measures of a family’s resources....

The Official Poverty Measure (OPM) only includes cash income in its measures of a family’s resources.

(1) Why is this a problem for understanding the effects of most of our anti-poverty programs?

(2) What is ONE way in which the Supplemental Poverty Measure (SPM) fixes this problem?

Solutions

Expert Solution

1) Apparently official poverty measure only takes into account the cash income as mentioned in the question and not the various effects of the policy benefits provided by the government in its calculations. This cash income is then compared with a threshold to determine the extend of poverty in the country. However, ignoring the in kind benefits such as nutrition assistance or housing etc. gives a very vague picture to the calculations of the actual extend of poverty as measured by the official poverty measure which in turn does not show any impact of the anti-poverty programs that are there.

2) In the case of Supplemental Poverty Measure it takes into account the in kind benefits such as nutrition assistance, subsidized housing or energy assistance in its calculations. It further subtracts necessary expenses for critical goods and services not included in the thresholds from resources such as income tax, child care, medical care etc. Further the measure takes into account the geographical differences that were ignored in the OPM.

orchestra answered 1 year ago

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