Using Consumption to Measure Poverty

A consumption-based measure of poverty would do a better job of capturing the extent of, and changes over time in deprivation in the U.S. for several reasons:

• Consumption reflects lifetime income and wealth, and thus better captures the long-term prospects of a family than one year’s income.
• Consumption is more likely than income to capture the effects of saving and dissaving, the ownership of durable goods such as houses and cars, and access to credit.
• Consumption is also more likely to reflect private and government transfers.
• Material hardship and other adverse family outcomes are more severe for those with low consumption than for those with low income.
• Many sources of income—and in particular transfer income—are under-reported in surveys. Read more: "The Under-Reporting of Transfers in Household Surveys: Its Nature and Consequences" (Meyer, Mok, and Sullivan, 2009)

Other studies of the merits of consumption as a measure of the well-being of the poor:

• "Five Decades of Consumption and Income Poverty"
  Bruce D. Meyer, The Harris School of Public Policy Studies, The University of Chicago, and James X. Sullivan, University of Notre Dame, July 2010.
• "Further Results on Measuring the Well-Being of the Poor Using Income and Consumption"
  Bruce D. Meyer, The Harris School of Public Policy Studies, The University of Chicago, and James X. Sullivan, University of Notre Dame, July 2010.
• "Measuring the Well-Being of the Poor Using Income and Consumption"
  Bruce D. Meyer and James X. Sullivan, 2003. Journal of Human Resources, 38:S, 1180-1220.
• "Gaining Ground: Poverty in the Postwar United States"
  Daniel Slesnick, 1993, Journal of Political Economy 101(1): 1-38.
• "Macroeconomic Performance and the Disadvantaged"
  David M. Cutler and Lawrence F. Katz, 1991. Brookings Papers on Economic Activity 2: 1-74.
• "Measuring Consumption and Consumption Poverty: Possibilities and Issues" (pdf)
  David S. Johnson, U.S. Census Bureau, 2004