Statistical tests of changes in U.S. poverty, 1975 to 1990.

Summary

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Statistical inference methods and decomposable poverty measures were combined to generate a more realistic representation of poverty changes in the US between 1975 and 1990. The innovative approach produced a new paradigm for establishing poverty level rankings and evaluating poverty changes. Based on the results, poverty levels decreased from 1975 to 1978, rose significantly between 1979 to 1983 and stabilized between 1985 and 1990.

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Statistical tests of changes in U.S. poverty, 1975 to 1990.

I. Introduction

Since President Lyndon Johnson declared the war on poverty three decades ago, scholars have devoted many volumes to analyzing characteristics of poverty, evaluating effectiveness of anti-poverty policies, and measuring changes in poverty. Unfortunately, most poverty studies have focused primarily on the incidence of poverty rather than on both the incidence of poverty and the income distribution within the poor population. Although A. K. Sen's [23] seminal work on measurement of poverty demonstrated the importance of constructing and using a distribution-sensitive poverty measure in evaluating poverty, the U.S. Federal Government still uses the proportion of poor as virtually the only indicator of poverty. With few exceptions, such as Bishop, Formby, and Smith [5], most recent scholarly works on poverty issues, including Sawhill [21], Hanratty and Blank [17], and Slesnick [24], are also concerned exclusively with the incidence of poverty and use a single poverty line. In this study, we demonstrate that a more comprehensive look at poverty, using distribution-sensitive measures and multiple poverty lines, yields a different picture of poverty changes over time compared to what official U.S. statistics portray.

Practically, the comparison of poverty changes can be decomposed into three parts: (1) setting a poverty line - an income threshold below which a person is defined as poor. This step is also called the identification of the poor and is very important in poverty study; (2) choosing a method to aggregate individual poverty into overall poverty. Different methods of aggregating may lead to different conclusions about poverty changes. Therefore an appropriate method is essential for poverty study; and (3) statistical inference - since conclusions about poverty changes are drawn from a random sample of the population...

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