Report on Alternative Outcome Measures: Temporary Assistance for Needy Families (TANF) Block Grant . Extreme Poverty Rate

12/01/2000

Another alternative approach to measuring the well-being of children and families is to look directly at income levels, rather than program participation. One proposed measure would examine the rate of extreme child poverty - those living at 50 percent of the poverty level or less - or the change in this rate. This measure would focus on the extent to which states have success in improving the status of a very needy group - the "poorest of poor." At the July 1999 consultation meeting, there was a general sense that a measure below 100 percent of poverty was more likely to be influenced by changes in TANF policy than the standard measure at 100 percent of poverty, because most states' cash assistance need standards and payment levels are substantially below the official poverty line.(6)  In addition, these very poor families may be at greatest risk of experiencing substantial material hardships, such as hunger or homelessness.

Measurement issues. The simplest way to measure extreme poverty would be using the standard definition of income, which includes cash assistance, but not the cash equivalent value of food stamps, or the effects of taxes. A modified definition of income, which includes both taxes and transfers, would better capture the effects of a range of state policy choices on family well-being. The extreme poverty rate could be measured based on family units, on individuals, or on children. Focusing on children gives more weight to the circumstances of large families ( i.e., each child in a large family would be counted separately) who are somewhat more likely to be poor. By including all families, whether or not they receive TANF assistance, and whether or not they are employed, this measure rewards states that provide a comprehensive safety net for the most disadvantaged.

Data issues. The preferred data source for this measure is the ACS, which will provide reliable, timely state-specific data that could be used to calculate both the numerator and denominator of the rate, starting in 2000. The CPS provides data that could be used to calculate this measure in the short-term, but for all but the largest states we would have to rely on small area estimation techniques, such as moving averages (combining and averaging three or four years of data).

Fairness issues. The extreme poverty rate is likely to be affected by a number of factors - some of which are outside the scope of a state's TANF program. For example, the poverty rate is likely to be affected by a state's economy and by the policies of other social programs for the poor. Both the absolute rate and the change in the rate would be affected by these other factors. However, using the change in the extreme poverty rate as a measure might give states with historically high poverty rates an incentive to improve their performance, since they have a greater chance of performing well on a measure based on improvement.