Comparative Child Poverty Measures

Comparative Child Poverty Measures

          Comparative Child Poverty Measures

   Backgrounder No. 169                        by Marcelo Ostria                             October 2013

The United States has one of the highest child poverty rates in the developed world,
according to some international rankings. However, yardsticks commonly used by the
federal government and international organizations to measure poverty in America
and other countries are inconsistent with each other, and could be inaccurate or
                                      For instance, developed countries commonly use relative measures of
                                      poverty that categorize any household below a certain percentage of the
                                      national average income as impoverished — regardless of their standard
                                      of living. In contrast, deprivation measures define poverty using specific
                                      quality of life indicators, but the set of indicators could be arbitrary, and
                                      the data gathered by household surveys to determine the extent of poverty
                                      could be unreliable. Thus, claims that child poverty is more pervasive in
                                      the United States than in other developed countries are at least suspect.
                                         The issue of poverty measurement is important because the United
                                      States and other developed countries spend billions of dollars each year
                                      on families in poverty, and developed countries send billions of dollars
                                      in aid to developing countries to alleviate deprivation, especially among
                                      children. Thus, two questions arise: How is child poverty measured
       Dallas Headquarters:
                                      in the United States and internationally? And, how accurate are these
    12770 Coit Road, Suite 800
        Dallas, TX 75251              measures?
          972.386.6272                   The following is a review of several child poverty measures that are
                being implemented around the world, and some recommendations on how
        Washington Office:            the United States can improve the accuracy of its child poverty measures.
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                                        How the OECD Measures Child Poverty. The Organization for
      Washington, DC 20004            Economic Cooperation and Development (OECD), an association of
           202.220.3082               economically developed countries, measures child poverty in member
                                      countries and countries that are candidates for membership. Among the
                                      OECD countries [see Figure I]:
                                       ■■ Denmark enjoys the lowest poverty rate among developed countries,
                                          with 3.7 percent of children living in poverty.
                                       ■■ By contrast, the United States has a higher child poverty rate than 26
                                          other developed countries.
                                       ■■ The OECD claims that more than one-fifth (21.6 percent) of children
                                          in the United States live in poverty.
Comparative Child Poverty Measures
Comparative Child Poverty Measures

       Does the OECD standard                   But these countries have widely                       ■■ Annual average income in
    accurately reflect the quality of life      differing incomes per capita. As a                       Israel is high at $31,296 per
    of households with poverty level            result, the standard of living at the                    person, whereas it is only
    incomes? In OECD rankings,                  poverty level also differs widely.                       $7,935 in Romania.
    only Israel, Chile, Mexico, Turkey          For example, according to data                        ■■ Yet, the child poverty rate in
    and Romania have higher child               from the International Monetary                          Israel is higher than in Romania,
    poverty rates than the United States.       Fund for 2012:1                                          according to the OECD.

                                                                       Figure I
              Percentage of Children in Poverty in Organization for Economic
                      Cooperation and Development Countries (2008)
           Denmark                   3.7
            Finland                          5.4
            Norway                           5.5
             Iceland                          5.7
             Sweden                                 7
            Slovenia                                 7.2
           Hungary                                   7.2
          Germany                                          8.3
              France                                             9.3
        Switzerland                                               9.6
        Netherlands                                                9.7
               Korea                                                 10.3
            Belgium                                                      11.3
             Ireland                                                      11.4
              Greece                                                         12.1
    United Kingdom                                                             12.5
       Luxembourg                                                                 13.4
           Australia                                                                14
               Japan                                                                 14.2
             Poland                                                                    14.5
             Canada                                                                      15.1
                Italy                                                                     15.3
           Portugal                                                                              16.7
          Lithuania                                                                               17
               Spain                                                                                 17.7
              Latvia                                                                                        18.8
           Bulgaria                                                                                                21.4
       United States                                                                                                21.6
                Chile                                                                                                  22.4
             Turkey                                                                                                           23.5
           Romania                                                                                                                   25.5
             Mexico                                                                                                                   25.8
               Israel                                                                                                                     26.6

          Source: Organization for Economic Cooperation and Development, “OECD Family Database,” December 2012.
          Available at Access verified April 30, 2013.

Comparative Child Poverty Measures
Table I
                                         U.S. Poverty Thresholds for 2011
                         (by household size and number of children under 18 years of age)

                                                                     Related children under 18 years

    Household          Weighted
   size of family      average
                                          None              One              Two            Three            Four          Five
        unit          thresholds

   Two people…..        $14, 657
    under 65 years      $15,139          $15,063          $15,504

      65 years and      $13,609          $13,596          $15,446
    Three people        $17,916          $17,595          $18,106          $18,123

    Four people         $23,021          $23,201          $23,581          $22,811         $22,891

     Five people        $27,251          $27,979          $28,386          $27,517         $26,844          $26,434

     Six people         $30,847          $32,181          $32,309          $31,643         $31,005          $30,056      $29,494

     Source: United States Census Bureau, “How the Census Bureau Measures Poverty,” undated. Available at Access verified April 30, 2013.

 ■■ Similarly, the U.S. child poverty           disposable income (adjusted for                    ■■ By contrast, in 2010 the relative
    rate is higher than in countries            the number of individuals in the                      poverty-level income in the
    with lower per capita incomes,              household). Thus, according to                        United States was €10,890
    such as Spain, Latvia and                   OECD statistics, in 2009:2                            (US$14,528). (The official
    Bulgaria.                                    ■■ A typical household under the                     poverty threshold used by the
   The reason child poverty rates                   relative poverty line in Turkey                   U.S. government is discussed
appear unrelated to the wealth of a                 had an annual income of €1,809                    below.)
country is because the OECD relies                  (or US$2,413), whereas a                        Changes in a relative poverty
on a measure of relative poverty:                   household in Switzerland was                 measure depend on the direction
the share of all children in a country              under the relative poverty line if           and number of people crossing
living in households with less than                 its annual income was less than              the poverty threshold.4 A relative
50 percent of the average (median)                  €17,704 (US$23,618).3                        poverty measure might not change

Comparative Child Poverty Measures
Comparative Child Poverty Measures

    when the condition of the poor           “Orshanky Poverty Threshold,”               $22,891 for a four-member
    worsens, because it does not             developed by economist Mollie               household with three children
    distinguish between those just           Orshanky at the U.S. Department             under 18 years of age.
    below the poverty threshold and          of Agriculture in the 1950s. The           However, the official U.S.
    the desperately destitute (such as       threshold is based on the minimum       poverty level ignores after-tax cash
    individuals living on less than $1 a     income a household needs for a          benefits such as the refundable
    day, discussed below).5                  food budget designed for families       portion of the child tax credit and
                                             under economic stress. In the 1960s,
       Measuring child poverty based                                                 the Earned Income Tax Credit,
                                             after Orshanky went to work at the      which is given to low-income
    on household income does little to
                                             Social Security Administration, her     families even if they have no
    reveal a child’s level of deprivation.
                                             measure, and survey data about the
    Moreover, relative measures do not                                               income tax liability. It also ignores
                                             percentage of their incomes families    in-kind government benefits such
    account for developed countries’
                                             spent on food, were used as the
    benefit programs for children,                                                   as free-or-reduced-price school
                                             basis for the Federal Poverty Level     lunches, child care assistance, the
    which often include cash, housing,
                                             (FPL).                                  Supplemental Nutrition Assistance
    health care, and day care.6 These
    programs raise a child’s living             The income threshold varies by       Program (SNAP), Medicaid and
    standard by providing resources          age and family size and is adjusted     housing subsidies, among others.
    and services that are not reflected      annually for inflation.8 The current    (An experimental measure, that
    in household income. In the United       U.S. standard has changed only          does account for government
    States, for example, a recent Cato       slightly since it was implemented       benefits, is discussed below.)
    Institute analysis found that in 35      during President Lyndon Johnson’s          Furthermore, with the exception
    states the average value of welfare      “war on poverty.” As of 2011 (the       of the states of Hawaii and Alaska
    benefits was higher than a full-time,    latest data available), the Census      (where transportation costs are
    minimum-wage job.7                       reported that 46.2 million people,      extremely high), the federal poverty
                                             or 15 percent of the total U.S.         level does not account for regional
       Internationally, a relative poverty
                                             population, lived in households         variations in the cost of living.10
    measure could mean very different
                                             below the poverty line.9                For instance, a family of four living
    living standards, depending on
    the country. For instance, a yearly         If a household’s total income        on $23,000 a year is below the
    income of $35,000 in a country           is lower than the threshold, every      poverty line, but that income will
    where essential goods and services,      individual in it is automatically       provide a higher standard of living
    such as health care and child care,      considered under the poverty line.      in the Midwest (where the cost of
    are free (or heavily subsidized)         Thus, according to 2011 U.S.            property, groceries, transportation,
    implies a much different standard of     Census Bureau data [see Table I]:       and other goods and services is
    living than in a country where these                                             substantially lower than average
                                              ■■ The U.S. poverty threshold for
    items must be paid for at market                                                 compared to a higher than average)
                                                 a household with two people
    prices.                                                                          cost area, such as New York City.
                                                 under 65 years of age is a yearly
       How the United States                     income of $15,135, whereas             Finally, accurately measuring
    Measures Poverty. The United                 the threshold for a household       child poverty using an absolute
    States is one of the few OECD                consisting of two people, 65        standard is difficult because
    countries with an official poverty           years of age and older, is a        children usually do not earn
    line. It is an absolute measure of           yearly income of $13,609.           income. Further, their well-
    poverty-level income, rather than a       ■■ The poverty line for a four-adult   being depends on factors beyond
    relative measure. The U.S. poverty           household is $23,021, but only      household income — including
    threshold today is still based on the                                            whether or not the children benefit

Comparative Child Poverty Measures
more or less than other individuals     small, additional amounts for other         “necessities,” rather than spending
from family or household resources.     needs.11 Table II illustrates how the       of all kinds.
  The Supplemental U.S. Poverty         measure estimates a household’s                The supplemental measure
Measure. In addition to the official    resources by adding cash income             assumes that unrelated individuals
poverty line, the United States         and any government in-kind                  in a household below the age of
has developed an experimental           benefits families could use for food,       15 are poor if their household falls
Supplemental Poverty Measure. The       shelter, clothing and utilities. Taxes,     below the poverty line. It also
supplemental measure addresses          work expenses and out-of-pocket             assumes that unrelated individuals
some of the inaccuracies associated     expenditures for medical care are           living in the household equally
with the official standard, but it is   subtracted from the estimated               share resources with the person
not used to determine eligibility for   resources.                                  answering the survey. Though this
any government benefits.                   However, even the supplemental           assumption may hold true in most
                                        measure does not include the                instances, the measure does not
   The supplemental measure is
                                        value of some government in-                account for cases of disproportionate
based on a National Academy of
Sciences’ proposal to base the          kind services, such as Medicaid.            resource distribution or resources
                                        Moreover, it still does not account         specifically dedicated to the
poverty line on a budget for food,
                                        for regional variation in the cost of       protection of well-being of an
clothing, shelter, utilities and
                                        living and only tracks spending on          unrelated child in the household.

                                                    Table II

                              Supplemental Poverty Measure
                                     (money income from all sources)
                            Plus                                                      Minus

     Supplemental Nutritional Assistance (SNAP)              Taxes (plus credits such as the Earned Income
                                                                          Tax Credit [EITC])

            National School Lunch Program                                Expenses Related to Work

    Supplementary Nutrition Program for Women                                Child Care Expenses
           Infants and Children (WIC)

                    Housing subsidies                           Medical Out-of-pocket Expenses (MOOP)

         Low-income Home Energy Assistance                                      Child Support Paid

   Source: Kathleen Short, “The Research Supplemental Poverty Measure: 2011,” U.S. Census Bureau, Current
   Population Reports P60-244. Available at Access verified April 30, 2013.

Comparative Child Poverty Measures

       Take foster children. In the          instance, a 2009 U.S. Department            they had been hungry at some
    United States, nearly one-half           of Energy Residential Energy                point during the past year but
    million children live in foster          Consumption Survey found that               did not eat because they could
    care, and many of them are placed        people below the poverty threshold          not afford enough food.
    with unrelated adults.12 The adult       have access to various household         ■■ Ninety-five percent had eaten
    responsible for a foster child           amenities that increase their               less than they thought they
    receives a check from the state          standard of living, such as a clothes       should at some point in the year
    government specifically to defray        washer, more than one television            because of a lack of money for
    expenses for that child. Further,        and a microwave oven.15 As Figure           food.
    Medicaid provides services to foster     II shows:
                                                                                      ■■ Ninety-nine percent reported
    children that adults in the same          ■■ Nearly two-thirds (64.5 percent)        having been worried that their
    household might not receive. More            of poor households in the               food would run out at some
    generally, in many low-income                United States have an automatic         point during the year before
    households, children are eligible for        clothes washer.                         they received money to buy
    Medicaid, but their parents are not.
                                              ■■ More than three-fourths of              more.
       Another instance of                       poor households have air               However, according to the same
    disproportionate resource                    conditioning (75.7 percent).        survey, though nearly 18 percent
    distribution within a household
                                              ■■ Almost all (99.4 percent) have a    of all poor households faced very
    that is not accounted for in the
                                                 refrigerator.                       low food security, less than two-
    supplemental measure is when one
                                                Hunger in Poor U.S.                  and-a-half percent of children in
    or more children receive child-
                                             Households. Deprivation of              poor households experienced very
    support payments while other
                                             necessities, such as food and           low food security. [See Figure III.]
    children in the same household do
                                             shelter, is certainly an indicator      This discrepancy demonstrates how
    not. This can happen when a parent
                                             of abject poverty. An estimated         the absolute income threshold for
    who is outside of the household
                                             46.6 million Americans live in          poverty measurement in the United
    due to a previous divorce pays for
                                             families receiving cash to buy food     States cannot make important
    services or resources directed only
                                                                                     distinctions with respect to the
    to the benefit of their own children.    through the Supplemental Nutrition
                                             Assistance Program (SNAP), run by       living standards of households
    Therefore, the children not affected
                                             the U.S. Department of Agriculture      below the poverty line. The USDA’s
    by the divorce who live in the same
                                             (USDA).16 The USDA conducts             school lunch, breakfast and dinner
    household do not benefit from those
                                             surveys to determine the extent         programs, for example, help reduce
    resources or services. Thus, while
                                             of hunger, or “food insecurity.”        the number of poor children facing
    the supplemental measure expands
                                             “Very low food security” means          hunger, and partially explain
    upon the official poverty line to
                                             that — at some point during the         differences in food insecurity levels
    address some of its limitations, it
                                             year — a household had difficulty       between children and adults in the
    still does not fully represent overall
                                             providing adequate food for all its     same household.18 Hunger among
    child poverty.
                                             members due to a lack of money or       children may also be lower because
       Access to Amenities in Poor                                                   parents are willing to forgo meals
                                             other resources.17 Over a 12-month
    U.S. Households. Household                                                       themselves in order to provide food
                                             period, the USDA says that out of
    surveys find that many Americans                                                 for their children.
                                             an estimated 6.8 million below-
    classified as living below the
                                             poverty households facing very low         How the European Union
    poverty line enjoy a number of
                                             food security nationwide:               Measures Poverty. Like the
    amenities that indicate they are far
                                              ■■ Sixty-five percent reported that    OECD, the European Union uses a
    from abject deprivation.13,14 For
                                                                                     relative measure to assess poverty:

Figure II
                       Percentage of Poor Households in the United States
                                With Various Amenities (2009)
                                   Photocopier      4.7
                   More than one refrigerator             10.7
                             Laptop computer                     22.5
                          Video game console                     23
                              Separate freezer                   23
                                       Printer                      27.2
                             Use a dishwasher                        28.4
  1 - 3 rechargeable portable tools/appliances                        31.4
                                  Toaster oven                         32.5
                            Stereo equipment                             34.3
                                    Computer                             34.3
                  Separate television cable box                           36.1
                         Separate DVD player                                  42
                           Cordless telephone                                      47.3
                          Have internet access                                     48.2
                                 Coffee maker                                        50.8
           1-3 Rechargeable electronic devices                                          54.4
                               Clothes Washer                                                  64.5
                      More than one television                                                    69.2
                            Air Conditioning                                                          75.7
                                    Microwave                                                                92.3
                                          Stove                                                               93.4
                     Space heating equipment                                                                   95.2
                                    Television                                                                  97.6
                                  Refrigerator                                                                    99.4

     Source: Source: U.S. Energy Information Administration, “2009 RECS Survey Data,” Residential Energy Consumption
     Survey (RECS), 2009. Available at Access verified June 17,

households with net incomes of less         studies to combat poverty.20 Shortly                based on household surveys, though
than 60 percent of national median          after, Europeans began to view                      deprivation statistics gleaned from
income.19 During the post-World             poverty relative to conditions in                   surveys may be unreliable.22 In
War II period, Europeans began              a particular country at a specific                  2009, for the first time, the EU
to perceive poverty as a relative           time.21                                             Statistics on Income and Living
concept that goes beyond notions of                                                             Conditions survey included a
                                               League Table of Child                            section dedicated to children ages
physical deprivation and includes           Deprivation. In a new effort to
standards of social participation.                                                              1 to 16 years, sampling more
                                            more accurately measure child                       than 125,000 households in 29
In 1975, the European Union                 deprivation, Europe has more                        countries.23 Utilizing this data, the
Council of Ministers implemented            recently developed and adopted                      UNICEF Innocenti Research Centre
a program of pilot schemes and              “multiple-deprivation” indices                      constructed a league table on child

Comparative Child Poverty Measures

    deprivation and created a 14-item      ■■ Indoor games (at least one per    countries rank in terms of child
    deprivation index.24 This index           child, including educational      poverty, based on the Child
    considers a child deprived when           baby toys, building blocks,       Deprivation Index.
    fewer than 13 items are met. Those        board games, computer games
                                                                                   While the standard for
    items include:                            and so forth).
                                                                                deprivation is often lower in
     ■■ Three meals a day, and at least    ■■ Money to participate in school    developing countries, the higher
        one meal a day with meat,             trips and events.                 standards of the Child Deprivation
        chicken or fish (or a vegetarian   ■■ An Internet connection.           Index make assumptions that
        equivalent).                                                            reflect values in certain developed
                                           ■■ Some new clothes (that is, not
     ■■ Fresh fruits and vegetables           all second-hand).                 countries, which may not be shared
        every day.                                                              universally. For instance, the index
                                           ■■ Two pairs of properly fitting
     ■■ Books suitable for the child’s        shoes (including at least one
                                                                                considers a child deprived if he/
        age and knowledge level (not                                            she cannot bring friends home
                                              pair of all-weather shoes).       to play, or does not have outdoor
        including schoolbooks).
                                           ■■ The opportunity, from time to     leisure equipment. But this criterion
     ■■ Outdoor leisure equipment
                                              time, to invite friends home to   may not be relevant to views of
        (bicycle, roller-skates and so
                                              play and eat.                     deprivation in certain regions,
                                            Figure IV shows how EU              communities or households.

                                                 Figure III
                   Hunger in Poor U.S. Households (2011)*

          Households below the poverty line                Children below the poverty line
       * Hunger is defined as “very low food security,” meaning that — at some point during the year
       — a household had difficulty providing adequate food for all its members due to a lack of money or other
       Source: United States Department of Agriculture, “Household Food Security in the United States in 2011,"
       Economic Research Report No. 141, September 2012. Available at Access verified June 18, 2013.

Figure IV
          Percentage of European Union Children Living in
                         Deprivation (2009)
         Iceland    0.9
         Sweden     1.3
         Norway      1.9
         Finland      2.5
       Denmark        2.6
    Netherlands       2.7
   Luxembourg           4.4
         Ireland         4.9
United Kingdom            5.5
         Cyprus             7
           Spain             8.1
        Slovenia              8.3
         Austria              8.7
 Czech Republic               8.8
       Germany                 8.9
           Malta               9.1
        Belgium                 10.1
          France                   12.4
         Estonia                    13.3
            Italy                          17.2
          Greece                             19.2
        Slovakia                              19.8
      Lithuania                                20.9
          Poland                                       27.4
          Latvia                                              31.8
       Hungary                                                31.9
       Bulgaria                                                               56.6
       Romania                                                                                72.6
       Source: UNICEF Innocenti Research Centre, “Measuring Child Poverty,” May 2012. Available
       at Access verified April 30, 2013.

Comparative Child Poverty Measures

       If the purpose of a deprivation         and so forth — should be included          who complete the survey are not
     index is to consider the overall          as well. Furthermore, the EU               always objective, and the arbitrary
     well-being of a child, other crucial      Statistics on Income and Living            definition of what is “essential” for
     measures — such as domestic               Conditions survey may not provide          a child may vary from country to
     abuse/security, quality of education,     better direct accounts of real living      country.
     housing conditions and amenities,         standards. In some cases, parents

                                                         Table III

                          Multidimensional Poverty Index Indicators
             Dimension                        Indicator                                         Deprived If…
                                        1. Years of Schooling                       1. No household member has
              Education                 2. Child School Attendance                      completed five years of schooling
                                                                                    2. Any school-aged child (8+ years)
                                                                                        is not in school (thru 8th grade)
                                        3. Child Mortality                          3. Any child has died in the family
                Health                  4. Nutrition                                4. Any adult or child for whom there
                                                                                        is nutritional information is
                                        5. Electricity                              5. The household has no electricity
                                        6. Improved Sanitation                      6. The household’s sanitation
          Living Standards              7. Safe Drinking Water                          facility is not improved
                                        8. Flooring                                     (according to Millennium
                                        9. Cooking Fuel                                 Development Goals guidelines),
                                        10. Asset Ownership                             or it is improved but shared with
                                                                                        other households
                                                                                    7. The household does not have
                                                                                        access to safe drinking water,
                                                                                        which is more than a 30-minute
                                                                                        roundtrip walk from home
                                                                                    8. The household has a dirt, sand or
                                                                                        dung floor
                                                                                    9. The household cooks with dung,
                                                                                        wood or charcoal
                                                                                    10. The household does not own
                                                                                        more than one radio, TV,
                                                                                        telephone, bike, motorcycle or
                                                                                        refrigerator and does not own a
                                                                                        car or truck
          Source: Oxford Poverty and Human Development Initiative, “Multidimensional Poverty Index 2011,” December
          2011. Available at Access verified April
          30, 2013.

Living on Less than a Dollar          poverty in the developing world.          it reflects the intensity of their
a Day in Developing Countries.                                                     deprivation. [See the side bar.] For
                                            The Multidimensional Poverty
A popular poverty measure for                                                      instance:
                                         Index in Developing Countries. As
developing countries follows an                                                     ■■ In Latin America, Bolivia
                                         calls for more precise measures of
absolute poverty line, setting the                                                     (one of the poorest countries
                                         poverty in developing countries have
income threshold at $1 a day.                                                          in Latin America) has an MPI
                                         increased in recent years, the Oxford
Since it was implemented in 1990,                                                      score of 0.089 — which means
                                         Poverty and Human Development
the World Bank has updated the                                                         20.5 percent of its population
                                         Initiative (OPHI) created the
international average poverty                                                          lives in poverty and, of that
                                         newest standard for measuring
line to $1.25 a day.25 In 2008, the                                                    percentage, on average, the poor
                                         poverty in developing countries for
World Bank estimated that 1.29                                                         are deprived in 43.7 percent of
                                         the United Nations Development
billion people in the world lived in
                                         Program (UNDP). Called the                    the indicators, indicating the
absolute poverty. Their definition
                                         Multidimensional Poverty Index                intensity of their poverty.28
characterized absolute poverty as
                                         (MPI), it uses indicators beyond           ■■ One of Africa’s poorest
severe deprivation of basic human
needs, including food, adequate
                                         income to measure poverty. In its             countries, Togo, has an MPI
                                         annual Human Development Report,              score of 0.284, with 54.3 percent
shelter, safe drinking water, and
                                         the UNDP applies 10 essential                 of its population living in
access to education and health
                                         indicators within three dimensions            poverty, and an average intensity
services. This poverty measure
                                         to measure poverty in 10 developing           across the poor of 52.4 percent.29
presumes that anyone living under
$1.25 a day will be deprived                                                        ■■ Cambodia, one of the poorest
of defined, basic human needs.              As Table III illustrates, the              countries in Southeast Asia, has
However, the income required             MPI focuses on education, health              an MPI score of 0.212. Some
for basic human needs is not             and other components of living                45.9 percent of its population is
uniform across locations and time.       standards (such as water, sanitation          poor, with an average poverty
Furthermore, the measure does not        and electricity) and deems a person           intensity of 46.1 percent.30
consider other resources that could      poor if they are deprived in at least
                                                                                      Challenges for Accurate
be available to a poor family, such as   30 percent of the weighted MPI
                                                                                   Measurement of Poverty.
benefit programs. Thus, an absolute      indicators.27 Thus, the MPI is not
                                                                                   International child poverty rankings
measure does not provide a truly         solely a reflection of the percentage     seek to expose which countries
representative account of abject         of poor people in the country;            are the most and least effective

                                  Calculating Multidimensional Poverty
        The MPI is calculated by multiplying the proportion of that country’s population in poverty (H) by the
     average intensity of poverty (A). Thus, MPI = H x A. For example, in the MPI index, Sierra Leone has a
     calculated 77 percent of MPI poor people and an average intensity across the poor of 57 percent:31
                                                 MPI = 77.0 (H) x 57.0 (A)
                                                         MPI = 0.49
        Therefore, MPI standards indicate that 77 percent of Sierra Leone’s population is poor, and deprived in at
     least 30 percent of the weighted indictors. Additionally, the MPI poor population suffers from deprivation in 57
     percent of indicators, on average.

Comparative Child Poverty Measures

     in addressing child deprivation.         country’s agreed-upon standards.         a more accurate account for child
     However, if countries do not agree       Undoubtedly, the lack of uniform         poverty than current international
     upon a standard measure, drawing         data and differing standards would       rankings represent.
     comparisons means little when            make it cumbersome to construct a
                                                                                      Conclusion. The lack of accuracy
     pressuring countries to address the      fair ranking system.
                                                                                   with relative measures of poverty,
     issue. And because many countries           Recommendations for Child         and reliability with surveyed
     are not addressing the limitations       Poverty Measurement in the           deprivation statistics, challenges
     of current child poverty measures,       United States. The United States     the belief that the United States
     social policies are likely being         could develop a child poverty        has more pervasive child poverty
     implemented based on misleading          measure based on several indicators than other developed countries.
     data.                                    currently not considered in the      Developed countries must improve
        In terms of material deprivation,     official poverty line. For instance: the accuracy of child deprivation
     it appears that children would            ■■ A child poverty measure should   measures in order to effectively
     benefit if each country adopted              account for a household’s total  target policies to benefit children,
     high standards. But measuring                income, including government     especially when attempting to bring
     child deprivation requires a                 benefit payments and the value   about social change.
     multidimensional measure that                of in-kind services received.    Marcelo Ostria is a research
     relates a child’s well-being to                                               associate with the National Center
                                               ■■ The measure should also account
     a country’s living standards. A                                               for Policy Analysis.
                                                  for any disproportionate benefit
     socially-perceived necessities
                                                  or income that children in a
     model, which takes into account
                                                  household receive, such as some
     societies’ own perception of what
                                                  children receiving child support
     is necessary for a child’s overall
                                                  while other children in the same
     well-being, may differ from
                                                  household do not.
     country to country, and encompass
     specific factors like direct material     ■■ A child poverty measure should
     deprivation (such as sufficient food         include adjustments for regional
     to avoid malnutrition) as well as            differences in the cost of living.
     less specific considerations, such as     ■■ Finally, it would be worthwhile
     having adequate recreational time.           for household surveys to include
     Differing social judgments in each           questions about resources
     country regarding child deprivation          available to children that
     are a further challenge to a universal       enhance their quality of life,
     standard of child poverty and the use        such as children’s extracurricular
     of comparative measures.                     and recreation activities, along
        For these reasons, current                with an approximate value of
     international child poverty rankings         each.
     may not adequately compare the              These issues are important
     well-being of children in different      because it is necessary to include
     countries. A transparent comparative     any factors that significantly
     child poverty measure would              influence a child’s standard of
     have to measure poverty based on         living when measuring poverty.
     a multidimensional poverty and           Moreover, implementing these
     deprivation index and adjust for each    recommendations would provide

     International Monetary Fund, “Report for Selected Countries and Subjects,” April 2013.
  Conversion from Euro to U.S. dollar based on the official European Central Bank’s exchange rate of €1 = $1.3340
as of August16, 2013. Daily exchange rate available at
 A typical household is what an equivalent adult in a household in the middle of the income distribution earns in a
year. The term “equivalent” in this sense refers to the equivalence technique in economics in which members of a
household receive different weightings. For more information on OECD equivalence scales see http://www.oecd.
 European Commission, “European Union Statistics on Income and Living Conditions data and Eurostat,” 2009.

Available at
 Heikki Hiilamo, Seppo Sallila and Reijo Sund, “Rethinking relative measures of poverty,” Luxemburg Income

Study, Working Paper No. 368, February 2004. Available at
 Jonathan Bradshaw and Naomi Finch, “A Comparison of Child Benefit Packages in 22 Countries,” British

Department of Work and Pensions, Research Report No. 174, 2002. Available at
 Michael Tanner and Charles Hughes, “The Work versus Welfare Trade-off: 2013,” Cato Institute. Available at
  United States Census Bureau, “How the Census Bureau Measures Poverty,” undated. Available at http://www.
  Office of the Assistant Secretary for Planning and Evaluation, “2013 Poverty Guidelines,” U.S. Department of

Health and Human Services. Available at
  Kathleen Short, “The Research Supplemental Poverty Measure: 2011,” U.S. Census Bureau, Current Population

Reports P60-244. Available at Access verified April 30, 2013.
  Children’s Bureau, “Foster Care Statistics 2010,” May 2012. Available at

factsheets/foster.pdf. Access verified July 23, 2013.
  U.S. Energy Information Administration, “2009 RECS Survey Data,” Residential Energy Consumption Survey

(RECS), 2009. Available at Access verified June
17, 2013.
  United States Department of Agriculture, “Household Food Security in the United States in 2011,” Economic

Research Report No. 141, September 2012. Available at Access
verified June 18, 2013.
  U.S. Energy Information Administration, “2009 RECS Survey Data,” Residential Energy Consumption Survey

(RECS), 2009. Available at Access verified June
17, 2013.
  United States Department of Agriculture, “Supplemental Assistance Program: Average Monthly Participation

(Persons),” July 2013. Available at Access verified July 19, 2013.

Comparative Child Poverty Measures

       United States Department of Agriculture, “Household Food Security in the United States in 2011,” Economic

     Research Report No. 141, September 2012. Available at Access
     verified June 18, 2013.
       United States Department of Agriculture Food and Nutrition Service. “Program Data: Child Nutrition Data,”

     Available at June 28, 2013. Access verified July 7, 2013.
           The European Commission, “The Measurement of Extreme Poverty in the European Union,” January 2011.
        Bjorn Hvinden and Rune Halvorsen, “Political Implications of the Current Debate on Poverty, Deprivation
     and Social Exclusion in Europe,” Combating Poverty in Europe (COPE), October 2012. Available at http://cope- Access verified July 3, 2013,
           The European Commission, “The Measurement of Extreme Poverty in the European Union,” January 2011.
       European Commission, “European Union Statistics on Income and Living Conditions data and Eurostat,” 2009.

     Available at Access verified April 30, 2013.
       UNICEF Innocenti Research Centre, “Measuring Child Poverty,” May 2012. Available at http://www.unicef-irc.

     org/publications/pdf/rc10_eng.pdf. Access verified April 30, 2013.
       Martin Ravallion, Shaohua Chen and Prem Sangraula, “Dollar a Day Revisited,” The World Bank Economic

     Review, Vol. 23, No. 2, June 2009, pages 163-184.
       United Nations Development Programme, “Multidimensional Poverty Index,” undated. Available at http://hdr.
     26. Access verified July 5, 2013.
       Oxford Poverty and Human Development Initiative (OPHI), “Country Briefing: Bolivia: Multidimensional

     Poverty Index (MPI) At a Glance,” 2013. Available at
     pdf?7ff332. Access verified August 1, 2013.
       Oxford Poverty and Human Development Initiative (OPHI), “Country Briefing: Togo: Multidimensional Poverty

     Index (MPI) At a Glance,” 2013. Available at .
     Access verified August 2, 2013.
       Oxford Poverty and Human Development Initiative (OPHI), “Country Briefing: Cambodia: Multidimensional

     Poverty Index (MPI) At a Glance,” 2013. Available at
     pdf?7ff332. Access verified August 2, 2013.
       Oxford Poverty and Human Development Initiative (OPHI), “Country Briefing: Sierra Leone: Multidimensional

     Poverty Index (MPI) At a Glance,” 2013. Available at
     SierraLeone-2013.pdf?7ff332. Access verified June 18, 2013.

About the NCPA

                                                                                             A major NCPA study, “Wealth, Inheritance
 The NCPA is a nonprofit, nonpartisan organization established in                            and the Estate Tax,” completely
 1983. Its aim is to examine public policies in areas that have a                            undermines the claim by proponents of the
 significant impact on the lives of all Americans — retirement, health                       estate tax that it prevents the concentration
                                                                                             of wealth in the hands of financial
 care, education, taxes, the economy, the environment — and to                               dynasties. Senate Majority Leader Bill Frist
 propose innovative, market-driven solutions. The NCPA seeks to                              (R-TN) and Senator Jon Kyl (R-AZ)
 unleash the power of ideas for positive change by identifying,                              distributed a letter to their colleagues about
 encouraging and aggressively marketing the best scholarly research.                         the study. The NCPA recently won the
                                                                                             Templeton Freedom Award for its study
                                                                                             and report on Free Market Solutions. The
 Health Care Policy.                                                                         report outlines an approach called
 The NCPA is probably best known for                    NCPA President                       Enterprise Programs that creates job
 developing the concept of Health Savings         John C. Goodman is called                  opportunities for those who face the
 Accounts (HSAs), previously known as               the “Father of HSAs” by                  greatest challenges to employment.
                                                The Wall Street Journal, WebMD
 Medical Savings Accounts (MSAs).
                                                   and the National Journal.                 Retirement Reform.
 NCPA President John C. Goodman is                                                           With a grant from the NCPA, economists
 widely acknowledged (Wall Street                                                            at Texas A&M University developed a
 Journal, WebMD and the National                                                             model to evaluate the future of Social
 Journal) as the “Father of HSAs.” NCPA       Taxes & Economic Growth.
                                                                                             Security and Medicare, working under the
 research, public education and briefings     The NCPA helped shape the pro-growth           direction of Thomas R. Saving, who for
 for members of Congress and the White        approach to tax policy during the 1990s.       years was one of two private-sector
 House staff helped lead Congress to          A package of tax cuts designed by the          trustees of Social Security and Medicare.
 approve a pilot MSA program for small        NCPA and the U.S. Chamber of Com-                 The NCPA study, “Ten Steps to Baby
 businesses and the self-employed in 1996     merce in 1991 became the core of the           Boomer Retirement,” shows that as 77
 and to vote in 1997 to allow Medicare        Contract with America in 1994.                 million baby boomers begin to retire, the
 beneficiaries to have MSAs. In 2003, as      Three of the five proposals (capital gains     nation’s institutions are totally unprepared.
 part of Medicare reform, Congress and        tax cut, Roth IRA and eliminating the          Promises made under Social Security,
 the President made HSAs available to all     Social Security earnings penalty)              Medicare and Medicaid are inadequately
 nonseniors, potentially revolutionizing      became law. A fourth proposal —                funded. State and local institutions are not
 the entire health care industry. HSAs now    rolling back the tax on Social Security        doing better — millions of government
 are potentially available to 250 million     benefits — passed the House of Repre-          workers are discovering that their pensions
 nonelderly Americans.                        sentatives in summer 2002. The NCPA’s          are under-funded and local governments
    The NCPA outlined the concept of          proposal for an across-the-board tax cut       are retrenching on post-retirement health
 using federal tax credits to encourage       became the centerpiece of President            care promises.
 private health insurance and helped          Bush’s tax cut proposals.
 formulate bipartisan proposals in both the     NCPA research demonstrates the               Pension Reform.
 Senate and the House. The NCPA and           benefits of shifting the tax burden on         Pension reforms signed into law include
 BlueCross BlueShield of Texas devel-         work and productive investment to              ideas to improve 401(k)s developed and
 oped a plan to use money that federal,       consumption. An NCPA study by Boston           proposed by the NCPA and the Brookings
 state and local governments now spend        University economist Laurence Kotlikoff        Institution. Among the NCPA/Brookings
 on indigent health care to help the poor     analyzed three versions of a consumption       401(k) reforms are automatic enrollment
 purchase health insurance. The SPN           tax: a flat tax, a value-added tax and a       of employees into companies’ 401(k)
 Medicaid Exchange, an initiative of the      national sales tax. Based on this work, Dr.    plans, automatic contribution rate
 NCPA for the State Policy Network, is        Goodman wrote a full-page editorial for        increases so that workers’ contributions
 identifying and sharing the best ideas for   Forbes (“A Kinder, Gentler Flat Tax”)          grow with their wages, and better default
 health care reform with researchers and      advocating a version of the flat tax that is   investment options for workers who do
 policymakers in every state.                 both progressive and fair.                     not make an investment choice.

About the NCPA

 The NCPA’s online Social Security
 calculator allows visitors to discover their
 expected taxes and benefits and how                                  What Others Say About the NCPA
 much they would have accumulated had
 their taxes been invested privately.
                                                                                                     “The NCPA generates more analysis per
 Environment & Energy.                                                                               dollar than any think tank in the country.
                                                                                                     It does an amazingly good job of going out
 The NCPA’s E-Team is one of the largest
                                                                                                     and finding the right things and talking about
 collections of energy and environmental
 policy experts and scientists who believe                                                           them in intelligent ways.”
 that sound science, economic prosperity                                                             Newt Gingrich, former Speaker of the
 and protecting the environment are                                                                  U.S. House of Representatives
 compatible. The team seeks to correct
 misinformation and promote sensible
 solutions to energy and environment
 problems. A pathbreaking 2001 NCPA                                                                  “We know what works. It’s what the NCPA
 study showed that the costs of the Kyoto                                                            talks about: limited government, economic
 agreement to reduce carbon emissions in                                                             freedom; things like Health Savings Accounts.
 developed countries would far exceed                                                                These things work, allowing people choices.
 any benefits.                                                                                       We’ve seen how this created America.”
                                                                                                     John Stossel,
 Educating the next generation.                                                                      host of “Stossel,” Fox Business Network
 The NCPA’s Debate Central is the most
 comprehensive online site for free
 information for 400,000 U.S. high school
 debaters. In 2006, the site drew more than                                                          “I don’t know of any organization in America
 one million hits per month. Debate                                                                  that produces better ideas with less money
 Central received the prestigious Temple-
                                                                                                     than the NCPA.”
 ton Freedom Prize for Student Outreach.
                                                                                                     Phil Gramm,
 Promoting Ideas.                                                                                    former U.S. Senator
 NCPA studies, ideas and experts are
 quoted frequently in news stories
 nationwide. Columns written by NCPA
 scholars appear regularly in national
 publications such as the Wall Street                                                                “Thank you . . . for advocating such radical
 Journal, the Washington Times, USA                                                                  causes as balanced budgets, limited government
 Today and many other major-market                                                                   and tax reform, and to be able to try and bring
 daily newspapers, as well as on radio                                                               power back to the people.”
 talk shows, on television public affairs
 programs, and in public policy newslet-                                                             Tommy Thompson,
 ters. According to media figures from                                                               former Secretary of Health and Human Services
 BurrellesLuce, more than 900,000 people
 daily read or hear about NCPA ideas and
 activities somewhere in the United States.

 The NCPA is a 501(c)(3) nonprofit public policy organization. We depend entirely on the financial support of individuals, corporations and foundations that believe in private
 sector solutions to public policy problems. You can contribute to our effort by mailing your donation to our Dallas headquarters at 12770 Coit Road, Suite 800, Dallas, TX 75251,
 or visiting our Web site at and clicking “Support Us.”
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