The Official Poverty Measure Sensitivity to Direct Poverty: What Types of Material Hardship Does the OPM Best Predict and for Who?

Background and Purpose

            The Official Poverty Measure (OPM) is the statistical measure of income poverty in the United States.  Mollie Orshansky developed the basis of the OPM when her supervisor at the Social Security Administration recognized its potential role in President Johnson’s War on Poverty.  The Orshansky income poverty measure—the price of a minimally adequate diet multiplied by 3.0—was institutionalized in 1969.  Critics of the OPM argue the restrictive definition of income and family results in an overestimation of income poverty.  Conversely, others argue the OPM underestimates income poverty due to its geographic invariance and inadequate multiplier.

            The dual purposes of this study are: (a) to investigate OPM sensitivity to material hardship and (b) to identify personal characteristics that influence its sensitivity.  In this context, the OPM is a “test” for poverty and material hardship is the “true” indicator of poverty.  Sensitivity and specificity are complimentary evaluative statistics for binary tests; they are the ratio of true positives and true negatives, respectively.  Predictive values are also evaluative statistics and represent the likelihood of a correct classification.  The second purpose of this research is to estimate the contributions of sociodemographic group membership and labor-power potential to OPM material hardship sensitivity.

Methods

            This research is an analysis of data from the 2008 Survey of Income and Program Participation (SIPP) panel.  The SIPP is a multi-wave survey of noninstitutionalized civilians and military personnel in private residence.

Study sample.  The sample for this study is lone families in the United States, a lone family occupies their household alone.  The estimate of lone families in the US is over 186 million with the US Census sample weights.  The sample of families is married couples with or without children and single adults with children.

Study measures.  The two measures for this study are the OPM and the Basic Needs & Food Insecurity measure.  The latter measure is the US Census material hardship instrument, and it includes rent or mortgage nonpayment, eviction, food insecurity, utility nonpayment and disconnection, telephone disconnection, and unmet medical and dental need.

Results

            The OPM sensitivity to material hardship is low.  Less than 40 percent of families are correctly classified true positive (income poor with material hardship).  Most positive predictive values are also low (< 30 percent).  The OPM specificity is high, but false positive classifications for telephone and healthcare hardship are over 10 percent.  Most negative predictive values are high (> 90 percent).  Race and ethnicity, lone parenthood, low education, and unemployment are consistently positively associated with OPM sensitivity.

Conclusions and Implications

            Low OPM sensitivity means many families are misclassified as nonpoor when they experience hardship.  Its high specificity means few false positives.  Family racial and ethnic membership, lone parenthood configuration, low educational attainment, and unemployment positively contribute to OPM sensitivity.  These families have statistically significantly higher odds of material hardship when “positive” for income poverty.