The Time-Poor: A New Look at Poverty

If the minimal nonpoor level of consumption requires both money and household production, then the official poverty standards do not correctly measure household needs. Any income-support program that corrects for money differences but not for time differences across households will discriminate against households with only one adult. Furthermore, such programs will provide financial incentives for households to form in certain ways. This paper sets up a two-dimensional poverty definition and then shows how this standard can be used to define voluntary versus involuntary poverty. Since the official poverty index was developed in the mid-1960s by the Social Security Administration (SSA) 7, 8, their categorization by income has been accepted as an equitable criterion with which to compare different types of households. As a result, policy-makers have thought that adjusting the benefit structure of an income-transfer program for money differentials across households corrected for the resource differences of these households. But households differ in their time resources as well as their money income. This paper argues that to base the benefit schedule of an income-support program on an index that defines poverty in terms of money income alone is to create gross inequities The author is Assistant Professor of Economics, University of California, Berkeley. * This paper benefited from comments made on an earlier draft by Barbara Bergmann, Nancy Chodorow, Frances Flanagan, Gillian Garcia, Aaron Gordon, Mel Jameson, Theodore Keeler, Harold Wilensky, Michael Wiseman, and Lloyd Ulman. Cynthia Rence provided invaluable assistance. Financial support was provided by the U.S. Department of Labor under Research Grant No. 72-06-74-04 and the Institute of Industrial Relations. Since grantees conducting research projects under government sponsorship are encouraged to express their judgment freely, this paper does not necessarily represent the official opinion or policy of the Department of Labor. The author is solely responsible for its contents. Manuscript received February 1976; accepted July 1976. The Journal of Human Resources * XII * 1 This content downloaded from 157.55.39.54 on Thu, 30 Jun 2016 06:06:26 UTC All use subject to http://about.jstor.org/terms 28 I THE JOURNAL OF HUMAN RESOURCES across households that vary in their number of adult hours. The equity problem, important in itself, takes on added significance when it creates incentives for individuals to adjust their living arrangements, and the problem becomes aggravated if the household structure appears to be in a transitional phase as in the 1970s. The impact of an income-maintenance scheme on the structure of households may prove to be more important over the long run than the program's influence on the labor supply, an issue that has captured the attention of economists and policy-makers. This paper attempts to shift the focus of attention by laying a foundation for analyzing the economic incentives for household formation implicit in proposed income-maintenance programs. First, a poverty standard in terms of both time and money inputs is defined. In this definition, the necessity of home production for the well-being of the household's members is emphasized. Then a measure of this generalized poverty standard is used to estimate the number of additional female-headed families who would be counted as poor because of a deficiency of nonmarket time. The policy implications of the new definition are explored by using the index to distinguish among the hard-core poor, the temporary poor, and the voluntary poor, and to estimate the potential poverty population. The paper concludes with a discussion of the policy dilemmas posed by the potential interaction between benefit schedules and household composition.