Impacts of Adding Net Worth to the Poverty Definition

Abstract

This paper estimates changes in the level and composition of poverty that would result from modifying the conventional income-based poverty measure to include the annuity value of household net worth. Under the new income/wealth measure, 13 percent of those currently measured as poor have enough assets to be removed from poverty. Among those more often found to be in poverty under the new measure are young, renters, and large central city residents. Age, home ownership, farm employment, education, retirement status, public assistance participation, and residence in the West are significant factors in explaining the divergence of the alternative poverty measures.