Standard Food Basket Variant

THE STANDARD food basket variant is any method of determining a poverty line using the cost of meeting basic nutritional requirements as the primary basis for setting the poverty threshold. The standard food basket variant is used by many countries, including the United States, to set the official poverty line.

The use of this method in the United States dates back to 1961, when Mollie Orshansky first calculated poverty thresholds for American households using the economy food plan developed by the United States Department of Agriculture (USDA). The USDA regularly calculates the cost, for a variety of family sizes, of providing a nutritionally complete diet under four differing levels of spending. The least costly plan, and the one used by Orshansky, is known as the thrifty plan (formerly known as the economy plan).

Orshansky then multiplied the annual cost of the thrifty food plan by three to arrive at the poverty line, since empirical data on consumer expenditure patterns from the 1950s showed that the typical family of three or more persons spent approximately one-third of their after-tax income on food.

Once the original thresholds were established in 1963, the poverty lines were then adjusted over time based on changes in prices, at first in the price of the appropriate food basket but after 1969 by changes in the overall Consumer Price Index instead. Thus, while the original poverty thresholds in the United States were established using a standard food basket, the current poverty line is not based directly on the current cost of providing an adequate diet. For example, in 2003 the thrifty food plan for a family of four ranged from $5,060 to $5,850 depending on the ages of the household members. The official poverty line for a two-adult, two-child household in the same year, however, was $18,660, between 3.2 and 3.7 times greater.

There are many criticisms of using the standard food basket variant for establishing the poverty line. The most common complaint is that the basic methodology of estimating the cost of food and then applying a multiplier of three is seen as arbitrary. Many advocate instead using a basic needs consumption basket for determining the poverty line. The problem with the consumption basket approach, however, is determining which items are deemed as necessities and which items are luxuries. For example, is a telephone considered a basic need that should be included in the consumption basket, or is it a luxury that should be excluded?

Others suggest that fixing a poverty line (adjusting for inflation, of course) based on consumption patterns from the 1950s and 1960s fails to account for improvements in society's general welfare levels. As society grows wealthier and the general population gains access to new and improved goods and services, it is argued that the poverty line should rise as well to allow those who cannot afford these new products to be counted as poor. For example, in the 1950s, few households, regardless of income status, had automatic dishwashers, washing machines, or television sets. Therefore there would have been no reason to count those persons without the means to acquire these items as poor.

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