Noncash Benefits:

Methodological Review of Experimental Valuation Methods Indicates Many Problems Remain

PEMD-87-23: Published: Sep 30, 1987. Publicly Released: Nov 2, 1987.

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In response to a congressional request, GAO: (1) developed a general approach for assessing future proposed methods to change poverty indicators; and (2) applied its approach to one method the Census Bureau used to place cash value on noncash benefits.

The GAO assessment approach: (1) identified specific concerns within each method; (2) examined these concerns using indicators, such as changes in the poverty rate; and (3) combined the results of these steps to form a final judgement. GAO applied this approach to the Bureau's market-value method and found that: (1) the Bureau's conceptual choices as to which benefits to include in the definition of income could affect the poverty rate by as much as 4.7 percent; (2) the Bureau's methodological choices in carrying out poverty calculations influenced the method's validity and the accuracy of its benefit values; and (3) overestimation of data quality problems caused flaws that resulted in fluctuations in the poverty rate.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Action taken was not completely responsive because the research report designed to address those problems has not been released. The full report is likely to be issued in December 1990.

    Recommendation: The Secretary of Commerce should direct the Director of the Census Bureau to conduct a more comprehensive examination of the problems with the Bureau's valuation methods, especially those involving medical benefits, giving full consideration to the assessment approach GAO developed. The Bureau should fully disclose in its publications the magnitude of the effects of these problems.

    Agency Affected: Department of Commerce


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