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Evaluating the Effects of Geographic Adjustments on Poverty Measures Using Self-Reported Financial Well-Being Scores

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Abstract

A central aspect of poverty measurement is how well the measure can identify the people and places that are experiencing financial hardships. This paper explores the relationship between poverty financial hardship by using the CFPB's financial well-being scale, which reflects individuals' self-assessments of their financial challenges. Using this measure, for every 1 percentage point increase in a state's official poverty rate for working-age adults, there is a 0.59 percentage point increase in the share of working-age adults with very low financial well-being. In contrast, the state's supplemental poverty rate is negatively correlated with the rate of financial hardship using the CFPB measure. This finding is due to the supplemental poverty measure's geographic adjustment shifting poverty towards areas that have lower rates of self-reported financial hardship.

Suggested Citation

  • Jeff Larrimore, 2024. "Evaluating the Effects of Geographic Adjustments on Poverty Measures Using Self-Reported Financial Well-Being Scores," Finance and Economics Discussion Series 2024-030, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2024-30
    DOI: 10.17016/FEDS.2024.030
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    1. Bettina Aten & Eric Figueroa & Troy Martin & Trudi Renwick (Census), 2014. "Supplemental Poverty Measure: A Comparison of Geographic Adjustments with Regional Price Parities vs. Median Rents from the American Community Survey," BEA Working Papers 0111, Bureau of Economic Analysis.
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    More about this item

    Keywords

    Cost of living adjustments; Poverty; Well-being;
    All these keywords.

    JEL classification:

    • I30 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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