Reevaluating Geographic Adjustments in the Supplemental Poverty Measure

• In Event: Why'd We Have to Make Things So Complicated? The Case for a Simpler, More Transparent SPM

Abstract

Over the last decade, the Supplemental Poverty Measure (SPM) has become a central tool for assessing how policies and social safety net programs reduce hardship. Relative to the Official Poverty Measure, the SPM incorporates additional dimensions of need and resources, including geographic variation in housing costs. A key feature of the measure is its geographic adjustment, which raises or lowers poverty thresholds across areas based on differences in local rents. This adjustment is used to capture variation in local costs of living across the country, but it implicitly assumes that differences in housing costs reflect differences in economic need. However, in some areas, especially those with weaker local economic conditions, low housing costs may reflect limited economic opportunity, weak labor markets, or population decline, all of which may signal economic distress rather than greater affordability. When this occurs, the SPM may understate hardship by assigning these areas lower poverty thresholds. This concern is especially relevant for nonmetropolitan areas, where low housing costs may coexist with persistent economic disadvantage.

This paper reevaluates the SPM’s geographic adjustment and considers a simplified alternative that prevents thresholds from falling below the national baseline. Rather than allowing low local rents to reduce poverty thresholds below that baseline, the alternative imposes a floor of one on the geographic adjustment. Using this approach, we show that measured poverty rises in several low-cost areas, with especially large increases in nonmetropolitan parts of the South and Midwest. This pattern suggests that the current adjustment may suppress measured poverty most in the places where low housing costs are least likely to signal economic security.

More broadly, the paper examines how a seemingly technical component of the SPM can shape conclusions about where hardship is concentrated. The findings suggest that the current adjustment may understate hardship in low-cost areas and warrant further consideration of alternative approaches to geographically adjusted poverty thresholds.

Author

• Christopher Wimer, Columbia University
  Presenting Author