Finance and Economics Discussion Series (FEDS)
May 2024
Evaluating the Effects of Geographic Adjustments on Poverty Measures Using Self-Reported Financial Well-Being Scores
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 and 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.
Keywords: Cost of living adjustments, Poverty, Well-being
DOI: https://doi.org/10.17016/FEDS.2024.030
PDF: Full Paper
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