What Happens to Poverty and Other State Economic Stats When One Finally Takes Into Account Different State Cost of Living Levels

This is really interesting, and I suppose not surprisingly, quite under-reported.  It appears the blue state model is even worse than we thought for combating poverty.  Not only does it suppress economic growth, but it also tends to raise prices of housing and other necesities

The familiar official [poverty] measure is more than 50 years old, and is showing its age. It has two huge shortcomings: it considers the cost of living to be the same in the 48 contiguous states (a patently ridiculous proposition when considering that the average rent in San Francisco in the first quarter of 2015 was $3,458 vs. $867 in Houston), and it doesn’t account for in-kind benefits, such as Section Eight housing subsidies and Electronic Benefit Transfer cards (food stamps).

Thus, the federal government’s main poverty gauge undercounts material poverty levels in high-cost states such as California, New York, and Hawaii, while over-counting true poverty in much of the low-cost Midwest and South.

Responding to concerns from Congress, advocates for the poor, and academics, some 20 years ago the U.S. Census Bureau began developing an alternative measure of poverty to address weaknesses in the official measure. The Census Bureau’s new, more comprehensive Supplemental Poverty Measure (SPM) is the result....

The authors use this data to compare Texas and California

Official Poverty Measure Rate, 2011-2013 Supplemental Poverty Measure (SPM) Rate, 2011-2013
California 16.0% 23.4%
Texas 17.2% 15.9%
National Average 14.9% 15.9%

The share of minorities in California and Texas is about 50 percent higher than in the nation as a whole, triple that of Wisconsin or Minnesota, more than quadruple that of Iowa, and about six-and-a-half times that of New Hampshire. Thus, it is an illuminating measure the wellbeing of America’s four largest racial or ethnic groups in the two most-populous states that one-fifth of Americans call home. The table below shows the average SPM for four years, 2010 to 2013, for these four groups.

White, non-Hispanic SPM Rate, 2010-13 Black, non-Hispanic SPM Rate, 2010-13 Hispanic SPM Rate, 2010-13 Asian SPM Rate,2010-13
California 14.8% 30.1% 33.7% 17.9%
Texas 9.7% 19.9% 22.7% 14.1%
National Average 10.8% 24.7% 27.7% 17.1%

I guess its time for a disparate impact suit against California!

In a related bit of data, here is the real value of $100 in each state (higher is better) which is sort of the inverse of cost of living.  States with higher costs of living will have lower numbers

$100 Map

Leading to this interesting outcome:

$100 Chart


  • trentmcbride

    I'm just not sure this is an appropriate adjustment. When you move from California to Nebraska and make the same income, yes your dollars might buy more things, but it can't buy...living in California, which all things being equal most people would prefer. So I think it is more complicated that TF is making it, but I don't know the right way to do it. Maybe, like we do it now, which is not to adjust at all.

  • mckyj57

    "I'm just not sure this is an appropriate adjustment. When you move from
    California to Nebraska and make the same income, yes your dollars might
    buy more things, but it can't buy...living in California, which all
    things being equal most people would prefer."

    Are you from California? I was born there, have lived there, and didn't choose to stay there. I turned down two lucrative jobs because they would have required me to live in California. You may think that living in Nebraska is a bummer, and is worth nothing, but I assure you people choose to leave California all the time.

    Living in the crowds of California, with all of the nice but superficial people, just isn't my cup of tea. I have many friends who left as well, people who left because they didn't like the crowds or the lifestyle. In any case, it has nothing to do with poverty. There are more poor people in California simply because it has become a haven for illegals, who with their offspring provide a large portion of the poor. California's poverty is largely imported.

  • trentmcbride

    No, I'm not from CA, and your fortunate (for you) preference notwithstanding, I'm simply making the point that MOST people would choose California; they have, by definition, as CA has more pop density than NE. To put it at it's most base, show me a place with a higher cost of living, and I'll show you a place that more people want to be. And if that is the case, "correcting" for this cost of living without accounting for the various amenities that come with it confounds the poverty measurement, just in a different direction.

  • Matthew Slyfield

    According you your link on the supplemental measure, the official measure doesn't even consider rent.

    Here is what it says is the base for determining the poverty level in the official measure: "Three times the cost of a minimum food diet in 1963"

    Which has then been adjusted based on the full CPI.

    The supplemental measure uses: "The mean of the 30th to 36th percentile of expenditures on food, clothing, shelter, and utilities (FCSU) of consumer units with exactly two children multiplied by 1.2 "

    and is adjusted based on: "Five-year moving average of expenditures on FCSU"

  • Matthew Slyfield

    Perhaps true, but the official measure bases the poverty level only on the cost of a minimal diet where as the supplemental measure considers the cost of food, clothing, shelter and utilities.

  • Not Sure

    "which all things being equal most people would prefer"

    Yes, and if people had four arms, they could play two guitars at the same time. Of course, neither of those things has anything to do with the real world, where all things are not equal.

  • Incunabulum

    The issue I have with that map - and its a minor one - is that many of those states (like Arizona :)) have relatively small but well-off urban areas surrounded by mostly rural living. Less than half the population lives in Phoenix and Tucson while many/most of the east Coast blue states are heavily urbanized.

    There's a huge difference in how far a hundred dollars will go in Phoenix compared to Yuma, for example. I imagine the same could be said for Alberquerque and, uh, not Alb.

  • Incunabulum

    Except, today, it can buy *everything* else except living in CA. And that leaves CA with . . . a nice climate.

    I live in Yuma, AZ - if I had lived here in the 80's (or even the 90's before online shopping took off) I probably would have killed myself already - after living in San Diego for several years.

    Outside of nice weather during the summer and access to the beach (which I didn't use much anyway - and if I want, there's the Colorado River), there's not really anything San Diego has to offer that I can't get here.

    *Plus* - I can go shooting or ride an OHV down the street in the open desert. Taxes are low, regulatory burden for starting a business is low.

    Except for the omnipresent *dust* and 120 degree summers, its great.

  • sean2829

    You also have to consider your stage of life. California is a great place for singles and young adults. Lots to do. People raising families however, prioritize good schools and affordable housing which rarely occur together in the Golden State but are available elsewhere. Then you have the boom bust cycles the state goes through and pretty soon having marvelous weather looks less and less like a reason to stay. I think the demographics bear this out with growth in empty nesters and retirees (who don't care about the boom bust cycles or the schools and have time to enjoy the weather) and loss of families with school age kids. Oh well, at least with all the poor immigrants at least it's cheap to get the yard work done.

  • Daublin

    You're reasoning is right on its own, but I think the adjustment is fine for talking about poverty.

    People talking about relative poverty are interested in how many people are going to have their entire income wiped out by basic life necessities such as food and housing. If you're trying to understand the poverty rate in California, then it's completely crazy to use a national average rate for food and rent. These are much higher in California, and it gets even sillier if you focus just on San Francisco by itself.

  • Matthew Slyfield

    "then it's completely crazy to use a national average rate for food and rent."

    Actually, the official measure just uses a national average for food. Other necessary living expenses such as shelter (rent), clothing, and utilities are not even considered.

  • Jim

    Hi - this is an interesting adjustment and promotes good discussion on poverty. I would like to see data, however, on relative levels of transfer payments and aid to low income households and how that impacts the regional purchasing power. While a dollar might go further in Nebraska, I do not think there is nearly as many resources or aid available as in California.

  • MJ

    "Most people" are also not in poverty. If you've been to Los Angeles, you know that most of the poor in LA County live along a corridor between LA and Long Beach -- several miles inland --, or in places like East LA or the San Fernando Valley. These are not "amenity-rich" types of areas. They certainly aren't Malibu or Brentwood or Venice Beach, or even Huntington Beach.

    Quality of life might matter for non-poor residents who actually have the resources to choose among many competing locations for housing, but the poor have few options. As mckyj57 mentioned, a large portion of the poor in Los Angeles are comprised of first or second-generation immigrants, many from south of the border, and who come from locations with climates just as hospitable as LA. The other large urban area in California is the SF Bay Area. Tell me where the poor in SF live, apart from on the street.