Evaluating the effects of geographic adjustments on poverty measures using self-reported financial well-being

Abstract

A central aspect of poverty measurement is identifying the people and places experiencing financial hardships. This paper explores this relationship using the Consumer Financial Protection Bureau's Financial Well-Being Scale, which reflects individuals’ self-assessments of 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 with low financial well-being. In contrast, the supplemental poverty rate is negatively correlated with the financial hardship using the CFPB measure. This reflects the supplemental poverty measure's geographic adjustment shifting poverty towards areas with lower rates of financial hardship.