Regional Cost of Living Adjustments for Poverty Rates in Virginia

Common sense tells us that the cost of goods and services are different in different parts of the country.  For instance, the economic reality and expenditures of families living in Northern Virginia are not the same as those living in Lynchburg or those living in Wise County.  The cost of housing and rent is particularly variable, but other basics such as food or transportation are surprisingly different across Virginia’s regions as well.

Despite common sense, official poverty rates do not account for this variability.  The income threshold for poverty for a family living in New York City is the same for a similar family living in Fargo, North Dakota.  More disturbingly, billions of dollars of government benefits and services are distributed to localities and families based on the official poverty measure.  Other public and private organizations also use the official statistics to target their operations.

With so much at stake, a new poverty measure that addresses regional differences in the cost of living is needed.  The Census Bureau has recently developed the Supplemental Poverty Measure (or SPM) to do this at the national level, but states and localities are at a disadvantage.  Only 3-year SPM averages are available for states and none are available at the sub-state level.

Virginia, however, now has a new alternative poverty measure that accounts for regional differences in the cost of living and provides sub-state estimates of poverty rates.  As elaborated in my previous post, the new “Virginia Poverty Measure” (VPM) provides some interesting insights about economic distress in the commonwealth, but perhaps the most striking results are the result of its regional adjustments.

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Why Virginia Needs a New Poverty Measure

How many of us are poor?

Answering that question is not as easy as one may think.  Yes, we do have an official poverty statistic that is produced by the U.S. Census Bureau, but nobody likes it.  Many on the Left think it is too low, failing to capture the full array of expenses that families face.  Folks on the Right think it is too high because it does not account for the effects of many anti-poverty programs and tax credits on family budgets.

Even the Census Bureau is not entirely satisfied with current poverty statistics.  As they continue to produce the official measure, they have recently been releasing alternative statistics through the “Supplemental Poverty Measure” (SPM) program.  These new numbers reflect a more nuanced look into poverty, and are widely believed by researchers and the media to better capture the actual financial circumstances of American families.

But the SPM has its limitations.  Primary among them is that the new measure is designed for the national level.  State estimates are only available as three-year averages, and local-level estimates are not available at all.

This is unfortunate for a state like Virginia, which has wide regional inequalities in terms of economics, education, and even basic demographics.  Because of this, official poverty statistics don’t make sense in Virginia.  A one-size-fits-all measure that defines poverty in Northern Virginia the same as it does in coal country does not work and belies our commonsense understanding of the actual resources and costs families face across regions.  A better method is needed.

Today, the Cooper Center is releasing its work on a new “Virginia Poverty Measure” (VPM) that will provide SPM-like estimates for Virginia and its local regions.

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