Face Validity of the Supplemental Poverty Measure: Viewing Rural and Urban Poverty through the Lens of Redistributive Institutions

Background and Purpose

Most acknowledge that the Supplemental Poverty Measure (SPM) has improved the validity of poverty measurement, but SPM implications for rural poverty are subject to debate. Until recently, rural populations have been described as experiencing higher poverty on the basis of the Official Poverty Measure, as well as barriers to safety net participation (Jensen & Ely, 2017; Lichter & Schafft, 2016; Sherman, 2014). However, Nolan et al. (2017) showed that, relative to urban areas, rural populations have experienced lower poverty and higher safety net participation since the early 1990s (Nolan et al., 2017; Rothwell & Thiede, 2018), thus “overturn[ing] conventional wisdom that rural poverty has been greater than urban poverty over the past fifty years” (Warlick, 2017, p. 389). While these differences are partly attributable to the SPM’s use of geographic adjustments (Nolan et al., 2017), we suspect that other trends contribute to what we call the SPM’s face validity problem.

We turn to Gornick & Smeeding’s (2018) framework of three “institutional arenas” of redistribution (p. 21.1): predistribution, private redistribution, and public redistribution.  We ask: 1) What are the differences in these arenas across the Metro/Nonmetro space? 2) How do the three arenas relate to SPM poverty? 3) What are the implications for our understanding of rural and urban poverty?

Methods

We pooled Current Population Survey (CPS) data across 2016 to 2018 (Flood et al., 2018), and merged them with state-level policy data (University of Kentucky, 2018; National Council of State Legislature, 2019). We used descriptive statistics to depict the rural experience of the redistributive categories overall, and across metro space. We calculated static counterfactual SPM poverty rates with and without private income transfers for four market-income-to-SPM poverty categories following Moffitt (2015).

Results

We find that Metro households were more likely to live in a state with predistributive policy conditions likely to favor redistribution: e.g., 60 % of Nonmetro households lived in states with a right-to-work law (discouraging unionization), vs. 47% in Metro. Private transfers were associated with a reduction of over 1 pp in the SPM poverty rate (p<0.001). No difference is observed between Metro and Nonmetro in the proportion of households who rely on private redistribution, yet the reduction associated with private transfers was higher for Metro households in deep poverty than Nonmetro households (p<0.001). Like others, we find that a higher proportion of Nonmetro households access public income sources (61%, vs. 52% of Metro households).

Conclusions and Implications

We show preliminary evidence that the major redistributive levers function differently across the rural-urban continuum, and likely contribute to the SPM’s face validity problem. State-level predistributive policy variables suggest that Nonmetro households operate under considerably different policy conditions than Metro households. Rural Americans in deep poverty may be at a relative disadvantage, given lower access to private transfers. In the full paper, we incorporate adjustments for program participation under-reporting (Parolin 2019) and account for more diverse measures. We also explore how this framework can be applied historically prior to welfare reform in 1996.