Poor State, Rich State: Understanding the Variability of Poverty Rates across U.S. States

Abstract

According to the Supplemental Poverty Measure, state-level poverty rates range from a low of less than 10 percent in Iowa to a high of more than 20 percent in California. We seek to account for these differences using a theoretical framework proposed by Brady, Finnigan, and Hubgen (2017), which emphasizes the prevalence of poverty risk factors as well as poverty penalties associated with each risk factor. We estimate state-specific penalties and prevalences associated with single motherhood, low education, young households, and joblessness. We also consider state variation in the poverty risks associated with living in a black household and a Hispanic immigrant household. Brady et al. (2017) find that country-level differences in poverty rates are more closely tied to penalties than prevalences. Using data from the Current Population Survey, we find that the opposite is true for state-level differences in poverty rates. Although we find that state poverty differences are closely tied to the prevalence of high-risk populations, our results do not suggest that state-level antipoverty policy should be solely focused on changing 'risky' behavior. Based on our findings, we conclude that state policies should take into account cost-of-living penalties as well as the state-specific relationship between poverty, prevalences, and penalties.