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Measuring Poverty: A New Approach
spond to the CPI: BLS produces price indexes for a limited number of metropolitan areas, but not for rural areas. Moreover, the BLS indexes are designed to allow comparison of differences in price inflation across areas; they do not permit comparison of price levels across areas.
Yet there has been a substantial amount of empirical research on the issue, and we believe that it is important to make at least a partial adjustment for geographic cost-of-living variations. At this stage of knowledge, we recommend that the adjustment be made for the housing component of the poverty thresholds. Research indicates that housing (including utilities) is the item for which prices vary most across the country, and considerable effort has been devoted to estimating interarea housing cost indexes. We believe that data available from the decennial census will support an adequate adjustment for housing cost differences, which we recommend be implemented by size of metropolitan area within nine regions of the country. We recommend research on ways to update the housing cost index values for intercensal years. And we recommend further research, not only on geographic variations in housing prices, but also on cost-of-living differences more generally. Such research should be linked to the priority of improving the U.S. database on household consumption (see Chapter 5).
RECOMMENDATION3.2. The poverty thresholds should be adjusted for differences in the cost of housing across geographic areas of the country. Available data from the decennial census permit the development of a reasonable cost-of-housing index for nine regions and, within each region, for several population size categories of metropolitan areas. The index should be applied to the housing portion of the poverty thresholds.
RECOMMENDATION3.3. Appropriate agencies should conduct research to determine methods that could be used to update the geographic housing cost component of the poverty thresholds between the decennial censuses.
RECOMMENDATION3.4. Appropriate agencies should conduct research to improve the estimation of geographic cost-of living differences in housing as well as other components of the poverty budget. Agencies should consider improvements to data series, such as the BLS area price indexes, that have the potential to support improved estimates of cost-of-living differences.
Feasibility and Desirability
The feasibility and desirability of adjusting the poverty thresholds for geographic cost-of-living differences has been the topic of repeated discussion and