Measuring Socioeconomic Status

5. How SES is Measured

Univariate measures

Area/contextual level measures

During the past 5-10 years researchers have been increasingly using measures of SES tied to one’s residential neighborhood, which is often defined as a census tract or block-group (a consensus definition of “neighborhood” is as elusive as “SES”).  The idea is that social structure increasingly segregates persons by SES such that the poor increasingly live with the poor and the rich live with the rich. Consequently, the poor struggle for employment and educational opportunities while the rich leverage their material wealth and social relationships to access even greater shares of desired goods and services, such as elite college educations and occupations. It follows that, especially in highly segregated America, knowing where one resides is a superb indicator of their SES due to high level of “clustering.”

Previous work examined whether so-called area-level  measures were a good proxies for individual-level measures of SES. In an important paper, Geronimus and colleagues (Geronimus, Bound and Neidert 1996) showed that area level measures were not highly correlated with person-level SES and cautioned against their use as such. I have come to a different conclusion from the same evidence. The fact that area-level measures do not correlate perfectly with individual level measures of SES does not mean area level measures are wrong or even inferior. To the contrary, I have come to believe that a person’s “choice” of residence is the best single source of information about their status or place in the social structure – again, especially in segregated America. It is individual level measures of education and income that seem to not capture the full force of the latent variable SES. Though clearly imperfect, and with respect to US Census data, I think a block-group’s median value of owner-occupied housing is perhaps the best indicator of a person’s SES. Because of the “Great Sort” by economic means and political ideology (Bishop 2008), the median value of housing is high in desired areas and low in undesired areas. The simple supply and demand of real estate markets thus yields a strong indicator of SES.