Poverty Rates and the Social Safety Net
Statement in response to the U.S. Census Bureau report on poverty in 2016
On September 12, 2017 the Census Bureau released the official poverty rate for 2016 (12.7%), showing that 40.6 million Americans live below the federal poverty line (FPL), currently set at $24,563 for a family of four. This poverty measure is an estimate of the annual income required to meet basic needs.
There is an important relationship between the health of the U.S. labor market and the poverty rate. While representing a decline for the second year in a row, the poverty rate should be viewed in light of currently low levels of unemployment (4.4%). The poverty rate is connected to the availability of jobs, but also reflects those who cannot or do not work, as well as persistently low earnings among the working poor.
Certain groups are also disproportionately poor, including women and children and certain ethnic and minority groups. While poverty rates among minority groups remain substantially higher than the average, the 2016 poverty statistics show sizeable and statistically significant declines of approximately 2 percentage points in poverty rates for Blacks and for Hispanics.
There is a range of factors not accounted for in the official poverty rate that help provide a more accurate picture of poverty among Americans, including the effects of key parts of the social safety net. Unlike the official poverty rate, the Census Bureau’s supplemental poverty measure (SPM), for which 2016 figures were also released today (13.9%), treats in-kind and after-tax transfers as income. The social safety net is made up of refundable tax credits such as the Earned Income Tax Credit (EITC) and programs including Temporary Assistance for Needy Families (TANF), the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) and the Supplemental Nutrition Assistance Program (SNAP) that are a key to reducing poverty for children and low-income families.
Safety net programs provide services and benefits that help keep people out of poverty. SNAP provides vouchers for food to those with low incomes and, according to the SPM, reduced poverty by 1.1 percentage points in 2016. The impact of refundable tax credits (including the EITC, a tax credit program for the working poor) on the SPM, was a 2.6 percentage point reduction in poverty.
In addition to reducing poverty, our affiliates’ research shows that public health and nutrition interventions, including SNAP, have other benefits. Some benefits for children have long lasting effects into adulthood, which is important because our research at the University of California, Davis Center for Poverty Research shows that poverty tends to persist over generations.
For example, children exposed to food stamps during their first 5 years have a reduced risk of certain chronic diseases in adulthood. Also, both WIC and the EITC have been found to be associated with an increase in birth weight.
Federal health insurance programs and the Affordable Care Act also play a role in supporting those at risk of poverty, especially children. While Medicaid is not included in either of the federal poverty measures, it is an important source of health insurance for low income children and individuals and may even have multi-generational effects. In 2016 government health programs including Medicaid and CHIP reached 32.4 million children. Government health insurance provided coverage for 63.6% of those below the FPL. A contraction in the Medicaid program would likely have far-reaching negative consequences for the well-being of many of the poor.
Though not reflected in the official poverty measure, the effects of safety net programs are important in continuing to address poverty in the nation, particularly through their impact on children and those disproportionately at risk of poverty. Continued commitment to safety net programs is crucial to help sustain reductions in the poverty rate. They serve as an investment in the future productivity and employment of future generations.
Marianne Page is a professor of economics at UC Davis and director of the Center for Poverty Research.
Ann Huff Stevens is a professor of economics at UC Davis and deputy director of the Center for Poverty Research.