The Center's work on 'Poverty and Income' Issues

The Center analyzes major economic developments affecting low- and moderate-income Americans, including trends in poverty, income inequality, and the working poor. In addition, we analyze the asset rules in various public benefit programs that can discourage low-income people from building modest savings and highlight potential reforms.


Improving the Odds for America’s Children

April 21, 2014 at 12:18 pm

The safety net has been more effective than critics suggest, the Center’s Robert Greenstein, Sharon Parrott, and I explain in a chapter for Improving the Odds for America’s Children, which Harvard Education Press has just published.

For our chapter, we reviewed the last 40 years of anti-poverty policies for children and offered ideas for future decades.

Here’s some of what we found, and some of what we proposed:

Household incomes have risen since 1973 for the poorest fifth of children if you include the value of non-cash benefits, as most experts favor (the official poverty figures omit them).  If you eliminated the safety net today, another 9 million children would fall into poverty.

Also, studies show that income from safety-net programs like the Earned Income Tax Credit (ETIC) and SNAP (formerly food stamps) has a powerful effect on children’s long-term success, in school and beyond.

Yet poverty and hardship continue to stunt many children’s futures.  To help families obtain incomes that are adequate to raise successful children, we recommend steps in three core areas:

  • Jobs:  Creating a funding stream similar to the successful TANF Emergency Fund — through which states placed more than 260,000 low-income adults and youth in paid jobs during the Great Recession — but one that was permanent and expanded in an economic downturn.
  • Income support:  For example, expanding housing vouchers (and making it easier for people with vouchers to move to neighborhoods with more jobs and better schools), while preserving recent improvements in the Child Tax Credit and EITC.
  • Support for work and higher earnings:  For example, raising the minimum wage and providing more funding for job training and child care assistance.

Other chapters provide analysis and policy ideas from noted experts such as Greg Duncan and Richard Murnane (on inequality), Sara Rosenbaum (health care), Deborah Jewell-Sherman (education), Jane Waldfogel and Michael Wald (child protection and family support), Joan Lombardi (child care), and others.

Ryan Report Largely Ignores Anti-Poverty Programs’ Long-Term Successes

March 28, 2014 at 12:46 pm

House Budget Committee Chair Paul Ryan’s recent poverty report largely ignores evidence that anti-poverty programs can open doors of opportunity and yield lasting benefits for participants and society as a whole — even when this evidence comes from the same researchers whom the report cites for other purposes.

Here are a few examples:

SNAP (formerly food stamps).  Disadvantaged children born in counties with access to food stamps grew up to be healthier than children in counties without it, according to a major study.  They also were 18 percentage points more likely to finish high school, and girls from these counties rated higher on an index of adult “self-sufficiency” outcomes such as education, income, and staying off welfare.  The Ryan report ignores this evidence, while citing a different study by two of the same researchers on the program’s short-term work disincentives in its early years.

Working family tax credits.  Additional income from the Earned Income Tax Credit (EITC) and Child Tax Credit leads to significant increases in students’ test scores, a study found.  The authors also noted that such test-score gains tend to lead to sizeable improvements in students’ earnings as adults.  While the Ryan poverty report praises the EITC’s work incentives — and cites another study by one of the same researchers on the link between marriage and economic mobility — it ignores this and other research on the EITC’s long-term gains for children.

Head Start.  The Ryan report says that Head Start is “failing to prepare children for school,” citing the lack of measurable differences between Head Start students and a control group during elementary school.  But this conclusion ignores evidence of the program’s long-term benefits.

One study found that former Head Start attendees score higher than their siblings on a “composite index” of long-term outcomes in areas such as education, employment, and health status.  Another  study compared low-income counties that offered varying amounts of Head Start in 1965 (because some counties received more federal help launching the program) and found higher high school graduation and college enrollment and better health outcomes in the Head Start counties decades later for people of the right age to have participated in the program.

Importantly, such long-term gains don’t depend on sustained test-score gains, according to several studies of Head Start and similar interventions.  For example, a review of three leading preschool pilot programs notes that although participants’ test-score gains diminished over time, these participants were much likelier to finish high school and enter college than other students.  The Ryan report cites this study but only to show that the programs benefited girls more than boys.

To be sure, some Head Start programs need improving.  But these studies suggest that recent efforts by the Obama Administration and Congress to strengthen quality and accountability are a better way to go than simply abandoning the Head Start model.

The Ryan report grimly concludes that federal programs are “failing to address” poverty.  Poverty certainly remains too high.  But the report seems determined not to recognize the long-term successes of existing programs even when the evidence is in plain sight.

SSI Should Be Strengthened, Not Cut

March 27, 2014 at 11:22 am

House Budget Committee Chairman Paul Ryan’s misleading review of the safety net attacks Supplemental Security Income (SSI) — an important program that provides cash income to seniors, the blind, and people with severe and long-lasting disabilities who have little income and few assets.  This vital program aids some of the poorest and most vulnerable Americans and, rather than attack it, policymakers should strengthen it.

In December 2013, 8.4 million people collected SSI:  2.1 million seniors age 65 or older, 4.9 million disabled adults age 18-64, and 1.3 million disabled children under age 18.  Until the deep recession caused a modest uptick, SSI participation had generally been flat or falling as a share of the population since at least the mid-1990s (see graph).

SSI benefits alone don’t lift recipients living independently out of poverty; the maximum benefits for individuals ($721 a month) and couples ($1,082, if both spouses qualify) are about three-fourths of the poverty level.  But SSI greatly reduces the number of people in extreme poverty and lessens the burden on other family members.  A Social Security Administration study found that, in 2010, the poverty rate (based on family income) of recipients would be 65 percent without counting SSI payments; the actual rate, including SSI, was 43 percent.  Most families with an SSI recipient remained below 150 percent of the poverty threshold.  SSI benefits fall when recipients have other income (or live in a Medicaid facility or with relatives who provide support), so the average payment is just $529 a month.

Because SSI participants are elderly or have severe disabilities, it’s no surprise that relatively few of them work, even though program rules allow and encourage them to do so.  Nevertheless, nearly one-third of SSI recipients age 18-64, and three-fifths of elderly beneficiaries 65 or older, have worked enough — at least one-fourth of their adult lives — to qualify for Social Security benefits.  And two-thirds of children with disabilities who receive SSI and live in two-parent families — and one-third of those in single-parent families — have a working parent.

Severe disability in childhood — exacerbated by poverty — hampers adult outcomes (see here, here, and here), and about two-thirds of child beneficiaries reaching age 18 continue to qualify for SSI based on disability.  It’s not appropriate, as Ryan’s report implicitly does, to compare statistics like high school graduation rates and job-holding for young people who received SSI as children with statistics for those who didn’t.  The two groups differ in fundamental ways.  Similarly, there’s no basis for calling the adult struggles of those who received SSI as children an “effect” of their benefit receipt, as Ryan does.  Their underlying health problems coupled with their low incomes play an important role in their academic achievement and adult employment prospects, and at least one study suggests that childhood SSI benefits improve adult outcomes.

Special SSI program rules — like the Student Earned Income Exclusion — are designed to encourage a successful transition to adulthood for child beneficiaries, and the agency is rigorously testing even more targeted efforts.  Early results are mixed, but if the pilots are successful, such interventions would require more funding, not less, for this special group of young adults.

Leading Senator Adds to Momentum for Helping Childless Workers

March 26, 2014 at 5:23 pm

Senate Budget Committee Chairman Patty Murray (D-WA) proposed today to build on the Earned Income Tax Credit’s (EITC) pro-work success story by significantly boosting the credit for low-wage workers not raising minor children — the only group that the federal tax code taxes into (or deeper into) poverty.

Chairman Murray also made clear today that Congress should lock in permanently the EITC and Child Tax Credit (CTC) improvements of the 2009 Recovery Act that policymakers later extended through 2017.  These include critical marriage penalty relief in the EITC and a CTC expansion worth roughly $1,700 to a single mother of two working full time at the minimum wage.

The EITC and CTC lift more than 10 million Americans out of poverty, more than any other program except Social Security.  The current EITC, however, largely ignores childless adults (that is, those who have no minor children or are non-custodial parents).  Childless adults under age 25 are completely excluded, the maximum credit is small, and the credit phases out at a low income level.  A childless adult working full time at the minimum wage gets next to nothing from the EITC.

Momentum is building to fix this.  Prominent conservatives have highlighted the need to do more to subsidize these workers’ wages.  President Obama made a more robust EITC for this group a central part of his budget.  Senators Sherrod Brown (D-OH) and Richard Durbin (D-IL) have introduced proposals to strengthen the EITC for childless workers, as has Representative Richard Neal (D-MA).

Today’s Murray proposal is similarly robust.  It would expand the maximum credit for childless workers from around $500 to roughly $1,400 and double (from 7.65 percent to 15.3 percent) the rate at which the credit phases in with rising earnings.  These changes would keep many low-income workers from being taxed into (or deeper into) poverty and ensure that a tangible EITC flows to low-wage adults who work a substantial number of hours.

A more robust EITC for childless workers would create a stronger work incentive.  The EITC for families with children has increased employment rates significantly, especially among single parents.

The Murray proposal would also allow childless adults aged 21 to 25 to qualify for the EITC, helping them work and gain a toehold in the economy.

Expanding the childless workers’ EITC would help a diverse group of low-wage workers, from store clerks to child care workers to truck drivers to home and office cleaners.  Just under half are women, and while many are young workers just starting out, a significant share are over 45.

Expanding the credit also could benefit a significant number of noncustodial parents who have financial obligations to their children and often play an important role in their children’s lives.

The benefits of a stronger EITC would go beyond raising their incomes and helping offset their federal taxes.  Leading experts from across the political spectrum believe that an expanded credit would help address some of the challenges that less-educated young people face, such as low and falling labor-force participation rates, low marriage rates, and high incarceration rates.

The Murray proposal also includes a new tax deduction for second earners in a household looking to re-enter the workforce but facing high childcare and other costs.  Chairman Murray designed the deduction in such a way to help many married couples keep more of their EITC.

Why the EITC Is No Substitute for the Safety Net

March 26, 2014 at 12:45 pm

The Earned Income Tax Credit is a critically important and highly effective part of the safety net, but it can’t — and wasn’t meant to — stand alone as our answer to poverty, according to our new commentary.  Here’s the opening:

House Budget Committee Chair Paul Ryan’s recent report on safety net programs rightly praised the Earned Income Tax Credit (EITC) for reducing poverty and promoting work.  But, Ryan’s report criticizes much of the rest of the safety net.  And, over the past several years, Chairman Ryan’s budget plans have targeted low-income programs such as SNAP (formerly food stamps) and Medicaid for extremely deep cuts.  While it’s heartening to hear Chairman Ryan trumpet the EITC’s success, the EITC alone can’t do what’s needed to ameliorate poverty and hardship.

The things that the EITC — and its sibling the Child Tax Credit, which helps offset the cost of raising children — can’t do without other safety net programs include:

  • help people who are out of work or can’t work;
  • help families get health care;
  • help families on a monthly basis;
  • serve as an effective automatic stabilizer for the economy in recessions; and
  • keep large numbers of people out of “deep poverty,” or above half the poverty line.

As the graph shows, while the EITC and Child Tax Credit keep several million people out of deep poverty, other programs targeted on low-income individuals — such as SNAP (formerly food stamps) and Supplemental Security Income — do much more.  In fact, roughly 70 to 80 percent of the people that the safety net as a whole lifted out of deep poverty in 2010 would have remained in deep poverty if the EITC and CTC were the only forms of income-tested assistance for very poor families.