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.

Families With Children Gained in 2013, But Poverty Still Higher and Incomes Lower Than Pre-Recession

September 16, 2014 at 3:56 pm

The child poverty rate fell from 21.8 percent in 2012 to 19.9 percent in 2013 in the first statistically significant one-year drop in child poverty since 2000, according to new data released by the Census Bureau today.  While the poverty rate among children remained well above the 2000 level, when it was 16.2 percent, the improvement in 2013 is welcome news that the economic recovery has finally begun to improve the circumstances of the lowest-income children.

The drop in child poverty appears driven in large measure by an improving employment picture among parents.  Between 2012 and 2013, the share of families with someone working and the share with someone working full-time, year-round both rose.    For example, the share of families with children with a full-time, year-round worker rose from 76.3 percent in 2012 to 77.1 percent in 2013, meaning that an additional 220,000 families with children are supported by at least one full-time, year-round worker.

This improving employment picture for parents also translated into an increase in median income among families with children.  The median income for these families rose from $60,856 in 2012 to $62,161 in 2013 (all adjusted for inflation).  This is a welcome improvement, but median income among these families remains well below its 2007 level of $66,494 and even further behind its peak of $68,580 in 2000.  Between 2000 and 2013, the family with children right in the middle of the income distribution lost $6,400 in income.

Improvements in 2013 were particularly large among Latino families with children, but the Great Recession had been particularly harsh for these families as well.  Poverty among Hispanic children rose markedly from 26.9 percent in 2006 to 34.9 percent in 2010, an 8 percentage-point increase.  Since 2010, the situation has improved.  Poverty fell to 33.8 percent in 2012 and then to 30.4 percent in 2013, and now stands 4.5 percentage points below the 2010 level.  Today’s data show that the recovery is making a significant dent in Hispanic child poverty as the employment rates and earnings of Latino parents rebound.

Greenstein on Today’s Census Figures

September 16, 2014 at 1:44 pm

CBPP President Robert Greenstein just issued a statement on the Census Bureau’s 2013 data on poverty, income inequality, and health insurance:

Today’s Census data provide fresh evidence that the economy strengthened in 2013, but too slowly to improve the living standards of many middle- and low-income Americans.  Median household income did not rise significantly and remained 8.0 percent (or $4,497) below its level in 2007, before the Great Recession — and 8.6 percent below its level in 2000, before the 2001 recession.  The poverty rate fell from 15 percent in 2012 to 14.5 percent, the first statistically significant decline since 2006 (and only the second since 2000).  But the rate remained well above its 12.5 percent level in 2007 and even further above its 2000 level of 11.3 percent.  At last year’s rate of improvement, we would need to wait until 2018 for it to fall to or below the 2007 pre-recession level, and until 2020 to fall below the 2000 level.

Today’s report, however, does include a substantial and welcome decline in poverty among children, from 21.8 percent in 2012 to 19.9 percent in 2013 (although the child poverty rate remains well above its 2000 and 2007 levels).  The Census data indicate that the drop in 2013 was driven largely by a rise in employment and earnings among parents.  Indeed, median income among families with children rose between 2012 and 2013 even as overall median income was statistically unchanged.

In contrast with the 1960s, 1970s, and 1980s — when the benefits of economic recoveries were more broadly shared and poverty and median income improved more quickly when recoveries started — the recoveries of the past two decades have been much slower to generate income gains for middle- and low-income Americans.  Part of the problem is the rising inequality of recent decades, which has meant that economic growth has not been widely shared.  By various Census measures, inequality remained at or near record levels in 2013, with inequality essentially unchanged between 2012 and 2013.

Another factor that held down improvements in middle- and low-income living standards in 2013 was premature federal austerity policies, such as the sequestration budget cuts, that restrained economic growth.  The changes in federal spending and tax policies that took effect in 2013 reduced economic growth last year by about 1.1 percent of gross domestic product (GDP), according to Goldman Sachs.  The Congressional Budget Office projected that these policy changes cost the economy more than 1 million jobs.  We would have been wiser to invest more in infrastructure and education and training to put more people back to work in the short term and to strengthen productivity and economic growth in the long term.

Health care provides a brighter story.  The share of Americans without health insurance fell slightly in 2013, based on data from the Census Bureau’s American Community Survey.  In addition, an array of studies and data — including new data that the Centers for Disease Control and Prevention (CDC) issued this morning — show that the number of Americans without insurance has fallen markedly in 2014 with implementation of health reform.

These studies also show that the states that expanded Medicaid under health reform experienced much larger declines in their uninsured populations this year than states that rejected the expansion.  Since today’s Census and CDC data also show that people in the more than 20 states that rejected the expansion were likelier to be uninsured in 2013 than people in states that took the expansion, this means the gap in health insurance coverage between the two groups of states is widening.

Today’s data also provide some evidence about other areas (beyond health reform) where the safety net is producing results.  Programs like the Supplemental Nutrition Assistance Program (SNAP, formerly known as food stamps) are not counted in the official poverty measure, but the Census data issued today show that when SNAP assistance is counted as income — as analysts generally believe it should be — it lifted 3.7 million people above the official poverty line in 2013, including 1.5 million children.

Tomorrow’s Poverty Data Will Give Only Partial Picture

September 15, 2014 at 4:19 pm

As our preview of tomorrow’s Census release of 2013 poverty data explains, the official poverty statistics are based on pre-tax cash income, so they omit support like SNAP (formerly food stamps) and rental subsidies, as well as tax-based assistance like the Earned Income Tax Credit (EITC).  Later this year Census will release 2013 figures using an alternative poverty measure —the Supplemental Poverty Measure (SPM) — that includes these benefits.  Columbia University researchers recently estimated a version of the SPM called the “anchored” SPM for 1967 through 2012, and this measure tells a somewhat less dreary story about poverty trends over the last decade than the official measure.

The official poverty rate rose from 11.3 percent to 12.5 percent between 2000 and 2007, in part due to widening income gaps and poorly shared economic growth, then leapt to 15 percent by 2012 due to the Great Recession and the slow recovery.  Under the SPM, in contrast, poverty remained essentially flat from 2000 to 2007 and rose only about halfas much as under the official measure — 1.3 percentage points, versus 2.5 percentage points — through 2012 (see graph).

The better performance under the SPM largely reflects the powerful role of SNAP and refundable tax credits like the EITC — as strengthened by policymakers both early in the decade and through largely temporary measures in the Great Recession — which helped keep more Americans from falling into poverty as the recession deepened.

In 2013, the SPM will continue to capture policy changes left out of the official measure.

In short, tomorrow’s figures on the official poverty rate will give a real but incomplete picture of poverty and anti-poverty policies.

Our chart book on the War on Poverty has more on these issues, including

5 Facts to Help You Understand Next Week’s Poverty Figures

September 12, 2014 at 9:51 am

Our new report provides context for the official poverty and income figures for 2013, which the Census Bureau will release on Tuesday.  Here are the highlights:

  1. As in other recent recoveries, poverty has been slow to decline.  Over time, poverty rates tend to move roughly in tandem with economic indicators, which generally improved slightly in 2013.  Thus, the poverty rate — which jumped from 12.5 percent in 2007 to 15.1 percent in 2010 and remained essentially unchanged at 15.0 percent in 2011 and 2012 — may start to improve in 2013 as well, although the improvement might not be statistically significant.A return to pre-recession poverty levels is unlikely soon.  To replace the millions of jobs lost in the Great Recession anytime soon and keep up with population growth, the economy must create jobs faster than it has to date.  Although the economic recovery (which officially began in June 2009) is not uniquely disappointing in this regard, it is still problematic — and because the economic downturn was so deep, there is much more ground to make up.  Recoveries in the 1960s, 1970s, and 1980s featured quicker reductions in poverty (see graph).
  1. Austerity policies likely hampered progress against poverty in 2013.  The economy almost certainly would have improved more in 2013 had austerity policies not reduced the government’s contribution to the economy.  These included the “sequestration” spending cuts of the 2011 Budget Control Act and first implemented in 2013 and the expiration of the payroll tax holiday, which reduced most workers’ take-home pay by 2 percent of earnings.
  2. Unequal wage growth also slowed progress.  Between 2009 and 2013, inflation-adjusted hourly wages rose by 1 percent for workers at the 95th percentile (workers whose wage levels exceed those of 95 percent of all workers but are less than the remaining 5 percent), but fell by about 4 to 6 percent for workers in the bottom 60 percent of the wage scale, according to the Economic Policy Institute.
  3. Income inequality tied a record-high level in 2012.  The income gap between rich and poor as measured by the Gini index — the Census Bureau’s main summary indicator of inequality in pre-tax cash income — tied a record in 2012, with the data going back to 1967.  Other inequality measures also stood at or near record levels in 2012.
  4. Most poverty figures released on Tuesday won’t reflect non-cash benefits.  The Census figures will focus on the official poverty statistics, which are based on pre-tax cash income and omit support such as food assistance and rental subsidies as well as tax-based assistance such as the Earned Income Tax Credit (EITC).  An alternative Census Bureau poverty measure, the Supplemental Poverty Measure (SPM), includes these types of assistance, and experts generally consider it a more reliable tool for measuring changes in poverty over time as well as the safety net’s impact on poverty.  Unfortunately, Census will not release SPM figures for 2013 until later this year.  However, Census will release a table on Tuesday providing data on the poverty-reducing effects of certain programs, including SNAP (formerly food stamps) and the EITC.

Click here for the full report.

The Basics of the Minimum Wage

August 29, 2014 at 11:00 am

As Labor Day approaches, it’s worth taking a closer look at the important role that the minimum wage plays for millions of workers nationwide, its contribution to the economy, and how it could be strengthened.  Our new Policy Basic explains these key facts.

The federal minimum wage — the lowest hourly rate an employer can legally pay workers under the law — is now $7.25.  Where states and municipalities have enacted their own higher minimum wage laws, employers must pay at least the state or local minimum.  As of August 1, 2014, 23 states and the District of Columbia have minimum wages above the federal minimum wage.

In 2013, 5.5 million workers earned within 25 cents of the federal minimum wage, according to the Congressional Budget Office.  Three-quarters of these workers were at least 20 years old and two-fifths of them worked full time.  The median family income of workers in this range was about $30,000.

President Obama proposed raising the minimum wage to $9 an hour in his 2013 State of the Union address.  More recently, the Administration announced its support for the Fair Minimum Wage Act, which would raise the hourly minimum wage from $7.25 to $10.10 over the course of two years.  After that, the minimum wage would be indexed to inflation, eliminating the gradual erosion of minimum wage workers’ purchasing power (see chart) and the need for periodic, potentially contentious legislative debates to restore it that have been a feature of the minimum wage since its inception.

Although standard supply and demand theory suggests that an increase in the minimum wage reduces employment, empirical studies generally find that any such employment effects are modest.  Some studies have found no impact or even an increase in employment — at least for minimum-wage increases within the range of historical experience and those contemplated in recent proposals.

Click here to read the full backgrounder.