The Center's work on 'Trends' Issues


Safety Net Lifted 39 Million Americans out of Poverty in 2013

March 17, 2015 at 8:01 am

As the House Ways and Means Committee holds a hearing today on empirical evidence for poverty programs, it’s worth recalling that safety net programs cut poverty nearly in half in 2013, lifting 39 million people out of poverty.  The figures rebut claims that government programs do little to reduce poverty.

Our analysis of Census data shows that, in 2013:

  • Government policies cut the number of poor Americans by 39 million — from 88 million to 49 million.

    Of the 39 million people, “universal” assistance programs such as Social Security and unemployment insurance, which are widely available irrespective of income, cut poverty by 19 million. “Means-tested” benefits such as rent subsidies, SNAP (formerly food stamps), and the Earned Income Tax Credit (EITC), which target households of limited means, cut poverty by another 20 million.

  • For millions more people, government assistance makes poverty less severe: 34 million poor people were less deeply poor because of safety net benefits.

These figures use the federal government’s new Supplemental Poverty Measure (SPM), which — unlike the official poverty measure — accounts for taxes and non-cash benefits as well as cash income.  (The SPM also makes other adjustments, such as taking into account out-of-pocket medical and work expenses and differences in living costs across the country.) Because the SPM includes taxes and non-cash benefits, it gives a more accurate picture of the impact of anti-poverty programs than the official poverty measure.

Other analysts have recently used SPM data to show the strong impact of poverty programs.  For example,

  • Safety net programs lift thousands of children above the poverty line in every state, from 15,000 in Wyoming to 1.3 million in California, according to the Annie E. Casey Foundation’s Kids Count project.
  • Two tax credits for working families — the EITC and Child Tax Credit — combine to lift more than 9 million people in working families out of poverty, including more than 1 million each in Texas and California, according to the Brookings Metropolitan Policy Program.

If anything, these figures, understate the safety net’s impact. That’s because survey data miss a large share of safety net income due to underreporting by participating households, who often have trouble recalling benefits received months earlier or may feel embarrassed about receiving help.

Wisconsin Law Would Tilt Playing Field Even More Against Workers

March 4, 2015 at 3:38 pm

My colleague Jared Bernstein recently addressed some of the canards around Wisconsin’s proposed “Right to Work” (RTW) law, which would dilute unions’ bargaining strength by making it harder for them to collect dues from the workers they represent.  The bill, which would make Wisconsin the 25th state with such a law, is part of an ongoing movement to weaken protections for workers attempting to bargain collectively — a movement that’s exacerbating the trend toward growing income inequality and wage stagnation.

As Bernstein explains:

Here’s what the legislation does:  It makes it illegal for unions to negotiate contracts wherein everyone covered by that contract has to contribute to its negotiation and enforcement. . . .

Let’s also be clear about what goes on in non-RTW states, as anti-union forces consistently distort the current reality.  In non-RTW states, no one has to join a union.  There have been no “closed shops” in America for more than 20 years.  When RTW advocates say they’re fighting against “forced unionism,” they are making stuff up.  There’s no such thing.

​By weakening unions, RTW weakens wages, Bernstein explains, citing a study that found “a significant wage advantage in non-RTW states of about 3 percent, which, for full-time workers, amounts to $1,500 per year.”  Weaker wages, in turn, place upward pressure on income inequality.

The long-term growth in income inequality is well documented.  It has many causes, including the growth in investment income (which goes mainly to those at the top of the income scale) as a share of the economic pie.  At the same time, wages have grown more unequal due to longer periods of high unemployment (which reduce workers’ negotiating power), more foreign competition, and a decline in higher-paying manufacturing jobs.  Earnings for low- and middle-income workers have frequently fallen or remained stagnant.  A range of studies (see here and here for examples) have concluded that falling union membership has played a significant role in these unfortunate trends.

Federal and state policymakers can push back against these trends by enacting (and enforcing) stronger labor standards, reforming immigration policies to bring workers out of the shadows, promoting full employment, and, importantly, protecting workers’ rights to organize.

New Poverty Figures Show Impact of Working-Family Tax Credits

October 17, 2014 at 2:05 pm

The Child Tax Credit (CTC) and Earned Income Tax Credit (EITC) together lifted 9.4 million people out of poverty in 2013 and made 22.2 million others less poor, our analysis of Census data released yesterday show (see first graph).

Using Census’ Supplemental Poverty Measure (SPM), which includes taxes and non-cash benefits as well as cash income, our analysis shows how critical these tax credits are for low-income families.  It also highlights the impact if policymakers let key provisions of the credits expire, as I explain below.

Each credit plays an important antipoverty role.  The EITC lifted 6.2 million people out of poverty in 2013, including 3.2 million children.  The CTC lifted 3.1 million people out of poverty, including 1.7 million children.  Both credits acting together lifted some additional people out of poverty.

The EITC and CTC combined lift more children out of poverty than any other antipoverty program.

Unfortunately, critical provisions of the EITC and CTC are set to expire at the end of 2017.  If that happens, 16.4 million people — including 7.7 million children — will fall into or deeper into poverty, we estimate based on the Census data.  (See second graph.)  Our interactive calculator lets you explore what’s at stake for low-income families if policymakers don’t act.

Why We Should Give Wages Room to Grow

October 17, 2014 at 1:35 pm

My latest post for U.S. News’ Economic Intelligence blog shows that American workers have been shortchanged in the recovery from the Great Recession and explains why the projected quickening of wage growth over the next few years won’t trigger an upward spiral of wages and prices.  It says in part:

How can wage increases go from 2 percent per year to 3.5 percent [as the Congressional Budget Office projects will occur over the next three years] without igniting unacceptable inflation?  The answer lies in the arithmetic of prices, productivity and labor costs.

In round numbers, since the start of the recession in late 2007, hourly labor compensation (wages plus fringe benefits) has grown at about 2 percent a year on average.  Productivity growth (increases in output per hour worked) offset about 1.5 percentage points of that increase.  The difference, a mere 0.5 percent a year, is the growth rate of labor costs per unit of output produced.

Prices were rising three times as fast as that over this period — 1.5 percent per year — so businesses had three times the revenue per unit of output they needed to cover the increase in unit labor costs.  It’s not surprising that profits grew substantially while workers got the short end of the stick. Businesses could have raised hourly compensation by 3 percent a year over this period (half paid for by higher prices, half by greater productivity) without threatening their bottom line.

CBO projects that inflation will rise gradually toward the Fed’s stated longer-term goal of 2 percent per year. That means hourly compensation can rise at 3.5 percent a year without putting any additional upward pressure on prices: Price increases would cover 2 percentage points of that increase, and greater productivity would cover the rest.

Click here for the full post.

Rental Assistance Kept Over 3 Million People Out of Poverty Last Year, New Census Data Show

October 16, 2014 at 4:33 pm

Rental assistance programs kept millions of people above the poverty line in 2013, according to CBPP’s analysis of new Census data.  The findings highlight the central role that rental assistance plays in helping low-income Americans keep a roof over their heads.

Our analysis using the Census Bureau’s Supplemental Poverty Measure (SPM), which accounts for non-cash benefits and taxes as well as cash income, shows that rental assistance kept 3.1 million people, including 1.0 million children, out of poverty last year (see chart).  (The SPM methodology understates the value of some types of rental subsidies, so the actual impact on poverty likely is somewhat higher than these estimates indicate.)

The SPM data don’t break down what type of rental assistance kept these people out of poverty, but for most, it likely was one of the three primary federal rental assistance programs: Housing Choice Vouchers, Public Housing, and Section 8 Project-Based Rental Assistance.

Rental assistance could lift many more people out poverty, but due to funding constraints only one in four families eligible for assistance receives it.  Families without rental assistance are far more likely to experience homelessness and housing instability, which have been linked to negative health, education, and developmental outcomes over the long run.

Sequestration cuts to Housing Choice Vouchers in 2013 caused tens of thousands more families to be left without the assistance they need to afford stable homes.  Those cuts were only partly restored in 2014.  When it returns in November, Congress will consider legislation setting 2015 funding levels for many federal programs.  As they weigh their options, policymakers should place a high priority on protecting funding for rental assistance to avoid exposing more of the nation’s most vulnerable people to poverty, homelessness, and hardship.