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Is Poverty Falling Over the Long Run?

September 15, 2016

While Overall Poverty Has Decreased Recently, Trends in the Last Decades Differ Widely Across Age Groups

The release of the official poverty rate indicates poverty in the United States fell more than a percentage point year over year, down from 14.8 percent to 13.5 percent nationwide. In 2015 in hard numbers, there were 43.1 million people in poverty, 3.5 million fewer than in 2014. Poverty in each major age group is down since 2014, falling from:
  • 20.7 percent to 19.2 percent for children;
  • 13.5 percent to 12.4 percent for working-age adults (18-64); and
  • 10.0 to 8.8 percent for elder Americans (65 and older).

Source: Census report P60-256, Table B-2
Over many decades poverty has fallen for the elderly, while poverty among children and working-age adults has trended upward. In the recent recession, while elder poverty fell, child poverty jumped from 18 to 22 percent and the rate among adults age 18-64 increased from 11 to 14 percent.

Why has the official poverty rate trended down for older Americans while trending in the opposite direction for nonelderly Americans?

Poverty Trends Reflect Changing Priorities

In part, these trends are due to the tremendous success of the old age component of the Social Security program, and a shift away from cash benefits for nonelderly poor people during Bill Clinton’s administration.

Twenty years ago, on August 22, 1996, Bill Clinton fulfilled his 1992 campaign promise to “end welfare as we have come to know it” in partnership with House Republicans, abolishing the venerable Aid to Families with Dependent Children (AFDC) and creating Temporary Assistance to Needy Families (TANF). Since then, there has been bipartisan support for in-kind transfers and tax credits, but not for cash transfers that would count toward the calculation of the official poverty rates. Most welfare dollars no longer go directly to poor people, and much TANF funding instead goes to child care facilities or job training centers. These changes in policy that explain some of the trends in poverty reflect shifting priorities over decades, from the War on Poverty of the 1960s to the modern era of welfare reform. The focus of many antipoverty programs is now on supporting the working poor, and helping them achieve upward mobility through adult education and workforce programs, such as career pathways programs.

Another focus of policy is place-based neighborhood revitalization and community development. Promise Neighborhoods and other efforts centered on schools, Choice Neighborhoods and other housing-based efforts, and a wide variety of place-based grants aim to improve where poor people live.

Welfare reform also aimed to improve relationship skills and promote thoughtful family formation and two-parent families, with mixed results. Family and demographic shifts have had offsetting effects on poverty: while teen birth rates have fallen – since before welfare reform but faster recently perhaps due to increased access to improved contraceptive methods –, the percentage of children in single-parent households has risen steadily for decades. Changes in family composition explained changes in child poverty before the 1990s, but not since then.

When it Comes to Poverty, Are We Measuring What Matters?

As cash welfare has disappeared, many poor families have lost income. There is an ongoing dispute about how dire the situation is for the poorest of the poor. To be sure, non-cash benefits like expanded food aid and health insurance make poor people better off. Another thing to bear in mind is that some improvements in the situation of the poor could actually show up as increased poverty: as mass incarceration is reversed and homeless individuals are housed, the poverty rate will actually increase.

There is much to complain about how we measure poverty in the United States. The poverty line was established using an ad hoc approach in 1963 and adjusted for inflation ever since. Foster children and people in institutions – such as long-term care or prison – don’t have a poverty status, poor or not. Homeless people don’t get counted at all. Official poverty doesn’t count refundable tax credits like the Earned Income Tax Credit, or non-cash income like nutrition or housing assistance. This means in-kind nutrition assistance can have large impacts on hunger, but not poverty.

As it turns out, the Supplemental Poverty Measure (SPM), which measures in-kind assistance and improves the unit of analysis – putting related people and foster children in one family unit – tracks the official poverty rate pretty closely. Both the SPM and official poverty are at about 14 percent in 2015, but the SPM for children is four points lower (16 instead of 20 percent), due mostly to the inclusion of the EITC, and about five points higher for elders (14 instead of 9 percent), due mostly to subtracting out medical spending.

Even with modest improvements in the U.S. since the recent recession, the latest poverty numbers highlight the need for real solutions, and data-based decision-making, with hard evidence on long-term impacts, rather than mere rhetoric. Exciting work is underway on measuring the impact of a basic income guarantee, and more targeted policy innovations. And globally, extreme poverty has fallen dramatically across decades. But it remains to be seen whether we can reduce nonelderly poverty in the U.S., or the poor will always be with us.