December 23, 1999

Changes Since 1995 in the Safety Net's Impact on Child Poverty

Executive Summary

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Due to the improving economy and increases in employment and earnings among low-income families, the number of children living in poverty has declined significantly since 1993. Between 1993 and 1995, the reduction in child poverty was substantial; after 1995, progress against child poverty continued, but at a much slower pace. (Increases in employment and earnings were primarily the result of growth in the economy. Some research indicates that changes in welfare policy and expansions in the EITC also contributed to the increases in employment and earnings by prompting more single parents to enter the labor force.)

In addition, since 1995 the basic measure of the overall depth and severity of child poverty has improved very little, and those children who remain poor have, on average, become somewhat poorer.

To measure the depth of child poverty, the Census Bureau uses a measure called the "child poverty gap." The child poverty gap is the total amount by which the incomes of all children who are poor fall below the poverty line. Stated another way, the child poverty gap is the amount of money it would take to lift all poor children to the poverty line. In computing the child poverty gap, the Census Bureau divides the amount by which a poor family falls below the poverty line by the number of people in the family. The Census Bureau then assigns the "per-person poverty gap" for the family to each child in the family. Thus, if a family with two parents and one child falls $3,000 below the poverty line, the poverty gap for the child in the family is $1,000. The overall U.S. child poverty gap reflects both the number of children in the country who are poor and the depth of poverty of each poor child (i.e., how far each poor child falls below the poverty line).

The Census data show that the primary reason poor children became poorer between 1995 and 1998 is that the safety net became less effective in reducing the depth of child poverty.

These developments primarily reflect a lessening of the impact of cash assistance and food stamp benefits on child poverty.

The lessened effect of cash and food stamp assistance in reducing the depth of child poverty reflects the sharp declines in the numbers of children who receive these benefits. Between 1993 and 1995, the number of children receiving AFDC and food stamps declined modestly as the economy improved and the number of children in poverty decreased. But between 1995 and 1998, the decline in participation in these programs greatly accelerated. While the economy continued to expand and employment and earnings increased among low-income families, participation in the cash and food stamp assistance programs fell much more rapidly than did the number of children who were poor.

The decline in the role of cash and food stamp assistance programs in lessening the depth of poverty among those children who remained poor was paralleled by a decline in the role these programs play in lifting children out of poverty altogether.

Despite this erosion in the impact of cash assistance and food stamp programs in lifting children from poverty, the safety net as a whole lifted the same proportion of children out of poverty in 1998 as in 1995. In both years, government benefits and taxes lifted from poverty a total of 33 percent of the children who otherwise would have been poor.

The safety net lifted the same proportion of these children from poverty in 1998 as in 1995 because the decline in the impact of cash and food assistance programs in lifting children from poverty was offset by an increase in the anti-poverty impact of the Earned Income Tax Credit. The EITC was larger in 1998 than in 1995 (the sizeable EITC expansion enacted in 1993 did not phase in fully until 1996), and the proportion of otherwise-poor children lifted from poverty by federal income and payroll taxes and the EITC climbed from six percent in 1995 to nearly 10 percent in 1998.


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