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.)
- From 1993 to 1995, the number of children in poverty, after counting all government benefits and taxes, fell by 2.4 million.
- By contrast, in the 1995-1998 period, the number of poor children after counting government benefits and taxes fell 1.2 million half as much despite the fact that this period is one year longer than the 1993-1995 period.
- Measured on an annual basis, the number of poor children declined at a rate of 1.2 million per year between 1993 and 1995 and at a rate of 400,000 a year one-third as much between 1995 and 1998.
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).
- In 1993, the child poverty gap, measured after counting government benefits and taxes (including the Earned Income Tax Credit), was $20.3 billion. By 1995, this gap had narrowed to $16.8 billion. The child poverty gap declined $3.5 billion between 1993 and 1995, or 17.2 percent. (These figures are adjusted for inflation.)
- By contrast, between 1995 and 1998, the child poverty gap after counting government benefits and taxes hardly budged, declining only $400 million (from $16.8 billion to $16.4 billion). This represented a narrowing of this gap of just 2.4 percent.
- The reason the child poverty gap changed so little between 1995 and 1998, despite strong economic growth and a decline in the number of poor children, is that the children who remained poor became poorer, on average. In 1995, poor children fell an average of $1,471 below the poverty line. By 1998, they fell an average of $1,604 below the poverty line.
- The $1,604 figure for 1998 represents the largest poverty gap per poor child recorded since these data were first collected in 1979.
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.
- In 1995, the child poverty gap stood at $45.1 billion before counting government benefits and taxes. After counting government benefits and taxes, the child poverty gap was $16.8 billion. Benefits and taxes thus reduced the child poverty gap by $28.3 billion, or 63 percent, in 1995.
- In 1998, the child poverty gap was $38.2 billion before counting government benefits and taxes. This figure was $7 billion less than the comparable figure for 1995. But after counting benefits and taxes, the poverty gap in 1998 was $16.4 billion, only $400 million less than the comparable figure for 1995. Safety net programs reduced the child poverty gap by 57 percent in 1998; this represented a significant drop from the 63 percent reduction for which the safety net programs were responsible in 1995. (This also is a significant drop from 1993, when safety net programs reduced the child poverty gap by 60 percent.)
These developments primarily reflect a lessening of the impact of cash assistance and food stamp benefits on child poverty.
- In 1995, cash assistance benefits based on income (primarily Aid to Families with Dependent Children benefits but also benefits under the Supplemental Security Income program for low-income disabled children) shrank the child poverty gap by 24 percent. In 1998, cash assistance benefits reduced the child poverty gap by only 16 percent, or two-thirds as much.
- Similarly, in 1995, food stamps reduced the child poverty gap a little less than 13 percent; in 1998, food stamps reduced the child poverty gap 10.5 percent.
- Together, cash assistance and food stamps reduced the child poverty gap by nearly 37 percent in 1995, but by a little less than 27 percent in 1998.
- The impact of cash assistance and food stamps in shrinking the child poverty gap declined markedly among children in married and single-parent families alike and among children in white, black, and Hispanic families alike. The decline was greatest among Hispanic children.
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.
- Between 1993 and 1995, the number of children receiving AFDC dropped 4.6 percent, while the number of children who were poor before counting government benefits based on income declined at a similar rate of 5.8 percent.
- By contrast, between 1995 and 1998, the number of children receiving AFDC or TANF (which replaced AFDC in 1996) plunged 35.6 percent, more than three times the 10.1 percent decline during those years in the number of children who were poor before counting government benefits based on income.
- In both 1993 and 1995, there were 57 children receiving AFDC for every 100 children who were poor before counting benefits based on income. By 1998, only 41 children received TANF cash assistance for every 100 such poor children. The ratio of the number of children receiving cash assistance to the number of poor children was substantially lower in 1998 than in any year since 1970.
- Child participation in the food stamp program shows a similar trend. Between 1993 and 1995, the number of children receiving food stamps fell 2.4 percent, a rate not very different from the percentage decline in the number of poor children in these years. But between 1995 and 1998, the number of children receiving food stamps dropped 26.8 percent while the number of poor children fell 10.1 percent.
- In 1993, some 85 children received food stamps for every 100 children who were poor before counting benefits based on income. The figure for 1995 is similar that year, 88 children received food stamps for every 100 such poor children. In 1998, by contrast, 72 children received food stamps for every 100 such poor children. (This ratio increased between 1989 and 1993; the ratio for 1998 was still slightly above the ratio for 1989.)
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.
- In 1995, the combination of food stamps and cash assistance benefits based on income lifted from poverty 12.4 percent of the children who were poor before government benefits and taxes are counted. Thus, these programs lifted from poverty about one of every eight such children.
- In 1998, these programs lifted 9.2 percent of such children out of poverty, about one in every eleven such children.
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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