Long-Run Trends in the Poverty Rate

In 2013, about 14.5% of society was officially “poor”, with incomes that fall below the federal government’s official poverty line. This represents an increase from the early 2000s, when only about 11% – 13% of Americans registered as being poor.

Interestingly, today’s povery rates seem well within the normal boundaries established since the late-1960s. Over the past forty-plus years, poverty has bounced within an 11% to 15% range, going up during bad times and falling during good ones.

Long-term poverty patterns suggests that we have not made sustained progress in eradicating poverty. The figure below describes the poverty rate since 1959. Data is from the Census Bureau.1

us-poverty-over-time

 

Poverty fell considerably during the early-1960s, and reached its present range by 1966. Since then, we have not experienced any secular decline in the poverty rate.

Conservative critics of the welfare state often cite this fact as evidence that the policies established under Lyndon Johnson’s “War on Poverty” failed to achieve their goals. The signature policies of that “War”, the expansion of Social Security in 1964, the Food Stamp Act of 1964, the Economic Opportunity Act of 1965, and the Elementary and Secondary Education Act of 1965, marked substantial expansions of the social safety net.2 Critics argue that poverty stopped falling soon after these implementations, and infer that these programs were not effective. Moreover, one might note that median wages began to falter only a few years later, and argue that the expansion of the welfare state ultimately hurt people’s ability to secure jobs and earn money.

I’m more skeptical about this view. First, it is not altogether clear that domestic welfare policy was the primary determinant shaping hosueholds’ economic fortunes. One can read this graph and infer that poverty declined more or less steadily until 1973, right after the oubreak of the Stagflation Crisis, a range of systemic economic and financial problems that are just as much rooted in a changing geopolitical context than anything that was happening domestically.3 There is also the prospect that the dynamism of mid-20th century’s industry-led economy was nearing exhaustion.4 The country would soon also confront a range of demographic changes, like the Baby Boomers’ coming of age, the rise of divorce, and other assorted social changes that could have ultimately driven households into poverty.

More deeply, it is worth keeping in mind what is meant by “poor.” The official poverty line is the inflation-adjusted cost of what the USDA determined to be the cost of a minimal food diet in 1963. Those with incomes above that line are not poor, and those below are poor. This is a very crude measure of poverty, which to my mind borders on meaninglessness. In effect, a stagnating poverty rate does not imply that the number of poor people stagnated. Rather, it implies that gross household incomes roughly paced the real cost of basic food in 1963.

A different possibility is that these War on Poverty programs have prevented poverty (real or official) from exploding. This is particularly true of America’s burgeoninng elderly population, many more of whom would certainly be impoverished without their Social Security checks. Without public health care programs, like Medicaid, Medicare or CHIP, many more people would have much more trouble accessing medical care. Subsidized health insurance, subsidized school lunches, and other facets of the welfare state do not appear in household balance sheets as income, and so they would probably not affect poverty rates. Still, people’s overall wellbeing is likely helped by these programs.

Overall, what we can glean from long-term changes in the poverty rate is limited. Still, the graph is tought-provoking, and unpackaging what is happening here might help shed light on whether or not the welfare state actually helps the poor. I would wager it does, but the debate will likely continue for a long time.


  1. US Census Bureau (2014) “Table 2. Poverty Status of People by Family Relationship, Race, and Hispanic Origin: 1959 to 2013” Data table downloaded from http://www.census.gov/hhes/www/poverty/data/historical/people.html
  2. For an accessible overview, see Dylan Matthews (2014) “Everything you need to know about the war on poverty” Blog entry at Wonkblogfrom the Washington Post, January 8 http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/08/everything-you-need-to-know-about-the-war-on-poverty/
  3. See Fred Block (1977) The Origins of International Economic Disorder: A Study of United States International Monetary Policy from World War II to the Present University of Calfornia Press
  4. See Daniel Bell (1977) The Coming of Post-Industrial Society: A Venture in Social Forecasting Basic Books.

Welfare Spending: Most Goes to Seniors

What is interesting is that a core constituency of these anti-welfare initiatives are in fact society’s biggest welfare recipients: the elderly. We can illustrate that fact by digging into data from the Survey of Consumer Finances.1

Varieties of Welfare

Our first step involves asking, what is welfare? Here, it includes economic transfers from taxpayers to households that qualify for government programs designed to help families who do not earn enough money on their own. There are three major types of social payments programs in the US:

The Distribution of Social Spending, from Center on Budget and Policy Priorities
The Distribution of Social Spending, from Center on Budget and Policy Priorities

Many readers might object to the inclusion of Social Security as a type of welfare program, on the grounds that it is a system into which its recipients have paid. In fact, Social Security is a PAYGO system, in which today’s seniors’ checks are principally funded by the payroll deductions taken from the working populations’ paychecks. Today’s recipients’ payroll deductions were used to pay for the Social Security checks of those who were elderly during their working years. These are current transfers from the working to (largely) non-working population.

Program Costs

One way to gauge how much people are getting from these programs is to look at their costs. The figure to the left was taken from Center on Budget and Policy Priorities

Social Security is by far the most expensive, absorbing nearly one-quarter of the federal budget, along with a substantial part of state budgets. It roughly costs as much as all health care spending (post-Affordable Care Act) and more than double the amount of all remaining social safety net programs combined.

Number of Recipients

The figure below describes the percentage of households receiving any money from these three social payments programs:

g1

The number of people receiving all three types of assistance fell in numbers over the 1990s. In part, this was a byproduct of an extraordinarily long prosperity and strong labor markets. When jobs are bountiful and better paid, fewer people need public assistance.

Since 2001, America’s welfare system – at least the part of it that provides money to poor people – expanded considerably. Social Security recipients grew as a group since the mid-1990s. The proportion of households receiving welfare as cash payments (e.g., TANF, SNAP, traditional welfare checks) has grown steadily since 2001. Workers’ benefits have grown since the 2008 crisis.

Program Generosity

The figure below describes the median take from each of these three program types. This is the median receipts from each program type among all households receiving any money.

g2

The median take from Social Security is by far the biggest and fastest-rising. In 1992, it was just over $8100. By 2013, it stood at $16,740. Payments more than doubled, and did so at a time when incomes stagnated.

The take from workers’ programs also doubled, from $2,480 to $5,120.  This growth has been fueled by largely temporary expansions after the 2008 financial crisis (e.g., extending eligibility for Unemployment Insurance). Many of these program extensions have since expired, and they will probably be lower when the 2016 survey’s results are released.

Welfare, on the other hand, has not grown. In 1992, median welfare take stood at $2940. By 2013, it was $2,660.

Poor Young People Aren’t Major Social Assistance Recipients

America has a large welfare state, but it primarily serves the elderly. Social payments to the working age population and the poor are far less generous. Payments to the poor are low and have been shrinking, probably as a result of the political demonization of these programs.

In contrast, senior-targeted social programs have been generous. This generosity has been growing at a time when the government has been trying to cut other assistance programs.


  1. These analyses were aided by the excellent R resources made available by Anthony Damico