America's Children in Poverty: A New Look at Who's Poor Under the Supplemental Poverty Measure. The “Lifted Out”

12/01/2013

Children who are officially poor but are not classified as poor under the SPM differ from the core poor in three primary ways; their families: 1) have substantially more cash and other income resources (i.e., they are much closer to the official poverty threshold), 2) are more likely to be receiving assistance from safety net programs, and 3) receive greater levels of benefits from these safety net programs.

For labor market income, 86.0 percent of the lifted-out children’s families have wage/salary income, as compared to only 58.2 percent for the families of core-poor children (see Figure 2).2 This wage and salary income also is systematically higher for lifted-out children’s families ($17,160) as compared to core-poor children ($3,000 - see Figure 3). The median SPM resources -- which includes cash income, in-kind benefits, after-tax income, and the subtraction of necessary expenses -- of children’s families in the lifted-out group is $30,689. This compares to only $15,803 for the core group of poor children, meaning the total resources available to the lifted-out group are virtually twice as much as those available to the core-poor group. These differences are clear when comparing income-to-needs ratios as well (see Figure 4). Whereas the lifted-out group’s average OPM income-to-needs ratio is 0.66 (higher than the 0.43 among the core-poor group), under the SPM the average ratio more than doubles to 1.35 (as compared to 0.65 among the core-poor group). Thus, the typical family of children in the lifted-out group shifts from 37 percentage points below the poverty threshold under the OPM to 35 percentage points above the poverty threshold as a result of all the changes made under the SPM.

It is important to highlight that part of the difference in the income-to-needs ratio between the OPM and the SPM for the lifted-out group stems not just from changes in the types of resources counted, but also from the change in the poverty family unit, in particular the inclusion of unmarried partners in the SPM. Among the children in the lifted-out group, 22.8 percent live in a family with an unmarried partner present, as compared to only 12.7 percent of the core-poor children (see Figure 8). These unmarried partners often bring money into the family, which contributes toward “lifting” these children out of poverty under the SPM measure. When all SPM resources are counted except the personal income of the unmarried partner, approximately 1 million of the 5.6 million (or 18 percent) of the OPM-only poor children who are lifted out of poverty under the SPM measure would still be considered poor under the SPM (not shown here). This suggests that unmarried partner income is an important reason why some children are no longer poor once the SPM measurement is implemented.

As discussed above, many families of core-poor children are connected to social safety net programs. This is even more pronounced for children in the lifted-out group (see Figure 5), and for several safety net programs they receive larger benefits from the programs as well. Figure 5 shows that 78.2 percent of the group lifted-out of poverty live in families receiving some EITC compared to 56.9 percent of the core-poor group, which is consistent with the greater employment among the families of children in the lifted-out group. Also, two-thirds (67.7 percent) of the lifted-out group’s families receive SNAP benefits, compared to 51.7 percent of the children who are poor regardless of the measure. A similarly large differential is found for housing assistance (25.6 percent vs. 13.8 percent, respectively).

Figure 7. Median Annual Medical Expenditure by Child Poverty Status and Population

Figure 7. Median Annual Medical Expenditure by Child Poverty Status and Population

 

Figure 8. Percentage of Children Living in a Family with a Cohabiting Partner by Child Poverty Status

Figure 8. Percentage of Children Living in a Family with a Cohabiting Partner by Child Poverty Status

There also are some smaller differences for UI, WIC, LIHEAP, SSI, and cash welfare. Across ten safety net programs examined here, the children in the lifted-out group live in families connected to 4.1 programs on average, compared to 3.3 programs for the core-poor children.

Another way to analyze on the issue of safety net “bundling” is to look at the percentage of children whose families receive the six safety net benefits newly included in the SPM (SNAP, EITC, WIC, School Meals, LIHEAP, and housing assistance). Fully 65.2 percent of the lifted-out children live in families that receive three or more of these benefits in 2010, as compared to 42.7 percent of the core-poor group of children and only 15.3 percent of the children thrown in to poverty (see Appendix Table A-2).

Benefit amounts tend to be similar or larger in this group relative to the core-poor group. Of those families that receive the EITC, for example, the median benefit for the lifted-out group is $4,919, compared to $3,341 for children in the core-poor group. For SNAP, the median benefit for children’s families who receive it is more similar across these two groups ($4,815 for the lifted-out group compared to $4,416 for the core-poor group). A similarly modest differential is evident for cash welfare among those in families who receive it. It is worth noting that families of the lifted-out group have, on average, somewhat larger numbers of children, which could explain why some benefits are greater for this group despite their families’ higher incomes. UI and housing benefits, however, show the opposite pattern, with children’s families in the lifted-out group receiving smaller benefit levels when receiving the benefit. For housing assistance, this is a function of the higher baseline incomes of children’s families in the lifted-out group, as their higher estimated rent payments translate into lower value for their government housing subsidies. SSI benefits are identical for these two groups when families receive SSI, reflecting the generally fixed amount of the benefit formula for this program.

For some programs, such as housing assistance and SSI, the incidence of program participation is less common than for programs like SNAP or the EITC (e.g., in the lifted-out group, 25.6 percent of children live in families that have some housing assistance and 9.1 percent live in families that have some SSI) but the value of these benefits, among recipient families, is high (e.g., the families of lifted out children that receive housing assistance receive a median benefit of $6,098, compared to $8,481 for the core-poor group’s families; the median benefit is $8,088 for SSI among recipient families in both groups). As a result, children in families who receive these benefits are likely to be lifted out of poverty, especially if their pre-transfer family incomes are somewhat close to the poverty thresholds.

Figure 9 shows the relative importance of these safety net benefits for lifting children out of poverty. It shows the proportion of the lifted-out group that would still be poor (i.e., would not be lifted out) if all the changes under the SPM were made except for the inclusion of the individual benefit corresponding to each bar in the graph. SNAP and EITC have the largest effects, as 34.4 percent and 33.1 percent of children in the group would be poor, respectively, but for the inclusion of that benefit. Smaller percentages would still be poor if not for housing assistance (15.5 percent), the school lunch program (7.4 percent), and LIHEAP or WIC (1.2 percent each). Nearly two-thirds of children in the lifted-out group (63.5%) would still be poor absent SNAP and/or the EITC. This indicates that these major antipoverty programs, which reach many low-income families and offer sizable benefits, are able, in combination with earnings, to lift many working families above the poverty threshold.

With respect to expenses, no major differences are found for MOOP expenses between the families of core-poor children and those lifted out of poverty. Median family medical expenditures are $423 for lifted-out children, as compared to $385 for core-poor children. Work and child care expenses, however, do differ. Whereas the median family work and child care expenses of the core-poor group is $663, the median for the lifted-out group is $1,326. This difference reflects the greater amount of family members’ employment for children in the lifted-out group.

Figure 9. Percent of Children "Lifted Out" Who Would Still be Poor Absent Individual Benefits

Figure 9. Percent of Children "Lifted Out" Who Would Still be Poor Absent Individual Benefits


2 Note that a smaller percentage has a member that is currently employed. This is possible because employment is measured at the time of the survey, while reported income is measured for the prior calendar year. So, for instance, if one had a job in 2010, but lost it before the survey, he or she could have labor market income and yet have no one employed in the family.

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