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

12/01/2013

The smallest of the three groups of children is the 2.4 million children who are found to be poor under the SPM but not the OPM, or those who are “thrown in” to poverty under the SPM. Like the lifted-out group, these children are in families that are fairly well-connected to the labor market. Fully 87.4 percent of these “thrown-in” children are in families that have some labor market income (similar to the 86.0 percent in the lifted-out group, see Figure 2). The median amount of labor market income for these children’s families, however, is much higher ($27,000, vs. $17,160 in the lifted-out group, see Figure 3). Like the other two groups, median cash income for families in this group ($31,081) is higher than total wage/salary income by a few thousand dollars. Their OPM income-to-needs ratio is 1.45 on average before accounting for the changes embedded in the SPM (see Figure 4) meaning that these children are in families that have OPM incomes 45 percent above the OPM thresholds. After the changes in the SPM methodology are applied, however, the SPM income-to-needs ratio is .76. As shown below, this is largely a result of the large non-discretionary expenses these families face –for SPM cash resources alone relative to the SPM threshold, the average income-to-needs ratio is 1.19, still above poverty (meaning the majority of those “thrown in” would not be poor if looking just at differences in their pre-expense resources). Another approach is to examine where the thrown-in group stands relative to the official poverty line. In total, 44.4 percent of children in the thrown-in group live in families that have resources between 100 and 125 percent of the official poverty threshold, and another 22.5 percent live in families with resources between 125 and 150 percent of the official poverty threshold (not shown). Only one-third of children in this group (33.1%) live in families at or above 150 percent of the official poverty threshold. And only 10.3% percent live in families at or above 200 percent of the official poverty threshold.

Relative to the other two groups, children thrown into poverty are in families that are much less connected to the social safety net, and when these families do receive benefits the level of support is much lower. Across all programs, the thrown-in poor are engaged with, on average, 2.2 programs compared to 3.3 programs for the lifted-out group (see Appendix Table A-2). As shown in Figure 5, a similar proportion of children in the thrown-in group receive some EITC in their family compared to the lifted-out group (72.5 percent and 78.2 percent, respectively), but much lower percentages of these children live in families that receive other benefits. Children in the lifted-out group live in families that are nearly five times more likely to receive SNAP assistance (only 13.9 percent of the thrown-in poor, compared to 67.7 percent of the lifted-out group) and over twice as likely to receive WIC (12.6 percent of the thrown-in poor, vs. 29.4 percent of the lifted-out group). Only 1.3 percent of children in the thrown-in group live in families that receive any housing assistance (compared to 25.6 percent of the lifted-out group). Rates of receipt also are much lower for SSI, cash welfare, and LIHEAP. For many of the other means-tested benefits such as SNAP, the thrown-in group’s dramatically lower participation rates are likely driven by low income eligibility thresholds, as this group of children lives in families with the highest level of pretax cash income of the three groups (see Figure 3).

Benefit amounts also are smaller for the thrown-in group, again likely reflecting their generally higher family incomes than other groups (see Appendix Table A-2). For example, the median family SNAP benefit for those in this group who received it is only $2,280 (compared to over $4,000 for both of the other groups). Benefit values also are much smaller for the EITC. The median EITC amount for recipient families is only $2,937 for children in the thrown-in group (compared to $4,919 for the lifted-out children). This may reflect the fact that because this group has higher family labor market income, they are more likely to be in the “phase-out” range of the EITC, which is between $16,450 and $40,362 in 2010 for families with two children. Housing benefits also are smaller, again most likely reflecting the higher starting family incomes of this group, which make the value of the housing benefit smaller. Other benefits show more modest differences, if they are received at all. Since the incidence of benefits is much lower among the thrown-in group, any similar benefit levels among recipients apply to a much smaller number of children within the thrown-in group.

Figure 10. Mean Capped Work/Child Care Expenditure by Child Poverty Status

Figure 10. Mean Capped Work/Child Care Expenditure by Child Poverty Status

Children in the thrown-in poor group are most affected by their families’ non-discretionary expenses.3 As shown in Figure 7, whereas both of the other two groups’ median out-of-pocket medical expenses are about $400 ($385 for the core-poor and $423 for the lifted-out), the median MOOP for the thrown-in group is more than ten times higher, at $4,750. Similarly, work and child care expenses for this group are $2,814 on average, nearly twice the amount for the lifted-out group ($1,549) and three times that of the core-poor group ($904) (see Figure 10). Median values for work and child care expenses differ less dramatically, at $1,479 for the thrown-in group, $1,326 for the lifted-out group, and $663 for the core-poor group (see Appendix Table A-3). But the high mean values relative to the median for the thrown-in group indicate that some families in this group have very high work and child care expenses. Indeed, one quarter of children in this group are in families that have $2,754 or more in work and child care expenses for the year (not shown here). Together, all of these expenses, in particular MOOP expenses, are the predominate reason that many children in the thrown-in group are considered poor under the new SPM measure. For example, over half of the children newly poor under the SPM poverty measure (55.5 percent) would not be counted as poor if MOOP expenses had not been subtracted from their families’ resources (not shown here).

Interestingly, these large differences in MOOP across the three groups do not seem to stem from differences in reported health status. While the thrown-in group is somewhat more likely to have a family member in poor health (11.6 percent) than the lifted-out group (6.9 percent) or the core-poor group (8.9 percent) (see Appendix Table A-4), the large differences in MOOP expenditures between groups are nearly as large after excluding those children who have a very sick member in their family (see Figure 7). Likewise, the difference does not seem to stem from the fact that the two groups with low MOOP expenditures have much more frequent experiences of no medical expenses. Though fewer (3.2 percent) of thrown-in children have no MOOP expenses than either lifted-out children (10.0 percent) or core-poor children (13.7 percent), those differences are fairly small, and it is much more the magnitude of MOOP expenses than their prevalence that drives the fact that MOOP is so important in accounting for these differences (see Appendix table A-3). Indeed, as shown in Figure 7, among children whose families have MOOP expenses and do not have a family member with poor health, the median differences are still virtually as large: $500 for core-poor and lifted-out children, compared to $4,585 for the thrown-in group.

For MOOP spending, the key difference among the three groups of children is their health insurance coverage (see Appendix Table A-4). Overall rates of coverage are similar across the three groups, with over 80 percent of children in each group having any health coverage. But the thrown-in group (those with high MOOP expenditures) is much more likely to have private insurance (51.4 percent) than the lifted-out group (15.9 percent) or the core-poor group (16.77 percent), as shown in Figure 11. These latter two groups are concomitantly more likely to have public health insurance such as Medicaid (80.0 percent and 70.5 percent, respectively) than the thrown-in group (40.4 percent). Type of insurance likely contributes to the large differences in MOOP expenditures found here across the child poverty groups. Figure 12 shows the median MOOP expenditures for each group by type of insurance. The median family MOOP expenditure for the thrown-in group covered by private insurance is $9,320 (over half of the thrown-in children are covered by this type of insurance). This compares with $2,490 for the core-poor group and only $710 for the lifted-out group. The proportion of these latter groups covered by private insurance also is much smaller than the thrown-in group, see Appendix Table A-4).

Figure 11. Percentage of Children with Health Insurance by Type and Poverty Status

Figure 11. Percentage of Children with Health Insurance by Type and Poverty Status

 

Figure 12. Median MOOP Expenditures by Child Poverty Status and Private Health Coverage

Figure 12. Median MOOP Expenditures by Child Poverty Status and Private Health Coverage

Expenses for those with public or no insurance are uniformly lower than for those with private insurance, although the median expenditures for the thrown-in group are still substantially larger ($1,977) compared to either the core-poor group ($265) or the lifted-out group ($350) (see Figure 12).

Other factors may contribute to the high medical expenses of the thrown-in group as well. For example, children in the thrown-in group are also somewhat more likely to have an elderly person in their family. While not large, 9.4 percent of children in the thrown-in group have an elderly person in their family, as compared to 2.6 percent of the lifted-out group and 4.4 percent of the core-poor group (see Appendix Table A-4). When examining whether adults in children’s families have any type of difficulty that prevents them from performing certain activities, such as walking or climbing stairs, or problems with hearing or vision, etc. as well as whether adults have a health problem that limits their ability to work, differences across the groups also are quite small. For example, 14.4 percent of the thrown-in group has someone in the family who has a health difficulty, as compared to 15.1 percent of the lifted-out group, and 16.5 percent of the core-poor group. Similarly, 16.5 percent of the thrown-in group has a family member with a work-limiting disability, compared to 13.9 percent of the lifted-out group and 17.1 percent of the core-poor group.


3 Higher poverty thresholds are also somewhat important for this group. Fully 32.2 percent of the thrown-in group resides in the Pacific region of the country, as opposed to only 16.8 percent of the OPM poor group as a whole. And this is precisely the region of the country where the cost-of-living increases the SPM poverty thresholds most dramatically.

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