Indicators of Welfare Dependence: Annual Report to Congress, 2004. Measuring Economic Well-Being

04/27/2005

To assess the social impacts of any change in dependence, changes in the level of poverty should be considered. This chapter focuses on the official poverty rate, the most common poverty measure; additional measures of poverty and need are also included under the Economic Risk Factors found in Chapter III.

Poverty in 2002 remains much lower than in 1996, the year of passage of the Personal Responsibility and Work Opportunity Reconciliation Act. The official poverty rate for 2002 was 12.1 percent, compared to 13.7 percent in 1996. This difference in the poverty rate indicates that 1.96 million fewer people are in poverty and 2.33 million fewer children are in families with incomes below poverty than in 1996. There was a small increase in the overall poverty rate between 2001 and 2002, but the poverty rate for children was essentially unchanged (see Table ECON 1 in Chapter III).

Table SUM 1. Recipiency and Dependency Rates: 1996-2001

  1996 1997 1998 1999 2000 2001
Recipiency Rates (Rates of Any Amount of AFDC/TANF, Food Stamps, or SSI)
All Persons  16.0 14.8 13.5 13.3 12.5 12.6
Racial/Ethnic Categories
Non-Hispanic White  9.9 9.7 8.6 8.4 8.2 8.2
Non-Hispanic Black  35.6 30.2 29.6 29.8 27.0 26.3
Hispanic  32.0 28.0 24.5 23.4 21.0 21.6
Age Categories
Children Ages 0-15  24.7 22.1 20.0 19.7 18.1 20.8
Women Ages 16-64  16.0 14.7 13.6 13.6 12.5 12.5
Men Ages 16-64  11.7 11.1 10.0 9.6 9.2 9.6
Adults Age 65 and over  10.3 10.2 9.9 10.0 10.4 9.6
Family Categories
Individuals in Married Couple Families  9.6 8.7 8.3 7.9 7.2 7.4
Individuals in Female-Headed Families  46.0 41.6 37.5 39.9 37.1 36.4
Individuals in Male-Headed Families  25.3 24.3 19.7 19.3 21.8 21.2
Unrelated Individuals  11.5 11.9 10.9 10.0 10.1 10.0
Dependency Rates (More than 50 Percent of Income from AFDC/TANF, Food Stamps or SSI)
All Persons  5.2 4.5 3.8 3.3 3.0 3.1
Racial/Ethnic Categories
Non-Hispanic White  2.6 2.5 2.1 1.8 1.9 1.8
Non-Hispanic Black  13.8 11.4 10.5 9.1 7.7 8.8
Hispanic  10.9 9.1 6.6 5.4 4.5 4.5
Age Categories
Children Ages 0-15  9.7 8.4 6.8 5.6 5.1 5.9
Women Ages 16-64  5.2 4.6 3.9 3.5 3.0 3.3
Men Ages 16-64  2.7 2.5 2.1 1.9 1.9 2.0
Adults Age 65 and over  2.4 2.1 2.1 2.0 2.1 1.9
Family Categories
Individuals in Married Couple Families 1.7 1.4 1.1 1.0 0.9 1.0
Individuals in Female-Headed Families 21.1 18.4 15.0 13.6 11.4 11.9
Individuals in Male-Headed Families 5.4 5.6 4.2 3.0 4.4 4.0
Unrelated Individuals  4.2 4.2 4.2 3.4 3.8 3.8

Note: Recipiency is defined as living in a family with receipt of any amount of AFDC/TANF, SSI, or food stamps during the year. Dependency is defined as having more than 50 percent of annual family income from AFDC/TANF, SSI and/or food stamps. Dependency rates would be lower if adjusted to exclude welfare assistance associated with working. Spouses are not present in the Male-Headed and Female-Headed family categories. Persons of Hispanic ethnicity may be of any race. Due to small sample size, American Indians/Alaska Natives, Asians and Native Hawaiians/Other Pacific Islanders are included in the total for all persons but are not shown separately.

Source: March CPS data, analyzed using the TRIM3 microsimulation model.


Figure SUM 2. Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: 1979-2002

Figure SUM 2. Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: 1979-2002

Source: Congressional Budget Office tabulations of March CPS data. Additional calculations by DHHS. See ECON 4 in Chapter III for underlying table and further notes.


Figure SUM 2 shows poverty estimates under both the official poverty rate and two other measures that adjust income to take into account cash benefits, non-cash benefits and taxes. The three measures in the graph are based on analyzing three different concepts of income against the poverty threshold:

The solid line with filled squares shows the official poverty rate, based on total cash income, including earned and unearned income. The official poverty rate was 12.1 percent in 2002.

The dotted line shows what poverty would be if means-tested cash assistance (primarily AFDC/TANF and SSI) were excluded from cash income. Income in this measure includes earnings and other private cash income, plus social security, workers’ compensation, and other social insurance programs, as income. Poverty under this measure would be higher than the official measure, or 12.8 percent in 2002.

The lowest line shows that poverty would be lower if the cash value of selected non-cash benefits (food and housing) and taxes, including refunds under the Earned Income Tax Credit (EITC), were counted as income.4 Under this definition, poverty rates in 2002 would be at least two percentage points lower than the official measure, or 10.0 percent.


4 The effects of selected non-cash benefits (food and housing) are shown separately from the effect of taxes in Figure ECON 4 in Chapter III. Prior to 1993, taxes increased poverty. Since 1993, taxes, including the refunds through the Earned Income Tax Credit, have caused reductions in poverty.

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