Indicators of Welfare Dependence: Annual Report to Congress, 2006. Measuring Economic Well-Being


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 also are included under the Economic Risk Factors found in Chapter III.

The poverty rate in 2004 remains much lower than in 1993, when poverty reached its highest peak since the early 1980s. The official poverty rate for 2004 was 12.7 percent, compared to 15.1 percent in 1993. This difference in the poverty rate indicates that 2.3 million fewer people are in poverty and 2.7 million fewer children are in families with incomes below poverty than in 1993. There was an increase in the overall and child poverty rates between 2000 and 2003, but the poverty rate among adults over age 64 continued to decline for the second consecutive year (see Table ECON 1 in Chapter III).

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 12.7 percent in 2004.

The dotted line shows what the poverty rate 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. The poverty rate under this measure would be higher than under the official measure, or 13.5 percent in 2004.

The lowest line shows that the poverty rate 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 2004 would be more than two percentage points lower than the official measure, or 10.5 percent.

Figure SUM 2.
Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: 1979-2004

Figure SUM 2. Percentage of Total Population in Poverty with Various Means-Tested Benefits Added to Total Cash Income: 1979-2004

Source: Unpublished Congressional Budget Office tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1980-2005. Additional calculations by DHHS. See ECON 4 in Chapter III for underlying table and further notes.

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