Indicators of Welfare Dependence: Annual Report to Congress, 2008. 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 2006 remains much lower than in 1993, when poverty reached its highest peak since the early 1980s. The official poverty rate for 2006 was 12.3 percent, compared to 15.1 percent in 1993. This difference in the poverty rate indicates that 2.8 million fewer people are in poverty and 2.9 million fewer children are in poverty in 2006 than in 1993.

Figure SUM 2.
Percentage of Total Population in Poverty with Various Means-Tested Transfers Counted as Income: 1979-2006

Figure SUM 2

Note: The three measures of income are as follows: (1) “Before means-tested cash transfers” is earnings and other pre-transfer (“private” or “market”) cash income, plus social security, workers compensation, and other social insurance cash transfers.  It does not include means-tested cash transfers; (2) The “Official poverty measure” uses the official Census Bureau income definition, which includes means-tested cash transfers, primarily AFDC/TANF and SSI; (3) “After means-tested non-cash benefits and taxes” counts the cash value of means-tested food and housing benefits, adds the refundable Earned Income Tax Credit (EITC), and subtracts federal payroll and income taxes. The fungible value of Medicare and Medicaid is not included in any of the income measures.

Source: Unpublished tabulations from the Current Population Survey, Annual Social and Economic Supplement, 1980 – 2007, analyzed by the Congressional Budget Office. See ECON 4 in Chapter III for underlying table and further notes.

Figure SUM 2 shows poverty estimates under the official poverty rate and two other measures that adjust income by adding or subtracting means-tested cash transfers, means-tested non-cash benefits, and federal taxes.  While each of the three poverty measures in the graph uses a different definition of income, all three poverty measures use the Census Bureau’s official poverty thresholds.

The “Official poverty measure” trend line shows the official poverty rate based on total cash income, including means-tested cash transfers. The official poverty rate was 12.3 percent in 2006.

The “Before means-tested cash transfers” trend line shows what the poverty rate would be if means-tested cash transfers (primarily AFDC/TANF and SSI) were excluded from income.  Income in this measure includes earnings and other pre-transfer cash income, plus social security, workers compensation, and other social insurance cash transfers.  The poverty rate under this measure would be higher than under the official measure, or 13.0 percent in 2006.

The “After means-tested non-cash benefits and taxes” trend line shows that the poverty rate would be lower if the cash value of means-tested food and housing transfers and the effect of federal taxes were counted as income.4  Under this definition, the poverty rate in 2006 would be more than two percentage points lower than the official measure, or 10.0 percent.

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