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New estimates show that as a consequence of government transfer programs poverty has fallen by nearly 40 percent since the 1960s, according to study conducted by a team of researchers based at the Columbia School of Social Work.
The study was co-authored by:
The findings were released in two working papers issued by the CPRC:
The researchers used an “anchored supplemental poverty measure” to study poverty trends from 1967 to 2012. The anchored SPM measure used a fixed poverty threshold based on contemporary households’ expenditures on necessary items. As Christopher Wimer explained, “Evaluating poverty relative to a threshold that reflects today’s living standards indicates that poverty rates have fallen nearly 40% since 1967.”
The study found that without tax credits, food stamps, and other government programs, poverty would have been flat. As Liana Fox noted, “Our analysis shows that none of this decline in poverty would have occurred without government programs – trends in market incomes alone would have left poverty at roughly the same level in 2012 as it was in 1967.”
These findings would not have been evident if the researchers had used the official poverty measure (OPM), which does not take account of major government programs such as food stamps and tax credits. As Jane Waldfogel commented, “Our estimates using the anchored SPM show that historical trends in poverty have been more favorable – and government programs have played a larger role – than OPM estimates suggest.”
Study findings are particularly striking for child poverty and deep child poverty. As Irv Garfinkel elaborated, “In 2012, government programs reduced both child poverty and deep child poverty by 11 percentage points. In 1967, by contrast, government programs, through the tax system, actually increased child poverty rates, and reduced deep child poverty rates by only 4 percentage points.”
The researchers found that the impact of government anti-poverty programs was particularly pronounced in recent years. As Neeraj Kaushal noted: “We find that in 2012 the full tax and transfer system reduced overall poverty rates by 13 percentage points.”
The findings were based on data from the Annual Social and Economic Supplement to the Current Population Survey (March CPS) and the Consumer Expenditure Survey (CEX). The researchers used a methodology similar to that used by the Census in calculating the SPM, but with adjustments for differences in available historical data.
As detailed in the paper, they set poverty thresholds for 2012 based on consumer expenditures on food, clothing, shelter, and utilities (FCSU) between the 30th-36th percentiles of expenditures on FCSU, plus an additional 20 percent for additional necessary expenditures (based on a 5-year average of data from 2008-2012). Thresholds were further adjusted for whether the household made a mortgage or rent payment, or owned its home free and clear of a mortgage. To create the anchored SPM, thresholds for the years between 1967 and 2012 were calculated using the 2012 thresholds as an anchor and adjusting those for inflation. Thresholds were then applied to the March CPS and adjusted for family composition and size. Rather than comparing thresholds to only pre-tax income as is done in the OPM, thresholds were then compared to a much broader set of resources, including post-tax income and near-cash transfers, such as food stamps (the Supplemental Nutrition Assistance Program) and the Earned Income Tax Credit.
The analysis was supported by the Annie E. Casey Foundation as well as the Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD).