The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.
This report presents an analysis of policies recommended by the Center for American Progress Task Force on Poverty. The analysis uses the TRIM3 microsimulation model. The policies include increasing the minimum wage, expanding the EITC and other tax credits, expanding the child care subsidy system, increasing participation in the Food Stamp Program, rescinding restrictions on legal aliens' eligibility for benefits, and increasing the number of housing vouchers. The analysis focuses on the policies' impacts on poverty, using a broad definition of income—after taxes and child care expenses and including the value of food and housing aid.
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This report describes the methods used to simulate the potential poverty impacts and costs of a set of policies recommended by the Center for American Progress (CAP) Task Force on Poverty (Center for American Progress 2007). The key policy options include increasing the minimum wage, expanding the EITC and other tax credits, and expanding the system for child care subsidies for working parents. These policies were simulated separately and in combination, with and without indirect employment effects. We also simulated the impacts of increasing the participation rate in the Food Stamp Program, rescinding restrictions on legal aliens' eligibility for transfer programs, and increasing the number of housing vouchers. The results were tabulated to determine the changes in the number of people in poverty and the changes in the poverty gap, using a broad definition of income—after taxes and child care expenses and including the value of food and housing aid. All the simulations used the TRIM3 model—the Transfer Income Model, version 3.1 TRIM3 captures the detailed rules of government programs and the interactions among programs.
The simulations used data from the 2004 Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS), which captures the income and employment characteristics of the civilian non-institutionalized population during calendar year 2003. The ASEC data are augmented with additional data on hourly wages from the April through July 2004 CPS files, and the annual earnings data are adjusted to capture the impact of recent state minimum wage increases. We compared the policy options to a "baseline" reflecting the population, economic circumstances, and government policies in place in 2003, with the exception that some recent changes in federal income tax law are incorporated. We simulated the proposed policies as if they had been fully implemented (in real terms) in CY 2003.
The remainder of this report describes the methods used for the analyses and presents the results. The first section briefly describes the TRIM3 microsimulation model, the input data, and the baseline simulations. The second section discusses the alternative simulations and presents key results. We present more detailed information on the methods and additional results in appendices.
1 TRIM3 is maintained and developed at the Urban Institute under primary funding from the Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation (HHS/ASPE).
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