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How Do States' Safety Net Policies Affect Poverty?

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Document date: September 13, 2011
Released online: September 13, 2011

Abstract

Safety net policies can dramatically reduce poverty.  A full assessment requires use of a Supplemental Poverty Measure (SPM) that adds near-cash benefits and tax credits to cash income, deducts necessary expenses, and uses up-to-date, geographically-sensitive poverty thresholds.  This analysis implements the SPM in Georgia, Illinois, and Massachusetts to examine the effects of the key safety net programs on poverty.  The results show that safety net policies in these three states have substantially different effects on poverty, but federal programs narrow the differences across the states.

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Introduction

The safety net is a broad array of federal and state programs that supports families through cash, food, housing assistance, and tax credits. Some are universal insurance programs that provide benefits regardless of other income and assets while others, often called means-tested programs, provide benefits to those with low incomes. Some federal programs operate the same across the country, and others allow for significant state administrative variation. The federal and state governments jointly fund other parts of the safety net, and eligibility and benefits vary across the states. States may also fund programs to fill in the gaps or augment federal programs. These variations mean that low-income families can face very different safety nets across the country.

This paper examines how safety net policy variation affects poverty among adults under age 65 and children. We measure the effects using a Supplemental Poverty Measure (SPM) that captures the effects of cash, noncash, and tax elements of the safety net and show the net effects on adult and child poverty. In 2009, the Office of Management and Budget formed an Interagency Technical Working Group (ITWG) on developing the SPM to provide an “improved understanding of the economic well-being of American families and of how Federal policies affect those living in poverty.” The SPM would not replace the official poverty measure, which is based only on cash income, but would supplement it. The SPM provides a useful benchmark for assessing the effectiveness of safety net policies.

We highlight the safety nets in three focal states: Georgia, Illinois, and Massachusetts. These states were chosen to illustrate the effects of narrow, medium, and broad safety nets. The results show how universal and means-tested programs affect poverty and how federal and state program rules have very different effects across states with different populations and economies.

The paper begins with a summary of the safety net programs included in the assessment. The next section summarizes methods, including the data, the choice of focal states, the SPM metric, and the methods used to implement the SPM in the focal states. Then we describe the variation in demographic and economic characteristics and safety net policies across these states. The results show how the safety net policies affect both the official and SPM measures of poverty in the three states. Results also highlight how individual elements of the safety net affect poverty and net incomes throughout the income distribution.

Federal and state safety net programs substantially reduce poverty, especially among children. The focal states’ safety net policies have substantially different effects on poverty, but federal policies tend to smooth out differences across the three focal states.

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Topics/Tags: | Children and Youth | Families and Parenting | Poverty, Assets and Safety Net


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