The statement of task for our committee directed us to use the Supplemental Poverty Measure (SPM). The official poverty measure (OPM) of income poverty, which the U.S. federal government developed in the 1960s as a method for identifying a threshold amount of household cash income below which a given household would be designated as “poor” is still being used to determine social program eligibility and to track long-term trends in poverty rates. A key difference between the OPM and SPM is that SPM-based household resources also include “near-cash” income benefits such as the Supplemental Nutrition Assistance Program (SNAP, formerly called food stamps) and housing subsidies, as well as benefits from many smaller programs. We also adjust our SPM poverty measure for underreporting of some types of income in the survey data.
The $10.25 minimum wage threshold (for 2020) was chosen because past research supports our efforts to estimated its likely impacts on child poverty and employment among low-income adults. It is similar to but below the Congressional Budget Office’s (CBO’s) (2014) and Sawhill and Karpilow’s (2014) proposed minimum wage of $10.10 for 2017.
Yes, almost all of the committee-developed program options that lead to substantial poverty reduction were estimated to cost at least $20 billion annually.
Although programs like Temporary Assistance to Needy Families (TANF) may be among the most visible federal programs for children in low-income families, they are not the largest child-focused programs. Additionally, it is noteworthy that federal spending on the key cash assistance program that emerged from the 1996 welfare reforms (the TANF program) totaled only $13 billion in 2017 (Isaacs et al., 2018). Indeed, it is estimated that more than one-third (37 percent) of federal expenditures directed at children go to programs such as the Child Tax Credit and income tax exemption for children, which do not restrict benefits to families with low incomes. In the case of expanding programs such as the Temporary Assistance for Needy Families (TANF) program, evidence was lacking on the impacts of the freedom granted to states to spend their block grant funding in many different ways, and as a result we were unable to formulate options for enhancing TANF’s impacts on family income and child poverty.
Many evidence-based program areas such as home visiting and early education may generate benefits that fall outside of the 10-year window dictated by our Statement of Task. These kinds of programs are not included in this or any other report chapters.
A consumption-based poverty measure is theoretically attractive but has many practical problems. It may not provide as timely an indicator of when low-income families are under increasing financial stress as an income-based poverty measure, assuming good measurement of income. Importantly, it is difficult to trace the effects of more generous assistance programs (e.g., a more generous child tax credit) on consumption, whereas it is straightforward to do so for income. It also requires calculations of the annual consumption value of consumer durables like homes, automobiles, and many households appliances, which requires assumptions that are difficult to validate.
Strong evidence on the effects of work requirements is notably lacking and more federal support for evaluating those requirements is needed. The strongest evidence we have is from the 1990s, and that evidence showed that, while work programs for welfare recipients increased employment, poverty rates for two-parent families rose and those for single-parent families sometimes rose and sometimes fell (see Chapter 7, pages 7-10, 7-11, and 7-12).
There are many misconceptions about poor people including that they do not work very much, that they choose to be poor, hide income or commit program fraud. Our report provide substantial evidence that this indeed is not the case. It is important to recognize how child poverty actually impacts everyone. For example, childhood poverty is linked to child malnutrition and health problems, and as these children grow up, they tend to have lower earnings, lower employment, and worse health conditions, which will also eventually impact U.S. labor markets. Our research showed that having such high rates of childhood poverty as we have now costs 4 to 5.4 percent of the U.S. gross domestic product, roughly between $800 billion and $1.1 trillion annually. The cost for income support, incarceration and poor health outcomes are extremely high and are mainly paid by the non-poor .
The Committee reviewed the evidence on this question and found that some programs reduced the levels of work of recipients modestly. But the research it reviewed also showed that many welfare programs such as the Earned Income Tax Credit and child care subsidies lead recipients to work more. All of the packages the Committee presented would lead to a net increase in work among recipients.
The Committee did not do a systematic summary of the large research literature on this question. However, it did calculate the effects of current and existing welfare programs on the child poverty rate, many of those programs were created or expanded by the War on Poverty. The calculations showed that existing welfare programs have had significant impacts leading to large decreases in child poverty in the U.S.
The Committee was charged with searching for alternative ways to decrease child poverty by 50% and estimating their costs. Whether the costs are too high or too low, how they would be paid for if the policies laid out were enacted, is beyond the scope of the Committee’s charge, and is up to the country’s elected officials.