119 research outputs found
The effects of the monthly and lump-sum Child Tax Credit payments on food and housing hardship
No full textIn March 2021, the US Congress passed the American Rescue Plan (ARP), which included a large but temporary expansion of the Child Tax Credit (CTC). This study investigates the effects of the expanded CTC on two key indicators of material hardship: food insufficiency and not being caught up on rent or mortgage payments.Prior to the expanded CTC, tax filers could receive a maximum of 3,000 for children ages 6-17 and 250 per older child or 1,500 (over age 6) or $1,800 (under 6) was provided around March 2022 upon tax filing.Our findings on the CTC's effects on food and housing hardship are consistent with earlier research that studied the consequences of the initial monthly payments for food hardship (Parolin et al. 2021; Perez-Lopez 2021; Shafer et al. 2022) but expand on that work by using stronger research design to isolate plausibly causal effects, studying housing hardship in addition to food hardship and assessing the differential effects of the lump-sum as well as monthly payments. Previous theoretical literature (Thaler and Johnson 1990) and empirical work on other types of government payments (Shaefer, Song, and Shanks 2013; Sykes et al. 2015) suggest that households treat lump-sum payments differently from monthly payments, reserving the former for larger expenditures and debt repayment and the latter to meet ongoing, basic needs such as groceries. We find that households respond to the CTC in exactly this way, with food insecurity declining during the monthly payment period and rent/mortgage arrears falling during the lump-sum payment period
Inequality Below the Poverty Line since 1967: The Role of the U.S. Welfare State
No full textSince the War on Poverty in the 1960s, the U.S. social safety net has shifted away from direct cash assistance for the lowest-income households and toward tax-based transfers targeted at working families with children. Previous research has assessed this shift by evaluating its effect on the national poverty rate. Doing so, however, overlooks how it may also have led to increased inequality among low-income households. We apply a decomposition framework to measure how changes in taxes/transfers and composition have affected trends in inequality below the poverty line from 1967 to 2019. Income inequality among the poorest households has been volatile since the 1960s, and changes to the American welfare state played a decisive role in expanding or reducing inequality below the poverty line. Unlike in previous decades, after the mid-1990s, the policies that most reduced poverty were also those that most increased inequality among the poor. These findings challenge standard theories regarding the effectiveness of income transfers in reducing poverty by revealing that recent state-led antipoverty efforts have placed the near poor and the deeply poor on divergent paths
Poor State, Rich State: Understanding the Variability of Poverty Rates across U.S. States
No full textAccording to the Supplemental Poverty Measure, state-level poverty rates range from a low of less than 10 percent in Iowa to a high of more than 20 percent in California. We seek to account for these differences using a theoretical framework proposed by Brady, Finnigan, and Hübgen (2017), which emphasizes the prevalence of poverty risk factors as well as poverty penalties associated with each risk factor. We estimate state-specific penalties and prevalences associated with single motherhood, low education, young households, and joblessness. We also consider state variation in the poverty risks associated with living in a black household and a Hispanic immigrant household. Brady et al. (2017) find that country-level differences in poverty rates are more closely tied to penalties than prevalences. Using data from the Current Population Survey, we find that the opposite is true for state-level differences in poverty rates. Although we find that state poverty differences are closely tied to the prevalence of high-risk populations, our results do not suggest that state-level antipoverty policy should be solely focused on changing "risky" behavior. Based on our findings, we conclude that state policies should take into account cost-of-living penalties as well as the state-specific relationship between poverty, prevalences, and penalties
The direct effect of taxes and transfers on changes in the U.S. income distribution, 1967–2015
No full textScholars have increasingly drawn attention to rising levels of income inequality in the United States. However, prior studies have provided an incomplete account of how changes to specific transfer programs have contributed to changes in income growth across the distribution. Our study decomposes the direct effects of tax and transfer programs on changes in the household income distribution from 1967 to 2015. We show that despite a rising Gini coefficient, lower-tail inequality (the ratio of the 50th to 10th percentile) declined in the United States during this period due to the rise of in-kind and tax-based transfers. Food assistance and refundable tax credits account for nearly all the income growth between 1967 and 2015 at the 5th percentile and roughly one-half the growth at the 10th percentile. Moreover, income gains near the bottom of the distribution are concentrated among households with children. Changes in the income distribution were far less progressive among households without children
Exposure to childhood poverty and racial differences in economic opportunity in young adulthood
No full textYoung adults in the United States, especially young Black adults, experience high poverty rates relative to other age groups. Prior research has largely attributed racial disparities in young adult poverty to differential attainment of benchmarks related to education, employment, and family formation. This study investigates that mechanism alongside racial differences in childhood poverty exposure. Analyses of Panel Study of Income Dynamics data reveal that racial differences in childhood poverty are more consequential than differential attainment of education, employment, and family formation benchmarks in shaping racial differences in young adult poverty. Whereas benchmark attainment reduces an individual's likelihood of poverty, racial differences in benchmark attainment do not meaningfully explain Black-White poverty gaps for three reasons. First, childhood poverty is negatively associated with benchmark attainment, generating strong selection effects into the behavioral characteristics associated with lower poverty. Second, benchmark attainment does not equalize poverty rates among Black and White men. Third, Black children experience four times the poverty rate of White children, and childhood poverty has lingering negative consequences for young adult poverty. Although equalizing benchmark attainment would reduce Black-White gaps in young adult poverty, equalizing childhood poverty exposure would have twice the reduction effect
Estimating monthly poverty rates in the United States
No full textOfficial poverty estimates for the United States are presented annually, based on a family unit's annual resources, and reported with a considerable lag. This study introduces a framework to produce monthly estimates of the Supplemental Poverty Measure and official poverty measure, based on a family unit's monthly income, and with a two-week lag. We argue that a shorter accounting period and more timely estimates of poverty better account for intra-year income volatility and better inform the public of current economic conditions. Our framework uses two versions of the Current Population Survey to estimate monthly poverty while accounting for changes in policy, demographic composition, and labor market characteristics. Validation tests demonstrate that our monthly poverty estimates closely align with observed trends in the Survey of Income & Program Participation from 2004 to 2016 and trends in hardship during the COVID-19 pandemic. We apply the framework to measure trends in monthly poverty from January 1994 through September 2021. Monthly poverty rates generally declined in the 1990s, increased throughout the 2000s, and declined after the Great Recession through the onset of the COVID-19 pandemic. Within-year variation in monthly poverty rates, however, has generally increased. Among families with children, within-year variation in monthly poverty rates is comparable to between-year variation, largely due to the average family with children receiving 37 percent of its annual income transfers in a single month through one-time tax credit payments. Moving forward, researchers can apply our framework to produce monthly poverty rates whenever more timely estimates are desired
Transitioning to adulthood: are conventional benchmarks as protective today as they were in the past?
No full textMore young adults in the United States are studying beyond high school and working full-time than in the past, yet young adults continue to have high poverty rates as they transition to adulthood. This study uses longitudinal data on two cohorts of young adults from the 1979 and 1997 National Longitudinal Study of Youth to assess whether conventional benchmarks associated with economic success—gaining an education, finding stable employment, and delaying childbirth until after marriage—are as predictive of reduced poverty today as they were in the past. We also explore differences in the protective effect of the benchmarks by race/ethnicity, gender, and poverty status while young. We find that, on average, the benchmarks associated with economic success are as predictive of reduced poverty among young adults today as they were for the prior generation; however, demographics and features of the economy have contributed to higher poverty rates among today's young adults
Child Care Expenses Push Many Families Into Poverty
No full textIn this fact sheet, authors Marybeth Mattingly and Christopher Wimer use the Supplemental Poverty Measure to assess the extent to which child care costs are pushing families with young children into poverty or preventing them from escaping it. They focus on families with at least one child under age 6 who report any child care expenditures. They report that one third of poor families who pay for child care for their young children are pushed into poverty by their child care expenses. Families most often pushed into poverty by child care expenses include households with three or more children, those headed by a single parent, those with a black or Hispanic head of household, and those headed by someone with less than a high school degree or by someone who does not work full time. Their findings suggest that lowering out-of-pocket child care expenses for families with young children would serve to reduce poverty. Additionally, things like increased subsidies may expand access to higher quality child care or open the door to increased labor force participation
Child Care Expenses Make Middle-Class Incomes Hard to Reach
No full textIn this brief, authors Robert Paul Hartley, Marybeth Mattingly, and Christopher Wimer present estimates of the number of families that cannot maintain a middle-class income as a result of child care expenses. Estimates are based on 2013–2017 data from the Current Population Survey’s Annual Social and Economic Supplement, which corresponds to income and expenses during 2012–2016. They report that approximately 9 percent of working families with children under age 6 are pushed out of the middle class as a result of child care expenses. For working families with very young children (under age 3), 8 percent are pushed below the middle-class threshold. If all middle-class working families with young children were to pay what typical upper-middle and middle-class families pay for child care, roughly $6,900 per year on average, an additional 21 percent would be pushed below the middle-class threshold. They report that the current funding infrastructure for helping parents find and pay for affordable, quality child care is woefully inadequate. One way to support working families would be to increase funding for the Child Care and Development Fund, which is currently targeted toward families below the middle class
The child tax credit and family well-being: an overview of reforms and impacts
No full textThe Child Tax Credit (CTC) has become an increasingly important element of the U.S. safety net. We discuss the structure of the CTC and its effects on childhood poverty and other indicators of well-being during its three distinct phases: prior to the 2021 American Rescue Plan (ARP) expansion, during the expansion, and after the expansion’s expiration. We also examine recent efforts to establish state-level CTCs. We show that, in 2020, roughly one in three children were ineligible for the full CTC because it is tied to family earnings. The temporary expansion under the ARP extended full CTC eligibility to nearly all of these children, thus moving more than three million children out of poverty in the expansion months. State-level analyses show how states could establish CTCs that reduce child poverty rates by half, either as a complement to an expanded federal CTC or in the absence of a continued federal expansion
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