Examining the Impact of Government Benefits on Chronic and Transient Poverty in the United States, 1998-2008edit
Research shows that long-term or chronic poverty has a greater impact on life outcomes than short-term or transient poverty. Moreover, economic theory posits that chronic and transient poverty are conceptually distinct phenomena, calling for different policy solutions. Thus it is important to examine poverty and consider the impact of poverty policies from a longitudinal perspective, considering chronic and transient poverty separately. All prior research on chronic and transient poverty in the United States has used the official federal poverty measure or a derivative of the official poverty measure as its basis, but there is widespread recognition of the inadequacies of the official federal measure. The Supplemental Poverty Measure (SPM) recently developed by the U.S. Census and Bureau of Labor Statistics is a bettergrounded poverty measure, and moreover facilitates analysis of the impact of a wide range of government benefits on poverty rates, which is not possible using the official poverty measure. However, the SPM has not yet been used to examine poverty from a long-term longitudinal perspective. This study fills that gap. Using data from the nationally representative Panel Study of Income Dynamics from 1998 to 2008 (n=8,375), this study identifies the extent and demographics of chronic and transient poverty in the United States using the SPM over an 11-year timeframe in the postwelfare-reform policy context. A primary focus is identifying the impact of a range of government benefits on the rates of chronic and transient poverty for the population overall and for three particularly vulnerable demographic subgroups: children, seniors, and immigrants. This analysis has not been possible in prior research on chronic and transient poverty in the United States because it requires a poverty measure like the SPM that accounts for indirect and cashequivalent government transfers. Government benefits and programs examined include the EITC, Child Tax Credit, SNAP (food stamps), housing subsidies, TANF, LIHEAP (heating subsidy), school lunch, WIC, SSI, Social Security, unemployment insurance, and worker’s Kimberlin 2013 – Impact of Govt Benefits on Chronic and Transient SPM Poverty 2 compensation. The impact of federal and state income tax and federal payroll tax (FICA) on chronic and transient poverty rates is also examined. Results show that all government benefits combined reduced the chronic poverty rate from 10.8% to 2.1%. Benefits reduced the transient poverty rate from 23.9% to 18.9%. Government benefits overall had a greater absolute and relative impact on chronic poverty rates than on transient poverty rates, in part because benefits shifted a proportion of individuals out of chronic poverty into transient poverty. Income taxes (before credits) had a negligible impact on chronic and transient poverty rates, but payroll taxes contributed to the transient poverty rate. Kimberlin 2013 – Impact of Govt Benefits on Chronic and Transient SPM Poverty 3 Examining the Impact of Government Benefits on Chronic and Transient Poverty in the United States, 1998-2008 Introduction Measurement methods are an important lens through which we understand the scope of social problems such as poverty, as well as the impact of policies on these problems. Poverty in the United States has most often been analyzed using a cross-sectional approach, examining the number and characteristics of households who qualify as poor by comparing annual income to an annual poverty threshold amount. This measurement approach does not capture information about the time dimension of poverty, specifically the experience of poverty across multiple years. However, empirical research shows that the persistence of poverty is relevant to understanding both the demographics of the poor population and the impact of poverty on life outcomes, as short-term and long-term poverty differ in the proportion of the population affected, demonstrate somewhat different demographics, and have different causes and prognoses per economic theory. Thus to understand the problem of poverty in the United States, and the impact of policy on U.S. poverty, it is relevant to examine short-term or transient poverty and long-term or chronic poverty as distinct phenomena. The measurement lens of chronic versus transient poverty has not been applied extensively in the United States, particularly in recent years, but it has been used more widely to examine poverty in developing countries (e.g. Jalan & Ravallion, 1998; Morduch, 1994; Carter & Barrett, 2006). Moreover, the chronic versus transient framework has been productively applied to describe other problematic social conditions in the United States, notably homelessness, and design corresponding policies (Kuhn & Culhane, 1998; Burt, 2002; Willse, 2010). Applying the chronic versus transient measurement lens to the analysis of poverty in the United States allows us to see a more complete picture of the impact of government policies on U.S. poverty, providing useful information about policy impact that is not available through traditional cross-sectional analysis. The current study thus examines chronic and transient poverty in the United States during a recent 11-year timeframe, from 1998 to 2008, a period representative of the current postwelfare reform policy environment.