A new nationwide study provides solid empirical evidence that safety-net programs including Social Security, unemployment insurance, and food stamps do a very good job of keeping U.S. households out of poverty. The poverty rate was cut almost in half last year through the combined impact of programs like these. But the new study also shows that the economy is doing a worse job of helping Americans escape poverty through work.
Not factoring in the impact of these government programs, the poverty rate fell sharply in the 1990s but has increased since 2000. Without these safety net programs, poverty in 2012 would have been at the highest level since 1967. This is partly an after-effect of the Great Recession, but it also reflects growing wage inequality and the large number of workers in low-wage jobs.
These findings are a reminder that the District is taking a sound approach to reducing poverty. The District now has the largest state-level Earned Income Tax Credit (EITC), which boosts the income of working poor families, although DCFPI’s new report finds that other parts of the DC tax code undermine the benefits of the EITC. And just this month, the District is poised to raise the minimum wage to $11.50 by 2016 and to ensure that everyone who works in DC has paid sick leave.
Some of the key findings of the new poverty study:
The safety net cut the national poverty rate almost in half in 2012. About 16 percent of Americans live in poverty, but without safety net programs the poverty rate would be 29 percent.
Safety net improvements during the Great Recession worked especially well. Poverty in the U.S. grew by less one percentage point in the deep recession, while it would have risen over 5 percentage points without government programs. Temporary expansions of food stamps, the EITC, unemployment insurance, and other programs were very effective at keeping families from falling into poverty.
Without the safety net, poverty would be at a 45-year high. Twenty-nine percent of Americans would be poor without government assistance programs. That is higher than the 26 percent pre-transfer poverty rate in 1967 — and the highest in the entire 1967-2012 period.
This important new research shows that addressing poverty takes both good jobs and a strong safety net. It’s an important message for policymakers everywhere, but particularly in DC, where poverty remains high and the rising costs of living are making it harder for residents to continue to call DC home.
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