A paper from the Center for Budget and Policy Priorities (CBPP) shows that during the decade following the mid-1990s shift in public assistance policy, the overall percentage of children living in poverty decreased, but the share of children living in deep poverty (family income below half of the poverty line) increased. CBPP released Deep Poverty Among Children Worsened in Welfare Law’s First Decade on July 23.
The authors focus on changes in poverty levels since 1995, highlighting possible effects of the 1996 welfare reform law, the Personal Responsibility and Work Opportunity Act. That law replaced the Aid to Families with Dependent Children program (AFDC) with Temporary Assistance for Needy Families (TANF), among other changes. The law marked a shift toward providing less assistance to families that had little or no income and imposing stricter work requirements and time limits. At the same time, a 1993 expansion of the Earned Income Tax Credit and the Child Tax Credit was fully phased in by 1996, benefiting low and moderate income working households.
CBPP found that there were significant increases in children’s deep poverty in the decade following the 1996 welfare reforms. The U.S. Department of Health and Human Services (HHS) evaluated eleven early 1990s programs that had work requirements and were otherwise comparable to the 1996 welfare law. The HHS evaluation found that deep poverty rates rose significantly for families in six of the programs, compared to families that stayed in more traditional welfare programs. All of the programs raised employment rates, but in most there was also an increase in the percentage of families that did not have employment or welfare.
Connecticut’s Jobs First pilot study of one welfare-to-work program found that economic losses were concentrated at the lower end of the income scale, with economic gains concentrated at the higher end. A study published in 2012 found that with non-cash benefits such as the Supplemental Nutrition Assistance Program (SNAP) taken into account, the overall U.S. poverty rate fell while the portion of those living in deep poverty rose between 1993 and 2004.
CBPP notes that data sources on poverty rates often have a technical flaw when representing the effects of the 1996 welfare reform law. Some data sources, including the Current Population Survey (CPS), omitted income from public benefits programs such as TANF, SNAP, and Supplemental Security Income. As a result, CPS missed more than one-third of public assistance benefits in 2005. This CPS underreporting of public benefits has declined in the last decade, making it appear as if benefits shrunk less than they have.
The paper analyzes how this underreporting obscures a rise in deep poverty by examining CPS data before and after correcting for underreporting of benefits. Before correction, the share of children in deep poverty remained roughly the same between 1995 and 2005. However, after correcting for the underreporting of public benefits programs, there is less deep poverty in any given year, but there is an increase over time from 2.1% in 1995 to 3.0% in 2005. The number of children in deep poverty rose from 1.5 million to 2.2 million. This highlights the extent to which AFDC was able to reduce deep poverty among children and how the change to TANF reversed that trend. AFDC kept 2.4 million children above half of the poverty line in 1995, while TANF kept only approximately 600,000 children out of deep poverty.
The authors suggest that policy makers examine this information as they consider changes to the nation’s income assistance programs, taking into account the role policy has in the well-being of children in low income families.
Deep Poverty Among Children Worsened in Welfare Law’s First Decade is at http://bit.ly/1kkVuKa
A Congressional Research Service summary of the Personal Responsibility and Work Opportunity Act is at http://1.usa.gov/1oA8M2y.