What Works to Reduce Poverty As part of Policy Futures, we examine “what works” when it comes to federal and state policies and programs to reduce poverty and promote opportunity for low-income Americans. We synthesize and amplify the work of poverty researchers around the country on program effectiveness. This effort is designed to inform discussions about new investments in anti-poverty programs as well as reforms of, and funding levels for, existing programs.

Previous analysis of Census data showed that safety net programs cut the poverty rate nearly in half.[1] Data released recently by the Urban Institute, which correct for underreporting of key government benefits in the Census survey, reveal an even stronger impact: the safety net reduced the poverty rate from 29.1 percent to 13.8 percent in 2012 and lifted 48 million people above the poverty line, including 12 million children. (See Figure 1.) Correcting for underreporting reveals that the safety net also did more to reduce deep poverty than previously shown, although 11.2 million Americans remained below half the poverty line.

The appendix tables provide state-by-state data showing that the safety net lifted thousands out of poverty and deep poverty in every state, ranging from 61,000 in Wyoming to 4.9 million in California.

Social Security raises more Americans out of poverty than any other program: 27.4 million in 2012. Among programs limited to people with low or modest incomes, SNAP (formerly food stamps) has the greatest poverty-reducing impact, lifting 10.3 million people out of poverty in 2012. SNAP also lifts more Americans out of deep poverty (5.2 million) than any other means-tested program.

The refundable tax credits for low-income working families — the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) — have an impact comparable to that for SNAP. Together they, too, lifted 10.3 million people out of poverty in 2012.

The safety net protects millions of Americans from poverty and especially from deep poverty. SNAP and the two working-family tax credits are especially important for children. The EITC and CTC lifted 5.3 million children out of poverty in 2012, while SNAP was close behind, lifting 4.9 million children out of poverty. SNAP also lifted more children out of deep poverty — raising 2.1 million children above half the poverty line — than any other program.

Correcting for Underreporting Reveals Stronger Safety Net

This analysis uses the Census Bureau’s Supplemental Poverty Measure (SPM), which, unlike the official poverty measure, counts government non-cash benefits such as food assistance and rent subsidies as income and subtracts from income various taxes paid, work expenses, and out-of-pocket medical expenditures. The SPM also makes other adjustments, such as using a poverty line that accounts for differences in living costs across the country.

This study goes beyond the SPM, however, by correcting for the underreporting in Census data of income from key forms of government assistance. Specifically, we use data for six programs from the TRIM microsimulation program designed and maintained by the Urban Institute. TRIM builds on Census data but adjusts it to more closely match actual program participation.[2]

This analysis focuses on 2012, the most recent year for which these corrections are available. (Because we lack comparable historical SPM data, we do not analyze trends over time.)[3]

The poverty rate using the corrected data is 2.2 percentage points lower for all people, and 4.6 percentage points lower for children, than using the uncorrected SPM data, as Figure 1 shows. Using the corrected data has a particularly strong effect on deep poverty. The figures reveal that the safety net reduced the share of persons with family income below half of the poverty line to 3.6 percent, well below the 5.1 percent in the uncorrected data. (See Figure 2.) For children, the reduction is even more notable — to 2.3 percent, about half the 4.7 percent figure in the uncorrected SPM data.[4]

Even after these corrections, however, 11.2 million people remained below half the poverty line in 2012: 1.7 million children, 4.9 million adult women, and 4.6 million adult men. The greatest number by race or ethnicity were non-Hispanic whites (5.8 million), compared with 2.6 million Hispanics and 1.7 million non-Hispanic African Americans, reflecting the large size of the white population overall. Minorities, however, faced a substantially higher likelihood of living in deep poverty: 4.8 percent of Hispanics and 4.5 percent of non-Hispanic African Americans lived below half the poverty line, compared with 3.0 percent of non-Hispanic whites. (See Table 1.)

Living below half the SPM’s poverty line meant having income after non-cash benefits, taxes, and expenses for items like health care and child care of less than $12,523 for a family of four (a couple with two children) renting a home in an average-cost community in 2012. A comparison illustrates the difficulty of making ends meet at such a low income level. In 2012, 68 percent of four-person families spent more than that on food and transportation alone, an imbalance that could leave a family living in deep poverty in debt before it begins to pay for shelter, clothing, or other basic needs.

Table 1. Number and Percent of People in Poverty and Deep Poverty

by Age, Race and Ethnicity, 2012 Below 100% of Poverty Below 50% of Poverty Number Percent Number Percent All Ages All 42,800,000 13.8 11,200,000 3.6 White 18,800,000 9.6 5,800,000 3.0 Black 7,700,000 20.4 1,700,000 4.5 Hispanic 12,700,000 23.8 2,600,000 4.8 Asian 2,400,000 15.0 700,000 4.5 Children Under 18 All 10,000,000 13.5 1,700,000 2.3 White 2,900,000 7.3 600,000 1.6 Black 1,900,000 18.9 300,000 2.7 Hispanic 4,300,000 24.0 700,000 3.7 Asian 500,000 13.7 100,000 2.8 Note: Figures use the federal government's Supplemental Poverty Measure (SPM) with corrections for underreporting. Source: CBPP analysis of 2012 Census Bureau data from the March Current Population Survey and SPM public use file; corrections for underreported benefits from HHS/Urban Institute TRIM model.

Which Programs Keep the Most People out of Poverty and Deep Poverty?

Social Security lifts more Americans out of poverty than any other program.[5] Using the corrected SPM, Social Security lifted 27.4 million Americans above the poverty line in 2012. This total includes 17.5 million seniors, who rely heavily on Social Security income in their retirement years. It also includes 1.6 million children, who may benefit from Social Security either directly (for example, by receiving the program’s survivor payments if a working parent has died) or indirectly (if a family member receives retirement, disability, or survivor benefits).

After Social Security, SNAP (the Supplemental Nutrition Assistance Program) and refundable tax credits for working families had the largest poverty-reducing impacts. SNAP lifted 10.3 million Americans above the poverty line in 2012, including 4.9 million children. [6] Similarly, the two refundable credits for low-income working families, the Earned Income Tax Credit and the Child Tax Credit, together lifted 10.3 million Americans — including 5.3 million children —above the poverty line.[7] (See Figure 3.)

When “means-tested” income-support programs — those that limit assistance to people with low or modest incomes — are considered as a group, they lifted more than 27 million low-income Americans above the poverty line in 2012. These programs include SNAP, housing assistance, Supplemental Security Income (SSI) for low-income seniors and people with disabilities, cash assistance funded by Temporary Assistance for Needy Families (TANF), and the EITC and the low-income (or refundable) component of the Child Tax Credit.[8]

Housing programs reach relatively few eligible households due to limited funding but have strong antipoverty effects for those they do reach. In 2010, about 10 million Americans in 5 million low-income households received housing assistance,[9] well below the number that received other major programs means-tested programs like SNAP or the EITC.[10] Yet, housing assistance lifted out of poverty a larger share of those it assisted: 37 percent of housing assistance recipients would be considered poor without this assistance but were above the poverty line because of it.

Unemployment insurance (UI) lifted 2.7 million Americans above the poverty line in 2012. UI’s poverty-reducing effects rise in times of high unemployment, particularly when Congress provides additional UI benefits through emergency legislation. In 2009, a year in which unemployment soared and Congress provided additional UI benefits, unemployment benefits lifted more than 5 million Americans above the poverty line, almost twice as many as in 2012.

The safety net also plays a crucial role in easing deep poverty, particularly for families with children. In 2012, public tax and benefit policies overall reduced the number of children living below half the poverty line by 86 percent, or 10 million.[11] They reduced the number of children living below three-quarters of the poverty line by 75 percent, or nearly 13 million.

Social Security does more than any other single program to protect Americans from deep poverty, keeping 24.5 million people above half the poverty line in 2012, most of them elderly retirees. SNAP kept 5.2 million people above half the poverty line, including 2.1 million children under 18. As noted, SNAP also kept more children out of deep poverty than any other program in 2012. After Social Security and SNAP, SSI kept the most people of all ages out of deep poverty (4.2 million) in 2012. (See Figure 4.) UI lifted 1.3 million people, including 300,000 children above half the poverty line in 2012.

State-by-State Figures

The tax and benefit system lifted thousands of people above the poverty line in every state, ranging from 61,000 in Wyoming to 4.9 million in California. Not surprisingly, states with large overall populations had the largest numbers of people lifted out of poverty. (See the appendix tables for state-by-state data.)

The government tax and benefit system reduced poverty by more than half in 41 states. In West Virginia, for example, the poverty rate was 31.1 percent before taxes and benefits are counted, but 10.0 percent — less than one-third as much — once taxes and benefits are taken into account.

These state figures average together data for four years (2009-2012) for increased reliability. Unlike the nationwide figures, the state estimates use Census data instead of TRIM data for the Low Income Home Energy Assistance Program (LIHEAP) and the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) because TRIM data for those two programs are not consistently available before 2012.

Conclusion

The safety net protects millions of Americans from poverty and especially from deep poverty, with the numbers lifted out of poverty seen to be even larger after correcting for underreported income. Nonetheless, 42.8 million people remained below the SPM poverty line in 2012 even after the corrections, including 11.2 million people living below half the poverty line.

Appendix Table 1: Number of Persons in Poverty and Deep Poverty (i.e., Below Half the Poverty Line), By Age and State

Using the Supplemental Poverty Measure after corrections for underreported income; average of 2009-2012 Number Poor Below 50%

of Poverty Line Below 75%

of Poverty Line State All ages Under 18 All ages Under 18 All ages Under 18 U.S. Total 42,422,000 10,294,000 11,317,000 1,943,000 22,034,000 4,689,000 Alabama 542,000 132,000 124,000 24,000 272,000 60,000 Alaska 69,000 18,000 25,000 7,000 42,000 11,000 Arizona 1,141,000 319,000 323,000 75,000 648,000 183,000 Arkansas 403,000 96,000 119,000 18,000 210,000 44,000 California 7,736,000 2,069,000 1,850,000 324,000 3,996,000 922,000 Colorado 622,000 147,000 203,000 28,000 338,000 63,000 Connecticut 381,000 83,000 107,000 17,000 201,000 39,000 Delaware 105,000 23,000 28,000 4,000 53,000 9,000 Dist of Columbia 119,000 21,000 36,000 5,000 67,000 10,000 Florida 3,336,000 742,000 914,000 159,000 1,816,000 371,000 Georgia 1,574,000 416,000 435,000 80,000 806,000 175,000 Hawaii 171,000 31,000 41,000 4,000 86,000 11,000 Idaho 150,000 38,000 45,000 10,000 77,000 19,000 Illinois 1,721,000 433,000 439,000 88,000 856,000 200,000 Indiana 784,000 216,000 194,000 30,000 359,000 77,000 Iowa 211,000 38,000 57,000 9,000 111,000 19,000 Kansas 268,000 73,000 77,000 14,000 135,000 33,000 Kentucky 483,000 103,000 144,000 21,000 255,000 49,000 Louisiana 644,000 159,000 173,000 31,000 315,000 65,000 Maine 112,000 19,000 32,000 3,000 56,000 7,000 Maryland 709,000 154,000 200,000 27,000 372,000 64,000 Massachusetts 813,000 164,000 191,000 27,000 413,000 78,000 Michigan 1,096,000 261,000 307,000 51,000 576,000 126,000 Minnesota 459,000 100,000 143,000 24,000 254,000 50,000 Mississippi 428,000 106,000 119,000 16,000 212,000 42,000 Missouri 637,000 144,000 171,000 22,000 339,000 57,000 Montana 100,000 19,000 34,000 5,000 55,000 10,000 Nebraska 152,000 34,000 53,000 9,000 81,000 16,000 Nevada 465,000 128,000 137,000 31,000 260,000 63,000 New Hampshire 121,000 21,000 38,000 4,000 69,000 10,000 New Jersey 1,138,000 266,000 321,000 63,000 623,000 128,000 New Mexico 268,000 61,000 82,000 11,000 141,000 29,000 New York 2,907,000 659,000 770,000 130,000 1,522,000 336,000 North Carolina 1,192,000 291,000 270,000 44,000 578,000 121,000 North Dakota 51,000 9,000 13,000 1,000 30,000 4,000 Ohio 1,208,000 252,000 335,000 50,000 601,000 109,000 Oklahoma 387,000 96,000 107,000 19,000 204,000 48,000 Oregon 480,000 94,000 134,000 15,000 245,000 40,000 Pennsylvania 1,347,000 260,000 358,000 40,000 687,000 110,000 Rhode Island 119,000 25,000 26,000 3,000 58,000 11,000 South Carolina 580,000 125,000 174,000 30,000 319,000 62,000 South Dakota 71,000 14,000 23,000 3,000 40,000 6,000 Tennessee 828,000 165,000 215,000 28,000 419,000 70,000 Texas 3,638,000 1,065,000 976,000 221,000 1,871,000 481,000 Utah 269,000 82,000 75,000 14,000 133,000 32,000 Vermont 51,000 9,000 13,000 1,000 23,000 3,000 Virginia 905,000 212,000 256,000 49,000 460,000 89,000 Washington 687,000 143,000 189,000 19,000 371,000 59,000 West Virginia 181,000 36,000 55,000 6,000 86,000 12,000 Wisconsin 517,000 115,000 152,000 24,000 268,000 51,000 Wyoming 46,000 7,000 15,000 2,000 25,000 4,000 Source: CBPP analysis of U.S. Census Bureau's March 2010-2013 Current Population Survey; Supplemental Poverty Measure public use files; and HHS/Urban Institute TRIM baseline microdata files.

Appendix Table 2. Effects of the Tax and Benefit System on Poverty By State

Using the Supplemental Poverty Measure after corrections for underreported income; average of 2009-2012 All Ages Under 18 Percent in Poverty Percent in Poverty State Number Lifted Above SPM Poverty Line Before Counting Taxes and Benefits After Counting Taxes and Benefits Number Lifted Above SPM Poverty Line Before Counting Taxes and Benefits After Counting Taxes and Benefits U.S. TOTAL 46,364,000 28.9 13.8 11,924,000 29.8 13.8 Alabama 935,000 31.2 11.5 222,000 31.2 11.7 Alaska 79,000 21.1 9.8 25,000 22.9 9.7 Arizona 998,000 32.4 17.3 290,000 36.0 18.8 Arkansas 601,000 34.8 14.0 138,000 33.0 13.6 California 4,851,000 33.6 20.7 1,443,000 37.3 22.0 Colorado 568,000 23.6 12.3 157,000 24.2 11.7 Connecticut 415,000 22.7 10.9 84,000 20.7 10.3 Delaware 145,000 28.0 11.8 38,000 29.1 11.1 Dist of Columbia 82,000 32.8 19.3 32,000 47.0 18.8 Florida 2,892,000 33.2 17.8 582,000 32.9 18.5 Georgia 1,401,000 30.6 16.2 414,000 32.4 16.3 Hawaii 224,000 30.3 13.1 72,000 33.9 10.3 Idaho 283,000 27.9 9.6 81,000 28.0 9.0 Illinois 1,745,000 27.1 13.5 474,000 29.2 13.9 Indiana 1,060,000 29.0 12.3 260,000 29.5 13.4 Iowa 413,000 20.8 7.0 93,000 18.1 5.2 Kansas 435,000 25.2 9.6 116,000 26.4 10.2 Kentucky 809,000 30.0 11.2 199,000 29.9 10.2 Louisiana 792,000 32.2 14.4 221,000 33.0 13.8 Maine 236,000 26.5 8.6 42,000 23.0 7.3 Maryland 535,000 21.5 12.3 137,000 21.5 11.4 Massachusetts 918,000 26.3 12.3 199,000 25.3 11.4 Michigan 1,756,000 29.2 11.2 371,000 27.4 11.3 Minnesota 670,000 21.5 8.7 160,000 20.4 7.8 Mississippi 593,000 35.2 14.7 163,000 35.0 13.8 Missouri 1,054,000 28.4 10.7 245,000 27.5 10.2 Montana 172,000 27.7 10.2 36,000 25.3 8.8 Nebraska 227,000 20.9 8.4 57,000 19.9 7.5 Nevada 345,000 30.3 17.4 92,000 32.9 19.1 New Hampshire 137,000 19.7 9.3 22,000 15.5 7.5 New Jersey 1,036,000 25.0 13.1 244,000 25.0 13.0 New Mexico 377,000 31.9 13.2 112,000 33.5 11.9 New York 3,062,000 31.0 15.1 839,000 34.4 15.1 North Carolina 1,676,000 30.4 12.6 427,000 30.8 12.5 North Dakota 73,000 18.7 7.7 15,000 15.9 5.8 Ohio 1,969,000 27.9 10.6 461,000 26.6 9.4 Oklahoma 620,000 27.3 10.5 172,000 28.5 10.2 Oregon 641,000 29.2 12.5 156,000 29.1 10.9 Pennsylvania 2,012,000 26.7 10.7 375,000 23.1 9.4 Rhode Island 176,000 28.4 11.5 43,000 30.3 11.1 South Carolina 854,000 31.3 12.7 204,000 30.3 11.5 South Dakota 122,000 23.8 8.7 30,000 22.1 6.9 Tennessee 1,176,000 31.6 13.1 293,000 30.9 11.1 Texas 3,691,000 28.9 14.3 1,246,000 33.0 15.2 Utah 314,000 20.6 9.5 94,000 19.8 9.2 Vermont 96,000 23.7 8.2 18,000 21.6 7.2 Virginia 781,000 21.4 11.5 190,000 21.2 11.2 Washington 1,038,000 25.4 10.1 280,000 26.4 8.9 West Virginia 383,000 31.1 10.0 70,000 26.9 9.1 Wisconsin 833,000 24.0 9.2 180,000 22.4 8.7 Wyoming 61,000 19.3 8.2 13,000 14.9 5.5 Government benefits are Social Security, unemployment insurance benefits, workers compensation, veterans benefits, TANF, SSI, SNAP, school lunch, WIC, rent subsidies, higher education grants, general assistance, and home energy assistance. The tax system is federal and state income and payroll tax owed, net of federal or state tax credits received such as the Earned Income Tax Credit (EITC) or Child Tax Credit. Source: CBPP analysis of U.S. Census Bureau's March 2010-2013 Current Population Survey; Supplemental Poverty Measure public use files; and HHS/Urban Institute TRIM baseline microdata files.

Appendix Table 3. Effects of the Tax and Benefit System on Deep Poverty (i.e., Income Below 50 Percent of SPM Poverty Line) By State

Using the Supplemental Poverty Measure after corrections for underreported income; average of 2009-2012 All Ages Under 18 Percent Below 50%

of Poverty Line Percent Below 50%

of Poverty Line State Number Lifted Above SPM Poverty Line Before Counting Taxes and Benefits After Counting Taxes and Benefits Number Lifted Above SPM Poverty Line Before Counting Taxes and Benefits After Counting Taxes and Benefits U.S. TOTAL 45,806,000 18.6 3.7 10,155,000 16.2 2.6 Alabama 916,000 22.0 2.6 194,000 19.2 2.1 Alaska 65,000 13.0 3.6 16,000 11.9 3.5 Arizona 984,000 19.8 4.9 239,000 18.6 4.5 Arkansas 571,000 23.9 4.1 112,000 18.5 2.6 California 5,441,000 19.5 4.9 1,463,000 19.0 3.4 Colorado 524,000 14.4 4.0 117,000 11.6 2.2 Connecticut 423,000 15.1 3.0 77,000 11.5 2.1 Delaware 122,000 16.8 3.2 28,000 14.8 1.7 Dist of Columbia 103,000 22.6 5.9 31,000 31.9 4.0 Florida 3,229,000 22.1 4.9 591,000 18.6 4.0 Georgia 1,457,000 19.5 4.5 369,000 17.6 3.1 Hawaii 174,000 16.6 3.2 40,000 14.7 1.3 Idaho 205,000 16.1 2.9 42,000 12.3 2.4 Illinois 1,695,000 16.7 3.4 370,000 14.7 2.8 Indiana 1,079,000 20.0 3.1 264,000 18.3 1.9 Iowa 334,000 13.0 1.9 47,000 7.8 1.3 Kansas 389,000 16.7 2.8 95,000 15.2 1.9 Kentucky 750,000 20.7 3.3 156,000 17.4 2.1 Louisiana 795,000 21.7 3.9 190,000 19.3 2.7 Maine 218,000 19.1 2.5 33,000 13.5 1.1 Maryland 585,000 13.6 3.5 117,000 10.7 2.0 Massachusetts 950,000 17.3 2.9 166,000 13.5 1.9 Michigan 1,697,000 20.5 3.1 346,000 17.2 2.2 Minnesota 637,000 14.8 2.7 125,000 11.7 1.9 Mississippi 600,000 24.8 4.1 148,000 21.4 2.1 Missouri 997,000 19.6 2.9 200,000 15.7 1.5 Montana 152,000 18.9 3.5 25,000 13.8 2.5 Nebraska 188,000 13.3 2.9 37,000 10.0 2.0 Nevada 369,000 18.9 5.1 87,000 17.7 4.6 New Hampshire 146,000 14.0 2.9 19,000 8.5 1.5 New Jersey 1,063,000 15.9 3.7 212,000 13.4 3.1 New Mexico 330,000 20.3 4.0 85,000 18.7 2.2 New York 3,105,000 20.1 4.0 739,000 19.9 3.0 North Carolina 1,625,000 20.1 2.9 350,000 16.9 1.9 North Dakota 70,000 12.6 2.0 12,000 8.8 0.6 Ohio 1,811,000 18.8 2.9 372,000 15.8 1.9 Oklahoma 558,000 18.0 2.9 120,000 14.9 2.0 Oregon 593,000 19.0 3.5 120,000 15.7 1.7 Pennsylvania 1,966,000 18.5 2.8 329,000 13.4 1.5 Rhode Island 180,000 19.8 2.5 39,000 18.9 1.4 South Carolina 829,000 21.9 3.8 161,000 17.6 2.8 South Dakota 101,000 15.4 2.9 19,000 11.1 1.5 Tennessee 1,164,000 21.8 3.4 224,000 17.0 1.9 Texas 3,416,000 17.3 3.8 987,000 17.2 3.2 Utah 268,000 12.1 2.6 70,000 9.5 1.6 Vermont 84,000 15.6 2.1 12,000 10.6 1.1 Virginia 819,000 13.6 3.2 165,000 11.3 2.6 Washington 867,000 15.6 2.8 190,000 13.0 1.2 West Virginia 372,000 23.6 3.1 64,000 17.8 1.4 Wisconsin 732,000 15.7 2.7 130,000 11.7 1.8 Wyoming 57,000 13.0 2.7 9,000 8.0 1.4 Government benefits are Social Security, unemployment insurance benefits, workers compensation, veterans benefits, TANF, SSI, SNAP, school lunch, WIC, rent subsidies, higher education grants, general assistance, and home energy assistance. The tax system is federal and state income and payroll tax owed, net of federal or state tax credits received such as the Earned Income Tax Credit (EITC) or Child Tax Credit. Source: CBPP analysis of U.S. Census Bureau's March 2010-2013 Current Population Survey; Supplemental Poverty Measure public use files; and HHS/Urban Institute TRIM baseline microdata files.