Panel Paper: Examining the Impact of Government Benefits On Chronic and Transient Poverty in the U.S., 1998-2008

Saturday, November 9, 2013 : 2:45 PM
DuPont Ballroom H (Washington Marriott)

*Names in bold indicate Presenter

Sara E. Kimberlin, University of California, Berkeley
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 (OPM) or a derivative of the OPM as its basis, but there is widespread recognition of the inadequacies of the OPM.  The Supplemental Poverty Measure (SPM) recently developed by the U.S. Census and Bureau of Labor Statistics is a better-grounded 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 OPM.  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 post-welfare-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 cash-equivalent government transfers.  Government benefits and programs examined include the EITC, Child Tax Credit, SNAP, housing subsidies, TANF, LIHEAP (heating subsidy), school lunch, WIC, SSI, Social Security, unemployment insurance, and worker’s 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 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.