Poverty and Economic Opportunity

Poverty and Economic Opportunity

December 19, 2016
Poverty and Economic Opportunity
Introduction
Who Are the People Living in Poverty?
In 2015, an estimated 43.1 million people, 13.5% of the
Non-Hispanic whites represent the largest racial/ethnic
total noninstitutionalized population, were living in families
group in the overall population (61%), and represent 41%
with incomes below the official poverty line. The number
of all people living in poverty. Racial/ethnic minorities
of people in poverty and the poverty rate dropped in 2015,
(Hispanics of any race and nonwhites) are over-represented
but both remain higher than before the recent recession.
in the poverty population, comprising 59% of people living
in poverty. People of all ages live in families with incomes
The key factor in determining economic well-being is work
below the poverty threshold, but children are
in a wage-paying job. For adults of working age, that work
disproportionately poor relative to their share of the overall
is either their own or their spouses’. For children, it is the
population.
work of their parents. For the aged and disabled, it is often
Social Security benefits or private retirement or disability
Figure 2. Population in Poverty by Age, 2015
income earned through their and/or their spouses’ past
work. While earnings and work-based benefits are not
always enough to raise family incomes above poverty, it is
their absence that generally results in poverty. Thus,
work—incentives, disincentives, requirements, and
availability—is central to the policy around poverty and
government assistance. Additionally, educational and
services programs often seek to improve individuals’
employability to enhance their economic opportunities.
Trends in Poverty
The federal government has produced official poverty
statistics for each year from 1959 through 2015. In general,
the rate of poverty declined in the early period (1959 to
1973). After 1973, the poverty rate generally fluctuated

Source: Congressional Research Service (CRS), based on data from
with economic conditions, falling during periods of growth
the U.S. Census Bureau; see CRS Report 44698.
and rising during economic downturns. However, since
2000 there have been relatively few declines in the poverty
The Central Role of Work
rate. There were three years in the 2001-2015 period when
the poverty rate declined by more than the margin of error
For working-age adults (ages 18-64), close to two-thirds of
in the poverty estimate. During the 2001-2007 economic
those living in families with income below the poverty line
expansion, the poverty rate declined once (in 2006).
did not work in 2015. (The reason for their nonwork was
Following the end of the Great Recession (2007-2009), the
most often illness or disability, caring for other family
poverty rate fell twice (2013 and 2015), but it remains
members, or going to school.) For aged adults (age 65+),
above pre-recession levels.
most have income either from their past work, in the form
of retirement or disability benefits, or from the current work
Figure 1. Number of People Living in Poverty, and
of family members, helping to explain why aged adults are
Poverty Rate: 1959-2015
under-represented in the poverty population.
Work alone is sometimes not enough to raise family
incomes above poverty, particularly in families with
children. In 2015, two-thirds of all children living in
poverty had at least one adult in their family who worked at
some point during the year.
Policy Responses
Before the Great Depression in the 1930s, poverty policy
was generally left to state and local governments. However,
the mass economic dislocation of the depression led to new
federal policies, such as federally funded cash relief and
public employment for the unemployed. The Social
Source: Congressional Research Service (CRS), based on data from
Security Act of 1935 created systems of social insurance
the U.S. Census Bureau; see CRS Report R44644.
where workers earned protection against wage losses due to
old age and unemployment, and it authorized grants for
https://crsreports.congress.gov

Poverty and Economic Opportunity
public assistance programs for the aged, the blind, and
In FY2015, federal spending for Social Security and
dependent children. Other milestones in policy toward
Unemployment Insurance totaled $914 billion. Federal
poverty and economic opportunity were President Lyndon
spending on needs-tested cash (including refundable tax
Johnson’s War on Poverty, and the welfare reforms of the
credits), food, and housing assistance totaled $303 billion.
1990s. The debates about these policy initiatives included
common questions and themes echoed in today’s discussion
Needs-Tested Programs
of poverty and economic opportunity—particularly, should
Needs-tested programs are diverse in their purposes,
the policy response
designs, and populations served. When health care,

education, social services, employment and training, and
be universally available (e.g., macroeconomic
energy assistance are added to the needs-tested safety net
policy or social insurance) or specifically targeted
programs discussed above, federal spending on needs-tested
to the poor?

programs totaled $848 billion in FY2015. Health programs
provide income to alleviate poverty, services to
(primarily the Medicaid program) are the largest category,
support economic opportunity, or provide publicly
accounting for more than half of all spending on needs-
subsidized jobs, wages, or other work supports?

tested benefits in FY2015.
be tied to specific behaviors, like work?
 be a federal response or one that is implemented at
Figure 4. Federal Spending on Needs-Tested Benefits,
the state and local level?
FY2015
Anti-poverty Effectiveness of Safety Net Programs
The anti-poverty impact of a program is generally measured
in terms of how many more people would be poor in the
absence of income from that program (not accounting for
any potential behavioral changes by program participants).
The programs with the greatest impact on poverty in 2015
were the social insurance programs (e.g., Social Security,
Unemployment Insurance, and Worker’s Compensation)—
particularly Social Security, with its large impact on the
aged population, as well as the non-aged, including
children. Social insurance programs are universally
available programs (not needs-tested), but they are
explicitly tied to work.
The refundable tax credits (the Earned Income Tax Credit

and the Child Tax Credit), targeted to working low-income
Source: CRS Report R44574.
parents, have the second largest impact on overall poverty,
and the largest impact on child poverty. Public assistance
Conclusion and Questions
(Temporary Assistance for Needy Families cash benefits
Most needs-tested spending represents health care or
and Supplemental Security Income for the Aged, Blind, and
programs of cash, food, and housing assistance to address
Disabled) and the noncash programs (e.g., food assistance,
poverty. A relatively small share of needs-tested spending
housing assistance) had a smaller impact on poverty. These
is for education, social services, or employment and
programs generally lessen the severity of poverty but often
training programs (combined, 11% of needs-tested
fail to raise family incomes above poverty.
spending) that seek to improve employability and economic
Figure 3. Anti-poverty Effectiveness of Selected Safety
opportunity for low-income people. The centrality of work,
Net Programs, 2015
both in preventing poverty and as a core component of
safety net programs, raises policy questions. If work is the
answer to poverty, and economic opportunities stem from
being able to work, how should policy address situations
when
 work is not enough to raise incomes above poverty
because of low wage rates or insufficient hours?
 work is scarce as a result of macroeconomic or
local economic conditions?
 individual circumstances—age, health, education
or experience, personal or systemic challenges—
serve as a barrier to success in the labor market?
Gene Falk, Specialist in Social Policy
Source: Congressional Research Service (CRS), based on data from
the U.S. Census Bureau. This figure uses the Supplemental Poverty
Maggie McCarty, Specialist in Housing Policy
Measure (SPM), which takes into account the value of noncash
Joseph Dalaker, Analyst in Social Policy
benefits, except the explicit value of medical insurance.
IF10562
https://crsreports.congress.gov

Poverty and Economic Opportunity

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.

https://crsreports.congress.gov | IF10562 · VERSION 2 · NEW