Need-Tested Benefits: Children and Poverty

September 27, 2021 R46922

Need-Tested Benefits: Children and Poverty
September 27, 2021
For families with children, the years immediately preceding the COVID-19 pandemic were
characterized by high rates of employment for parents and historically low poverty rates for
Gene Falk
children. In 2017, 95% of all children lived in families with earned income from work. Yet, in
Specialist in Social Policy
that year many families relied, in part, on need-tested benefits to escape or reduce the severity of

poverty. Need-tested programs by definition require an individual or family to meet a test of
financial need to qualify for benefits. The child poverty rate under the Supplemental Poverty

Measure (SPM) without counting the income from need-tested benefits would have been 25.6%
in 2017. Need-tested benefits cut the child poverty rate in half, to 12.6%.
Need-tested benefits are provided to families in different forms, cash or noncash. In general, cash can be used to purchase any
good or service to help meet families’ basic needs. Noncash benefits are restricted to purchasing a particular good or service
(e.g., food, housing, and child care). Cash and noncash benefits are generally provided to families on an ongoing (usually
monthly) basis. One form of need-tested benefits generally not provided to families on an ongoing basis are refundable tax
credits targeted to lower-income persons: the Earned Income Tax Credit (EITC) and the refundable portion of the child
credit, the Additional Child Tax Credit (ACTC). Under policies in place before 2021, all refundable tax credits were paid as
lump sum payments that were part of tax refunds received in the following year, and these tax credits were not available to
families without earnings.
The figure below shows poverty rate reduction attributable to need-tested benefits for children based on 2017 income and
prior to the policies put in place to address the economic impact of the COVID-19 pandemic. It adds , in sequence, income
from the two cash public assistance programs (the Temporary Assistance for Needy Families [TANF] block grant and
Supplemental Security Income [SSI]), noncash benefits, and refundable tax credits. The figure shows that most of the poverty
rate reduction was attributable to noncash benefits and refundable tax credits: benefits either restricted to the purchase of
certain goods and services or paid the following year in a lump sum and not available to meet ongoing needs in 2017.
Poverty Rates for Children, Before and After Counting Need-Tested Benefits
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic

Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic Supplement (ASEC) to
the Current Population Survey (CPS) and data from the Transfer Income Model, version 3 (TRIM3) microsimulation model.
The figure shows a relatively small role for the cash public assistance programs in reducing child poverty. Also, it should be
noted that for the comparatively small group of children in families without earnings (5% of all children), the post-benefit
poverty rate was 67.1%.
Examining how need-tested benefits affected families before the pandemic is relevant to the legislative debate in 2021
because some policies that addressed the effects of the economic fallout of the pandemic were either ad-hoc (e.g., stimulus
checks) or are scheduled to expire. One policy response to the pandemic was to provide cash to households. For families with
children, the American Rescue Plan Act of 2021 (P.L. 117-2) expanded the child tax credit to nonearners and very low
earners in addition to providing a portion of the credit as monthly advance payments for July 2021 to December 2021. These
cash payments—not specially targeted to low-income families, but available to them—represent a departure from pre-
pandemic aid. Prior to the pandemic, most lower-income families with children generally relied on earnings from work for
their ongoing cash, which was most often supplemented by noncash benefits and lump sum payments of refundable tax
credits received as part of tax refunds.
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Need-Tested Benefits: Children and Poverty

Introduction
For families with children, the years immediately preceding the Coronavirus Disease 2019
(COVID-19) pandemic were characterized by high rates of employment for the adults and
historical y low poverty rates for the children.1 While the economic fal out from the pandemic
heightened interest in the economic insecurities faced by some families with children and
prompted policy responses to them, even before the pandemic many families with children relied
on need-tested benefits to either escape or reduce the severity of their poverty.2 Need-tested
programs by definition require an individual or family to meet a test of financial need to qualify
for benefits. General y, to be eligible for need-tested assistance, family income must be below a
certain dollar threshold and some programs also require the value of assets to be below a certain
amount.
This report builds upon the analysis in CRS Report R46825, Need-Tested Benefits: Impact of
Assistance on Poverty Experienced by Low-Income Families and Individuals. Based on the
Supplemental Poverty Measure (SPM)3 in 2017, the child poverty rate absent the income from
need-tested benefits would have been 25.6%. Need-tested benefit and refundable tax credit
policies in place before the COVID-19 pandemic and its economic fal out were estimated to
reduce child poverty for that year by about half, to 12.6%. Before the pandemic, most of the
poverty reduction from need-tested benefits was attributable to noncash benefits and refundable
tax credits, rather than ongoing cash assistance.
Examining how need-tested benefits affected families before the pandemic is relevant to the
legislative debate in 2021. One policy response to the pandemic was to provide cash to
households. This included three rounds of economic impact payments (stimulus checks),
enhanced unemployment insurance, and an expansion and advance monthly payment of the child
tax credit. Under current law, the enhanced unemployment insurance has expired. In the fal of
2021, Congress is debating extending the expansion and advance monthly payment of the c hild
tax credit.
The need-tested benefits discussed in this report that reduced child poverty are cash assistance
from the Temporary Assistance for Needy Families (TANF) block grant and Supplemental
Security Income (SSI); nutrition assistance from the Supplemental Nutrition Assistance Program
(SNAP), school meals programs, and the Special Supplemental Nutrition Program for Women,
Infants, and Children (WIC); housing assistance; energy assistance; child care subsidies; and the

1 A review of characteristics and trends in child poverty can be found in Greg Duncan and Suzanne Le Menestrel, eds.,
A Roadm ap to Reducing Child Poverty, National Academy of Sciences, Engineering and Medicine, 2019. T he study
also includes a review of the literature on how poverty affects the development of children as well as some policy
proposals to further reduce child poverty.
2 See CRS Report R46823, Need-Tested Benefits: Who Receives Assistance?, which examines benefit receipt for
selected need-tested programs: Medicaid and the State Children’s Health Insurance Program (CHIP), the Supplemental
Nutrition Assistance Program (SNAP), housing assistance, public assistance funded under the T emporary Assista nce
for Needy Families (T ANF) block grant, Supplemental Security Income (SSI), child care subsidies, and the refundable
tax credits. It is estimated, based on 2017 income and pre-pandemic policies, that 57% of all children received at least
one of these need-based benefits. T he most commonly received benefits were from Medicaid/CHIP, SNAP, and the
refundable tax credits.
3 For a discussion of the research Supplemental Poverty Measure (SPM), see CRS Report R45031, The Supplemental
Poverty Measure: Its Core Concepts, Developm ent, and Use.
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Need-Tested Benefits: Children and Poverty

refundable tax credits—the Earned Income Tax Credit (EITC) and the refundable portion of the
child credit, the Additional Child Tax Credit (ACTC).4

Data and Methods Used in This Report
This report is one in a series that uses augmented Census Bureau data on income and poverty in 2017 to provide
an example of how a future year might look if the economy and policies revert back to their pre-pandemic states;
2017 is used because this is the year for which the Congressional Research Service (CRS) has created the
augmented data. The augmented data are from or associated with the Transfer Income Model, version 3 (TRIM3),
funded primarily by the Department of Health and Human Services (HHS) and maintained at the Urban Institute.
The data from TRIM3 were used to correct data from the Census Bureau, which is wel known to under-report
benefit income. TRIM3 data were used for SNAP, SSI, TANF, housing assistance, and child care subsidies. TRIM3
data were unavailable for the other need-tested benefits, so the Census data were used for them.
The year 2017 was deep into the previous economic expansion (year 8 of a 10-year expansion), but not the year
of peak economic activity. The data for 2017 may provide a sense of how need-tested benefits would affect
families and individuals after the pandemic ends, should the economy continue to recover and temporary policy
changes expire. However, the experiences in future years are unlikely to match those of 2017 exactly.
The policies estimated are general y those that were in place in 2017. The one exception is the federal income tax
code, particularly the child tax credit. Estimates of poverty (such as those used in this report) reflect estimates of
refundable tax credits based on the year for which they are calculated rather than the year they are paid. An
expanded child tax credit was enacted in the 2017 tax revision (commonly referred to as the Tax Cuts and Jobs
Act [TCJA, P.L. 115-97]), effective for tax year 2018. This report estimates receipt of the refundable tax credits as
if the TCJA were in effect in 2017. This is to provide a better sense of how policies may affect incomes once the
temporary measures adopted to respond to the COVID-19 pandemic expire.
For more information on the data and methods, see CRS Report R46824, Need-Tested Benefits: Technical
Companion to Selected CRS Reports on Need-Tested Benefits Receipt by Families and Individuals.
Child Poverty Before Counting Need-Tested
Benefits
To il ustrate the effects of need-tested benefits income on the poverty status of families with
children, this report discusses income minus the need-tested benefits described above. This pre-
assistance poverty measure is not meant to describe what the U.S. economic situation would look
like if need-tested benefit programs did not exist—if they did not, many things (e.g., behavior,
consumption patterns, overal living standards) would be different. The comparison of estimated
pre-assistance and post-assistance poverty among children is an analytic approach designed to
show the relative contribution of need-tested benefits versus other sources of income (e.g., market
income) to the living standard achieved by families with children under current law.
Children in Families with Earned Income
The year 2017 was the eighth full year of the 2009 to 2020 economic expansion, and was
characterized by comparatively high employment rates and low unemployment rates. In that year,
94.5% of children lived in families5 that had earned income from work.

4 T his report does not address how the value of Medicaid or other health coverage affects family well-being. Under the
SPM, the value of health insurance is not counted as income. Rather, the SPM subtracts out -of-pocket medical
expenses from income. Health care needs are also not included in the SPM poverty thresholds.
5 T his report uses the SPM definition of family, which includes cohabiting couples. Analyses that use the Census
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Need-Tested Benefits: Children and Poverty

Figure 1 shows both the pre-assistance child poverty rate and the number of children who were in
families with pre-assistance incomes below poverty in 2017. It shows that the poverty rate before
counting need-tested benefits was 22.1% for children in families with earnings and 85.6% for
children in families without earnings. However, because most children were in families with
earnings, most children who had income below poverty without counting need-tested benefits
were in families with earnings.
Figure 1. Poverty Rates for Children in Families With and Without Earnings, Before
Need-Tested Benefits Were Counted
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic

Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.
Notes: Percentages were computed based on unrounded numbers and hence might differ slightly from those
computed by the population numbers rounded to the nearest mil ion.
Thus, in the pre-pandemic year of 2017, high rates of work among parents (95% of children lived
in families with earnings) occurred together with one in four children being in families with
incomes below poverty absent need-tested benefits. Though it is beyond this report’s scope to
detail why income before need-based benefits failed to exceed the poverty level for that
proportion of children, several factors (outlined in the Appendix A tables) provide some
explanation:
 Among families with earned income, it often took two parents working, and at
least one working full-time al year, to have earnings above the family’s poverty
threshold. Earnings were more likely to be below the poverty threshold for
children in two-parent families with only one working parent (even full-time al
year), single-parent families, and families where no parent worked full-time al
year (e.g., both parents worked part-time) (see Table A-1).
 Even in a year wel into an economic expansion, some parents experienced
unemployment or involuntary part-time work. Children of parents with these

Bureau’s official definition of family, which comprises individuals living together related by blood or marriage, tend to
produce slightly lower percentages of children living in families with earnings. Under the official definition, the
earnings of an unrelated cohabiter are not counted.
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situations over the year were more likely to be in families with below-poverty
earnings (see Table A-2 and Table A-3).
 Family earnings were more likely to be below the poverty threshold in families
where the adults lacked a college credential, the adults were either young or older
(i.e., over 55), or the family had non-White members. Large families were also
more likely to have below-poverty earnings than smal er families (see Table A-4,
Table A-5, Table A-6, and Table A-7).
Children in Families Without Earnings
In 2017, an estimated 4.1 mil ion children (5% of al children) were in families with $0 in
reported earnings. This is a smal group compared to children in families with earnings, and a
heterogeneous group (see Table 1). However, it is a group with a relatively high pre-assistance
poverty rate. When income from need-tested benefits was not counted, an estimated 85.6% of
children in families with no earnings had family incomes below the poverty line in 2017.
Among the children who lived in families with no reported earnings, a little more than half (2.4
mil ion out of 4.1 mil ion) were in single-parent families. The second largest group (0.8 mil ion)
were in two-parent families and the third largest group (0.6 mil ion) were in families where no
parent of the child was present. Families with children and no reported earnings were also
characterized by having a family member who had disabilities (35.8%), had retired or was
receiving survivors benefits (19.3%), or was an adult student (18.2%).
Table 1. Selected Characteristics of Families with Children, Without Earnings, by
Family Type
Based on 2017 Data
Share of Children Living in Families Without Earnings That

Included ...
An
An
Individual
Individual
Who
Who
Received
Received
Retirement
Total
Disability
or Survivors
An Adult
Any of the
Family Type
Children
Benefits
Benefits
Student
An Infant
Preceding
Two parents
803,164
31.2%
18.2%
26.7%
8.7%
65.3%
Single mother
2,410,089
31.2
14.3
18.2
10.4
60.8
Single father
279,179
58.0
15.6
6.3
12.0
76.1
No parent
612,168
49.6
41.9
12.3
4.3
86.7
Total
4,104,600
35.8
19.3
18.2
9.2
66.5
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.
Notes: Children may fal into more than one of these groupings. Individuals who received disability benefits
include those estimated to have received Supplemental Security Income (SSI) benefits by the TRIM3 model, or
reported to have received Social Security disability benefits or private disability benefits. TRIM3 estimates of SSI
receipt are used because SSI benefits are under-reported on surveys. For a description of how TRIM3 estimates
SSI receipt, see https://boreas.urban.org/documentation/SSI/Main.php.
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Need-Tested Benefits and Child Poverty Rates
Under the policies in place before the COVID-19 pandemic, need-tested benefits were estimated
to reduce the child poverty rate from 25.6% when not counting the income from need-tested
benefit programs to 12.6% after benefits were counted. This is based on the SPM that counts the
value of noncash benefits as wel as the impact of federal and state taxes, including counting the
value of refundable tax credits that are accrued over a year.
For the purposes of this report, need-tested benefits are classified into three groups based on their
form (cash or noncash) or timing:
 Ongoing cash assistance, with benefits generally paid on a monthly basis.
Families with children are eligible for ongoing cash from the TANF block grant
and SSI. TANF helps fund state public assistance programs for needy families
with children. SSI is restricted to individuals age 65 and older or individuals of
any age (including children) with disabilities. Adding these benefits to pre-
assistance income provides a measure of total money income, general y cash, that
is fungible and may be used to purchase any good or service to help meet basic
needs.
 Noncash benefits that can only be used to pay for a specified good or service
(e.g., food, housing, or child care). Noncash benefits are general y provided
regularly; thus, adding noncash benefits to total money income provides a
measure of financial resources available on an ongoing basis to help meet basic
needs.
 Refundable tax credits under the federal income tax system. The two
refundable tax credits considered need-tested benefits and available to families
with children are the EITC and the ACTC. These benefits are general y paid in a
lump sum once a year. Estimates of poverty (such as those used in this report)
reflect estimates of refundable tax credits based on the year for which they are
calculated rather than the year they are paid. For example, this report uses
estimates of the two refundable tax credits as calculated for 2017 (i.e., as they
would be claimed on 2017 income tax returns), though these credits were
actual y paid to families in early 2018 as part of their annual tax refund (i.e., as a
lump sum) after their 2017 returns were filed.6 Thus, income from refundable tax
credits was not actual y available to meet ongoing basic needs in 2017, even if it
was modeled as such. Research has also shown that families use the income from
refundable tax credits received as a lump sum differently than income received
from other sources.7
This section wil look at the contribution of each of these forms of benefits to reducing child
poverty based on the policies in place before the pandemic.

6 In 2017, families might have received EIT C benefits and/or child tax credit benefits as part of their refunds based on
2016 income and circumstances. However, the ASEC does not ask whether families did receive these benefits; hence,
data are not available to calculate total income and poverty status on the basis of all income and tax benefits paid to
families during a calendar year.
7 For example, see Andrew Goodman-Bacon and Leslie McGranahan, “ How Do EIT C recipients spending their
refunds?”, Econom ic Perspectives, 2nd Quarter, 2008, Federal Reserve Bank of Chicago,.
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Need-Tested Benefits: Children and Poverty

Child Poverty Rates Were Halved When Need-Tested Benefits Were
Included in Income
Figure 2 looks at the SPM child poverty rate, starting with the rate as measured before need-
tested benefits are counted and then adding, in sequence, ongoing cash assistance, noncash
benefits, and refundable tax credits. As shown in the figure, most of the poverty reduction from
need-tested benefits came from noncash benefits and the refundable tax credits.
Adding monthly cash assistance from TANF and SSI to other money income reduced the child
poverty rate from 25.6% to 24.6% (1 percentage point). Adding the value of noncash benefits to
money income reduced the child poverty rate to 18.4%, a 6.2 percentage point reduction. The
refundable tax credits further reduced child poverty to its estimated post-benefit, post-tax rate of
12.6%, a further 5.8 percentage point reduction.
Figure 2. Poverty Rates for Children, Before and After Counting
Need-Tested Benefits
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic

Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.
Notes: TANF= Temporary Assistance for Needy Families block grant. SSI = Supplemental Security Income
program.
The pre-assistance poverty rate for children in families without earnings was higher than that for
children in families with earnings (85.6% versus 22.1%) in 2017. Table 2 looks at the child
poverty reduction attributable to need-tested benefits separately for families with children and
earnings and families with children and without earnings. Need-tested benefits reduced child
poverty rates for both types of families. For families with earnings, need-tested benefits reduced
the overal child poverty rate by 12.7 percentage points, to 9.4%. The bulk of the poverty
reduction was from noncash benefits (5.7 percentage points) and refundable tax credits (6.1
percentage points).
Need-tested benefits also reduced the poverty rate for children in families without earnings. For
these families, TANF assistance reduced the child poverty rate by a half a percentage point and
SSI reduced it by 2.3 percentage points. The bulk of poverty reduction for children living in
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families without earnings was from noncash benefits (15.8 percentage points). When these
noncash benefits were included in income along with cash assistance, the child poverty rate for
families without earnings fel from 85.6% to 67.1%. This is the post-benefit poverty rate for this
group because families without earnings were not eligible for refundable tax credits in 2017.
Table 2. Poverty Rates for Families With Children, With and Without Earnings,
Before and After Counting Need-Tested Benefits
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic
Poverty Rates
Change in Poverty Rates

(percentages)
(percentage points)
Children Children
Children Children
in
in
in
in
Families
Families
Families
Families
All
With
Without
All
With
Without

Children
Earnings
Earnings
Children
Earnings
Earnings
Before need-tested benefits were
25.6
22.1
85.6
—
—
—
counted
After TANF assistance was counted
25.5
22.0
85.1
-0.1
-0.1
-0.5
After TANF and SSI was counted
24.6
21.2
82.9
-0.8
-0.8
-2.3
After TANF, SSI, and al noncash
18.4
15.6
67.1
-6.2
-5.7
-15.8
benefits were counted
After al need-tested benefits (TANF,
12.6
9.4
67.1
-5.8
-6.1
NA
SSI, noncash benefits, and refundable
tax credits were counted)
Total change
—
—
—
-13.0
-12.7
-18.5
Source: Congressional Research Service (CRS) based on data from the 2018 Annual Social and Economic
Supplement to the Current Population Survey (CPS) and data from the Transfer Income Model version 3
(TRIM3) microsimulation model.
Note: NA=not applicable.

Sequence of Counting Benefits and Poverty Reduction
The measurement of poverty reductions from need-tested benefits—the poverty rate reductions above and
poverty gap reductions below—were done in a sequence starting with ongoing cash benefits, subsequently adding
noncash benefits, and final y adding refundable tax credits. This sequence, like comparison of estimated pre-
assistance and post-assistance poverty among children, is an analytic approach meant to show the relative
contributions of money income (market income plus ongoing cash public assistance), financial resources available
to meet ongoing needs (money income plus noncash benefits), and total resources to determining families’ poverty
status. A different sequence—or different method of considering need-tested benefits and poverty reduction—wil
produce different numbers but not change the overal conclusion that noncash benefits and refundable tax credits
account for the bulk of poverty reduction for families with children.
The Census Bureau, in its annual reports on the SPM, uses a different method to look at the impact of benefits on
poverty. The Census Bureau’s approach takes families’ final SPM poverty status and subtracts each benefit from
family resources to determine families’ pre-benefit poverty status. Appendix B shows poverty rates for families
with children using this approach, but substituting TRIM3 estimates to address under-reporting and aggregating al
noncash benefits together to make that analysis consistent with what is shown in the body of this report. The
Census Bureau method provides the marginal effect of each program or groups of programs on the poverty rate.
The differences between this approach and that used by the Census Bureau does not change the overal
conclusions of this report that the bulk of poverty reduction is attributable to noncash benefits and refundable tax
credits.
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Need-Tested Benefits Reduced the Aggregate Poverty Gap by Two-
Thirds
Need-tested benefits also reduce the depth (or severity) of poverty among families with children
with incomes below the poverty threshold. The poverty gap is a measure of the depth of poverty
(i.e., in dollars below the SPM threshold). It is defined for an individual family as the difference
between the family’s total income and its poverty threshold. The aggregate poverty gap is that
difference summed across al families with incomes below the poverty threshold.
Figure 3 shows the aggregate poverty gap in 2017 for families with children before and after
need-tested benefits were counted. Need-tested benefits reduced the aggregate poverty gap by
two-thirds ($77.2 bil ion), from $116.6 bil ion to $39.4 bil ion. The largest reduction in the
aggregate poverty gap was attributable to noncash benefits. As with the poverty rate, ongoing
cash assistance reduced the poverty gap by a comparatively smal er amount than noncash
benefits. However, ongoing cash assistance (SSI more so than TANF) reduced the poverty gap or
severity of poverty by about as much as the refundable tax credits. This is because SSI and TANF
general y assist very poor families, for whom they had a greater effect in reducing the poverty
gap. The refundable tax credits were available under pre-pandemic policies only to families with
earnings—and hence, higher income—who were more likely to be closer to their respective
poverty threshold.8
The figure also breaks out the reduction in the aggregate poverty gap for families with and
without earnings. Of the total $77.2 bil ion in poverty gap reduction attributable to counting need-
tested benefits, $57.8 bil ion was the reduction in the poverty gap for families with earnings. For
families without earnings, noncash benefits did more to reduce the aggregate gap than did
ongoing cash assistance, and SSI did more to reduce the gap than did TANF.

8 Refundable tax credits are also the last in the sequence of benefits added to family inco me. T hus, the reduction in the
gap was measured after both ongoing cash assistance and noncash benefits were counted.
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Need-Tested Benefits: Children and Poverty

Figure 3. Aggregate Poverty Gaps for Families with Children, With and Without
Earnings, Before and After Counting Need-Tested Benefits
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic

Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.
Notes: TANF= Temporary Assistance for Needy Families block grant. SSI = Supplemental Security Income
program.
Median Poverty Gaps
The median poverty gap is a measure of how deep poverty is for a typical family with income
below the poverty threshold. For context, the median poverty threshold for families with children
in 2017 was $26,657.
Figure 4 shows the median (or typical) poverty gap for families with children before and after
each form of need-tested benefits was counted. The median family with a child living in pre-
assistance poverty had income (before counting need-tested benefits) that was $11,958 below its
poverty threshold. Ongoing cash assistance from TANF and SSI reduced the median poverty gap
to $10,713. After ongoing cash and noncash benefits were counted (a measure of available
income and benefits provided on an ongoing basis), the median poverty gap was reduced to
$6,607. Refundable tax credits further reduced the gap to $6,522.9
The relatively smal difference between the median poverty gap before and after refundable tax
credits is partial y explained by the fact that receipt of these benefits often moves families over
the poverty line. Hence, there is no poverty gap for these families. The median poverty gap post-

9 Median poverty gaps, like aggregate poverty gaps, are computed for families that had incomes below the poverty line.
T his is done separately for each income concept (i.e., pre-assistance, after TANF, after SSI, after noncash benefits, and
after refundable tax credits), and represent the number of families with children with incomes below the poverty line
for each income concept. T hus, the median pre-assistance poverty gap represents the median difference between family
income and the poverty threshold for families with pre-assistance income below the poverty threshold, the post T ANF
poverty gap represents the median difference between family income and the poverty threshold for families with post -
T ANF income below the poverty threshold, and so on.
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Need-Tested Benefits: Children and Poverty

refundable tax credits represents the median difference between family income and the poverty
threshold for only those families with total income, including TANF, SSI, noncash benefits, and
refundable tax credits, below the poverty threshold.
Figure 4. Median Poverty Gaps for Families with Children, Before and After
Counting Need-Tested Benefits
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic

Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.
Notes: TANF= Temporary Assistance for Needy Families block grant. SSI = Supplemental Security Income
program. Al numbers are rounded to the nearest dol ar, so differences shown might be different from that
obtained by simply subtracting before and after counting median poverty gaps.
Figure 5 shows the reduction in median poverty gaps for families with children by whether or not
families had earnings during the year. Both types of families experienced a reduction in their
median gap. The largest median gap reductions for families with earnings were from noncash
benefits, which reduced the typical gap for these families by $3,736, from $9,669 to $5,934.
Refundable tax credits reduced their typical poverty gap further, by an estimated $540, to a post-
benefit gap of $5,393 for families with earnings who remained below the poverty threshold.
For families without earnings, the median poverty gap before need-tested benefits was $19,336.
Ongoing cash assistance reduced this gap to $15,349 (and once again, SSI had more of an effect
than TANF assistance). Noncash benefits further reduced the median poverty gap for families
without earnings to their post-benefit level of $9,566 (families without earnings were not eligible
for refundable tax credits in 2017). This gap was 77% higher than the gap for families with
earnings, indicating that families without earnings typical y remained in deeper poverty than did
families with earnings.
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Need-Tested Benefits: Children and Poverty

Figure 5. Median Poverty Gaps for Families with Children, With and Without
Earnings, Before and After Counting Need-Tested Assistance
Based on 2017 Income Data and Policies in Place Before the COVID-19 Pandemic

Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.
Notes: TANF= Temporary Assistance for Needy Families block grant. SSI = Supplemental Security Income
program. Al numbers are rounded to the nearest dol ar, so differences shown might be different from that
obtained by simply subtracting before and after counting median poverty gaps.
Policy Implications
This report shows that many families with children, including those with earned income, relied in
part on need-tested benefits to escape or al eviate poverty in the pre-pandemic period. The year
2017 was a strong one economical y, and 95% of children lived in families with earnings. Yet,
before need-tested benefits were counted, 25.6% of children lived in families with income below
poverty. Need-tested benefits reduced the child poverty rate to 12.6% and also reduced the
severity of poverty as measured by poverty gaps. This was largely accomplished through noncash
benefits and, for families with earners, refundable tax credits. Children in families with earnings
had an estimated post-benefit poverty rate of 9.4%. Need-tested benefits did reduce poverty
among the comparatively smal group of children in families without earnings; however, after al
assistance was counted, children in these families had a post-benefit poverty rate of 67.1%.
Families with children general y relied on earnings from work for their ongoing cash. However,
even in a strong economic year such as 2017, some parents lost time from work due to
unemployment or working part-time while desiring full-time work. Ongoing cash assistance—
particularly from TANF—played a relatively smal role in reducing and al eviating child poverty.
Cash assistance can be used to purchase any good or service; noncash benefits cannot. The
aggregate effect of noncash benefits was comparatively large; however, noncash benefits were not
always available to meet the specific basic needs, such as housing, of a family with children. The
most commonly received noncash benefit was nutrition assistance, whereas housing assistance
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Need-Tested Benefits: Children and Poverty

was received by far fewer families with children.10 Further, refundable tax credits also had a
comparatively large role in reducing poverty versus cash assistance; however, tax credits
calculated based on 2017 earnings and family structure (e.g., number of children) were not paid
out to families until early 2018 as part of their tax refund.
That need-tested aid is focused mainly on families with children and working parents, and
provided primarily through noncash benefits and refundable tax credits, is the result of policy
changes that largely began in the mid-1980s. These changes were motivated, in part, by a desire
to promote work for parents, particularly single mothers. The changes included expanding the
EITC and later creating and expanding the child tax credit, de-linking Medicaid coverage for
children from cash public assistance receipt, and establishing child care subsidies for lower-
income parents. They also included the end of the cash public assistance program for families
with children, Aid to Families with Dependent Children (AFDC), resulting from enactment of the
Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PROWRA, P.L. 104-
193). Federal funding for cash aid to needy families with children was folded into the broad-
purpose TANF block grant. The number of families receiving cash assistance and cash assistance
spending declined, and states shifted funds toward other benefits, services, and activities that can
be funded by TANF.11
In contrast to pre-COVID-19 pandemic policies for lower-income families with children, one of
the main policy responses to the economic fal out from the pandemic was direct cash payments to
households. Three rounds of economic impact payments (stimulus checks) were provided, and
unemployment insurance eligibility was enhanced and benefits were raised. The American
Rescue Plan Act of 2021 (ARPA; P.L. 117-2) provided further benefits for families with
children—expanding the child tax credit to nonearners and very low earners as wel as providing
a portion of the credit as monthly advance payments for July 2021 to December 2021. These cash
payments—not special y targeted to low-income families, but available to them—represent a
departure from pre-pandemic aid policies. The expanded child tax credit is scheduled to expire
under current law at the end of 2021. In the fal of 2021, Congress is considering legislation to
extend the expanded child tax credit beyond its scheduled expiration date of the end of the year.

10 See CRS Report R46823, Need-Tested Benefits: Who Receives Assistance?
11 For a discussion of the trend in the number of families who received public assistance from AFDC or are receiving
public assistance from T ANF, see CRS Report RL32760, The Tem porary Assistance for Needy Fam ilies (TANF) Block
Grant: Responses to Frequently Asked Questions.
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Need-Tested Benefits: Children and Poverty

Appendix A. Earnings and Child Poverty
Though it is beyond the scope of this report to fully explain why the poverty rate for children
when need-tested benefits were not counted was 25.6% in 2017, this appendix provides tables
presenting data from an exploratory analysis of pre-assistance child poverty. Because earnings
were the most common form of income received by families with children, it is likely that those
earnings play a large part in explaining the pre-assistance child poverty rate. Thus, these tables
provide some additional data showing the earnings-only poverty rate by various family
characteristics. This is simply the rate at which the (SPM) families’ earnings fal below the
poverty threshold.
Table A-1. Children in Families with Earnings Below the Poverty Thresholds, by Work
Experience During 2017
Number of
Percentage
Children in
of Children
Families
in Families
with Below-
Total
with Below-
Poverty
Children in
Poverty
Earnings
Category
Family Work Experience
Earnings
(Millions)
(Millions)
Both parents worked ful -time al year
0.7%
0.117
15.825
Both parents worked, one ful -time al year
3.9%
0.515
13.070
Both parents worked, neither ful -time al year
15.6%
0.462
2.954
One parent worked full-time al year, other parent did not
16.8%
2.442
14.533
work
One parent worked less than ful -time al year, other parent
50.6%
1.801
3.559
did not work
Single mother worked ful -time al year
20.9%
1.569
7.500
Single father worked ful -time al year
9.4%
0.203
2.169
Single parent worked less than ful -time al year
54.4%
3.211
5.897
Only non-parent earners in family
36.7%
1.597
4.351
Total
17.1%
11.916
69.859
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS). Detail may not add to totals because of rounding.

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Need-Tested Benefits: Children and Poverty

Table A-2. Children in Families with Earnings Below the Poverty Thresholds, by
Whether an Adult Lost Weeks of Work to Unemployment During 2017
Number of Children
Percentage of
in Families with
Children in Families
Below-Poverty
Total Children in the
Any Adult Lost Weeks to
with Below-Poverty
Earnings
Category
Unemployment?
Earnings
(millions)
(millions)
Yes
33.7%
1.882
5.581
No
15.6%
10.034
64.278
Total
17.1%
11.916
69.859
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS).
Note: Weeks lost to unemployment are those in which an individual was not working but looking for work.
Detail may not add to totals because of rounding.
Table A-3. Children in Families with Earnings Below the Poverty Thresholds, by
Whether an Adult Lost Hours of Work to Part-Time Work While Desiring Full-Time
Work During 2017
Number of Children
Percentage of
in Families with
Hours Lost to Working
Children in Families
Below-Poverty
Total Children in the
Part-Time While Desiring
with Below-Poverty
Earnings
Category
Full-Time Work?
Earnings
(millions)
(millions)
Yes
25.8%
0.744
2.884
No
16.7%
11.172
66.975
Total
17.1%
11.916
69.859
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS). Detail may not add to totals because of rounding.
Table A-4. Children in Families with Earnings Below the Poverty Thresholds, Based
on the Educational Attainment of Adults in the Family, 2017
Percentage of
Number of Children
Highest Educational
Children in Poverty
in Poverty Based on
Total Children in the
Attainment of the Adults
Based on Earnings
Earnings Alone
Category
in the Family
Alone
(millions)
(millions)
No high school
53.4%
2.184
4.090
High school diploma
26.9%
6.647
24.677
Postsecondary credential
7.5%
3.085
41.091
Total
17.1%
11.916
69.859
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS). Detail may not add to totals because of rounding.

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Need-Tested Benefits: Children and Poverty

Table A-5. Children in Families with Earnings Below the Poverty Thresholds, Based
on the Age of Adults in the Family, 2017
Percentage of
Number of Children
Children in Poverty
in Poverty Based on
Total Children in
Based on Earnings
Earnings Alone
the Category
Age Category
Alone
(millions)
(millions)
18 to 24
42.3%
0.454
1.074
25 to 29
29.8%
1.259
4.222
30 to 34
20.8%
1.937
9.296
35 to 39
17.3%
2.536
14.645
40 to 44
12.6%
1.660
13.145
45 to 49
10.9%
1.134
10.425
50 to 54
13.6%
0.893
6.566
55 to 64
15.5%
0.987
6.359
65 and older
25.6%
1.055
4.127
Total
17.1%
11.916
69.859
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS). Detail may not add to totals because of rounding.

Table A-6. Children in Families with Earnings Below the Poverty Thresholds, Based
on the Racial/Ethnic Composition of the Family
Percentage of
Number of Children
Children in Poverty
in Poverty Based on
Total Children in
Racial/Ethnic Composition of
Based on Earnings
Earnings Alone
the Category
the Family
Alone
(millions)
(millions)
Al White
9.5%
3.189
33.683
Al Black
27.8%
2.265
8.160
Al Hispanic
30.2%
4.115
13.603
Al Asian
14.4%
0.478
3.317
Al other
26.8%
0.148
0.552
Mixed race
16.3%
1.721
10.544
Total
17.1%
11.916
69.859
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS). Detail may not add to totals because of rounding.

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Need-Tested Benefits: Children and Poverty

Table A-7. Children in Families with Earnings Below the Poverty Thresholds, by
Number of Children in the Family, 2017
Number of Children
Living in Families
Total Number of
with Earnings Below
Children in the
Number of Children in the
the Poverty Level
Category
Family
Poverty Rate
(millions)
(millions)
1
12.1%
1.952
16.110
2
13.5%
3.663
27.190
3
19.3%
3.111
16.120
4
25.9%
1.715
6.620
5 or more
38.8%
1.486
3.830
Total
17.1%
11.930
69.880
Source: Congressional Research Service (CRS) based on data from the 2018 Annual Social and Economic
Supplement to the Current Population Survey (CPS). Detail may not add to totals because of rounding.
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Need-Tested Benefits: Children and Poverty

Appendix B. Change in the Poverty Rate from Each
Need-Tested Benefit or Group of Benefits
This appendix provides an alternative method of showing the estimated reduction in the child
poverty rate attributable to need-tested benefit programs. This method, following the one used by
the U.S. Census Bureau, subtracts each benefit in isolation from total family resources and
recalculates the poverty rate.12 This method does yield different estimates of the poverty impact
of the various need-tested benefit program categories from those presented in this report.
However, the estimates using the Census Bureau method do not alter the basic conclusion that
noncash benefits and refundable tax credits have a larger impact on the child poverty rate than do
ongoing cash public assistance programs from the TANF block grant or SSI.
Table B-1. Change in the Child Poverty Rate Attributable to Each Program or
Program Group
Based on 2017 Income
Poverty Rate Minus
Poverty Rate After
Benefit
the Benefit
Adding the Benefit
Difference
Temporary Assistance for Needy
13.2%
12.6%
-0.6
Families assistance
Supplemental Security Income
14.0%
12.6%
-1.4
Noncash benefits
19.2%
12.6%
-6.6
Refundable Tax Credits
18.4%
12.6%
-5.8
Source: Congressional Research Service (CRS), based on data from the 2018 Annual Social and Economic
Supplement (ASEC) to the Current Population Survey (CPS) and data from the Transfer Income Model, version
3 (TRIM3) microsimulation model.

Author Information

Gene Falk

Specialist in Social Policy

Acknowledgments
This report builds upon work done by CRS Research Assistant Isaac Nicchitta and former CRS Research
Assistant Jameson Carter in CRS Report R46825, Need-Tested Benefits: Impact of Assistance on Poverty
Experienced by Low-Income Families and Individuals. It also benefitted from the contributions of CRS
Analysts and Specialists Margot Crandall-Hollick, Kara Clifford Billings, Joe Dalaker, and Patrick

12 For the 2017 SPM report, see Liana Fox, The Supplemental Poverty Measure: 2017, U.S. Census Bureau, P60-265,
September 2018. Note that the data in this CRS report differs from the Census Bureau report because this report uses
estimates of benefits from the T RIM3 micosimulation model. T RIM3 estimates are used because need-tested benefit
receipt is under-reported on the survey underlying the Census Bureau estimates.
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Need-Tested Benefits: Children and Poverty

Landers. CRS Research Assistant Paul Romeo and CRS Graphics Specialist Amber Wilhelm provided their
expertise and contributed to the data visualizations in this report.

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 n ot 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.

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