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Understanding the Effects of Social Policy on Poverty

November 15, 2013 01:30 PM

By Becky Kelleman, Rutgers University

The Official Poverty Measure (OPM), criticized practically since its inception in the 1960s by researchers and policymakers alike, continues to be a topic of important discussion. The OPM determines poverty status by comparing pre-tax cash income by three times a minimum food diet, set in 1963, adjusted by family size and updated annually for inflation. In 1963, the average family spent a third of their income on household goods; although the ratio of income spent on a minimum food diet today is less than 33%, the federal government maintains this measurement.

Over 40 years later, the U.S. Census Bureau, in conjunction with the U.S. Department of Labor and Statistics, defined the Supplemental Poverty Measure (SPM). The SPM does not replace the OPM but offers an alternative definition of income thresholds that includes data on basic necessities and is adjusted for geographic differences in housing costs. These two measures were integral in the discussion

Christopher Wimer, Columbia University, offered a joint paper discussing the history of the OPM in conjunction with the new SPM from 1960 through 2010. A couple areas the paper addresses are the extent to which these programs are able to move people from poverty over time and the values of different benefits. The findings are promising. Using the data from the past 50 years, research has shown that without additional government benefits, poverty would have risen from 25% to 31%, instead of being only 16% today. Government programs play a particularly important role in alleviating poverty among children. Most importantly, tax credits and food supplement programs are integral in addressing the needs of people in poverty, especially during economic declines.

Timothy Smeeding, Institute for Research on Poverty, continued the discussion of social policies by specifically addressing the Supplemental Nutrition Assistance Program (SNAP). Smeeding and colleagues looked into the effectiveness of SNAP and offer improvements to the program. The findings from the research show the benefits go to those who are in most need, especially children. Overall, SNAP is only .5% of the U.S. GDP; Sneeding remarked SNAP as the best “bang for the buck” program in its cost and scope.

Don Oellerich, U.S. Department of Health and Human Services, concluded the paper presentations with his co-authored analysis of Medicaid. His paper, aptly called “The Poverty-Reducing Effect of Medicaid: An Analysis Using the Census Bureau’s New Supplemental Poverty Measure” aims to use the SPM and out of pocket spending data to estimate Medicaid’s impact on poverty. His findings indicate Medicaid provides valuable risk-protection to low income individuals; in 2010 alone, the program kept 2.1 million Americans from falling into poverty. The policy implications resulting from this analysis demonstrate Medicaid’s effectiveness as an anti-poverty program. More importantly, any expansion or cutback could significantly impact poverty rates affecting minorities, disabled and the elderly who benefit most from Medicaid’s financial protection.

The panel ended with discussant Mark Levitan, NYC Center for Economic Opportunity, suggesting researchers investigate how sensitive the poverty rate is by looking at other methods to see the impact. His final conclusion, regarding these specific programs, is that they really make a difference on poverty.


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