In 2013, Transfers Kept 27 Million Out of Deep Poverty

The Census released its income and poverty figures for the 2013 calendar year yesterday. Here I break down the impact of income transfers in the poverty data using my handy dandy Poverty Calculator.

A. Transfers Kept 27 Million People Out of Official Poverty

The Official Poverty Rate for 2013 stands at 14.5%. If you pull out Social Security, Supplemental Security Income, Welfare (TANF), Veteran's Benefits, and Unemployment Compensation, that rate jumps to 23.1%. This is what I call the market poverty rate.

The difference between the two rates is 8.6 percentage points, which means the Official Poverty Rate would be 60% higher if it were not for transfer programs. That is equivalent to 27 million people falling into poverty.

B. Transfers Kept 27 Million People Out of Official Deep Poverty

Deep poverty refers to those below 50% of the poverty line. Officially, 6.3% of people fell below the deep poverty line in 2013. But, if we strip out transfers, that number shoots to 15.1%, an increase of 140%.

The difference between the market deep poverty rate and the actual deep poverty rate is equal to 8.8 percentage points, which is equal to 27.4 million people. Without transfers, that's how many more people would have been in deep poverty last year.

C. The Effect of Individual Transfer Programs

For the following list, I determine how many people were kept out of poverty and deep poverty by each specific program. This is derived by erasing the specific program while holding all else equal and seeing how the poverty rate and poverty amount changes.

  1. Social Security kept 22.1 million out of poverty, 20.6 million out of deep poverty.
     
  2. Supplemental Security Income kept 2.2 million out of poverty, 3.3 million out of deep poverty.
     
  3. Unemployment Compensation kept 1.2 million out of poverty, 0.9 million out of deep poverty.
     
  4. Welfare (TANF) kept 0.3 million out of poverty, 0.6 million out of deep poverty.
     
  5. Veteran's Benefits kept 0.7 million out of poverty, 0.4 million out of deep poverty.

D. Transfers Most Helped Disabled and Elderly

Since Social Security is the biggest and most effective anti-poverty program going, it's main beneficiaries -- the eldelry and disabled -- received the biggest boost from transfers in 2013.

Without transfers, 52.6% of disabled people would have been in poverty in 2013. With transfers, just 21.4% of disabled people were in poverty. This is a decline of 60%, which is equal to 9 million disabled people who were kept out of poverty through transfers.

Without transfers, 45.3% of elderly people would have been in poverty in 2013. With transfers, just 9.5% were. This is a decline of 80%, which is equal to 15.9 million elderly people who were kept out of poverty through transfers.

E. Whites Receive the Biggest Boosts

One of the interesting things about the Poverty Calculator is watching how poverty shares change under different scenarios. Poverty share tells you what percent of all poor people fall into a given demographic category. At the market distribution of income, white people account for 52.7% of impoverished people. But at the disposable income distribution, white people account for only 41.5% of impoverished people. White people's share of impoverished people falls a whopping 11.2% when you move from market incomes to disposable incomes.

Meanwhile, the poverty share of every other race goes up when you move from market to disposable income. Obviously some non-white races have to go up in order to offset the fall in the white poverty share, but it's interesting to note that all of them do.

Even if you move away from poverty shares and look towards poverty rates, whites still end up receiving the biggest boosts. Here is the number of percentage points by which each race's poverty rate is reduced by transfers relative to their market poverty rate:

Only counting the transfers that the Official Poverty Metric includes, whites saw their poverty rate cut 9.9 percentage points by transfers, blacks 9.2 points, natives 8.7 points, multi-racials 7.3 points, Pacific Islanders 5.1 points, Hispanics 5.1 points, and Asians 4.4 points.

F. Poverty Reduced by Transfers Fell Slightly

The overall fall in the poverty rate from last year was 0.5 percentage points. But the market poverty rate fell by 0.6 percentage points. This means that changes in market income dynamics account for more than 100% of the poverty reduction, which also means that the poverty reduction attributable to transfers fell slightly.

The same is true of deep poverty. The overall fall in the deep poverty rate from last year was 0.3 percentage points. But the market deep poverty rate fell by 0.5 percentage points. The decline in deep poverty is therefore entirely attributable to changes in market income dynamics.

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