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Title: Wisconsin Poverty Report: Is the Safety Net Still Protecting Families from Poverty in 2011?

Citation Type: Miscellaneous

Publication Year: 2013

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Abstract: Although national authorities declared an end to the Great Recession almost four years ago, the economic downturn has continued to have repercussions in Wisconsin and beyond. Wisconsin had almost zero net job creation in 2011 and 2012. And so, Wisconsin’s market income poverty rate steadily rose from 21.3 to 25.2 percent between 2008 and 2011, suggesting that the performance of the Wisconsin economy in terms of jobs and earnings worsened over this period. The official poverty statistics provided by the U.S. Census Bureau also suggest that poverty in the state increased from 2008 to 2011, rising from 10.2 to 13.3 percent. This indicates that Wisconsin residents generally had lower pre-tax but post-transfer cash resources. But when we measure with our Wisconsin Poverty Measure (WPM), we find that state poverty has fallen between 2008 and 2011, despite a modest increase from 2010 to 2011 from 10.3 to 10.7 percent, and remained about 2.6 percentage points below the official rate. Behind this story is the impact of tax-related provisions and near-cash benefits from programs that government officials augmented to offset increased economic hardship due to the recession. The official poverty measure considers only pre-tax cash income as a resource, failing to fully capture the effects of government efforts to stimulate the economy and ease economic adversity caused by the recession. Researchers at the Institute for Research on Poverty (IRP) developed the WPM, now in its fourth year, to account for the needs and resources of Wisconsin families while taking the antipoverty impact of policies into account. The WPM considers cash resources, but also tax credits and noncash benefits, as well as costs like child care and health care that reduce available resources, in determining poverty status. For the third year in a row, the WPM tells a different story than the Census Bureau’s official poverty statistics. In last year’s Wisconsin Poverty Report, we found a decline in poverty between 2009 and 2010 under the WPM, mainly because the drop in families’ earnings and cash income was offset by tax credits and food assistance benefits, which saw major increases in funding through 2009’s American Recovery and Reinvestment Act (ARRA). In this Wisconsin Poverty Report, we reveal that tax credits played a large role in fighting poverty in 2011, though down from 2010 as ARRA tax provisions phased out and the Wisconsin state EITC was reduced. As a result, despite continued effectiveness of nutrition assistance benefits during 2011, there was a modest increase in the number of individuals and families living in poverty in 2011. Additional major findings of our report also demonstrate a diversified experience of poverty in Wisconsin following the onset of the recession. The increase in poverty for children is larger than the overall increases under the official measure and the WPM, where it climbed from 10.8 to 12.2 percent between 2010 and 2011. When we examine how specific noncash benefits, tax-related provisions, and medical and work-related expenses affect poverty, we find again that refundable tax credits had a smaller impact in reducing child poverty in 2011 than in 2010. We also noted that out-of-pocket medical expenses, while less of a burden in 2011 compared to earlier years, continued to push some low-income elderly persons into poverty, suggesting the importance of support for medical care for this population. We also examine poverty rates across regions within the state, revealing deep poverty in some areas, especially central Milwaukee. Our key finding and our answer to the question, ‘Is the safety net still working in Wisconsin?’ is “yes”. The social safety net provided a buffer against poverty during the recession, though its impact lessened in 2011 due to policy changes at the state and federal levels. We believe that the long-term solution to poverty is a secure job that pays well, not an indefinite income support program. But, as this report shows, in times of need, a safety net that enhances low earnings for families with children, puts food on the table, and encourages self-reliance—as Wisconsin’s safety net does—makes a big difference in combatting market-driven poverty. But as this year’s report suggests, cuts in that safety net without substantial improvement in the underlying economy can produce an increase in poverty as measured by the WPM.

Url: http://wiscap.org/wiscap/wp-content/uploads/2013/06/WI-PovertyReport2013.pdf

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Authors: Smeeding, Timothy, M; Isaacs, Julia, B; Thornto, Katherine, A

Publisher: University of Wisconsin–Madison

Data Collections: IPUMS USA

Topics: Poverty and Welfare

Countries: United States