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[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Appendices]
[Appendix H. Data on Poverty]
[From the U.S. Government Printing Office, www.gpo.gov]

 
APPENDIX H-DATA ON POVERTY

CONTENTS

Measuring Poverty
Trends in the Overall Poverty Rate
Poverty Rates for Individuals in Selected Subgroups of the Population
Poverty Rates for Families
Poverty Under Alternative Measures of Income and Price Inflation
Poverty by Metro Area and State
Trends in Family Composition and Income, 1967-2002
Definitions and Methods
Income Measure
Income Shares
Trends in Pretax Cash Incomes by Type of Family
Pretax Adjusted Family Income
Average Family Cash Income By Family Type
Antipoverty Effectiveness of Various Cash and Noncash Transfers
References

MEASURING POVERTY

	When the Federal Government began measuring poverty in the 
early 1960s, the continued existence of poor people in a time of the 
"Affluent Society" seemed anomalous. Official concern soon translated 
into efforts to measure the size of the poverty population, and the 
search began for programmatic ways to alleviate poverty. The first 
rough estimates of the incidence of poverty were based on survey data 
indicating that families generally spent about one-third of their 
income on food. A poverty level income was then calculated by using 
as a yardstick the amount of money necessary to purchase the lowest 
cost "nutritionally adequate" diet calculated by the Department of 
Agriculture (roughly equivalent to the current Thrifty Food Plan). 
This price tag was multiplied by three to produce a poverty 
threshold. The assumption underlying this procedure is that if a 
family did not have enough income to buy the lowest cost 
nutritionally adequate diet, and twice that amount to buy other goods 
and services, it was "poor." Adjustments were made for the size of 
the family, the sex of the family head, and for whether the family 
lived on a farm. Farm families were assumed to need less cash income 
because their needs could be met partially by farm products, 
particularly food. The adjustments for sex of the family head and 
for farm-nonfarm residence were abolished in 1981. Policy officials 
made a major change to the basic approach for calculating the poverty 
threshold in 1969. Rather than multiplying the cost of the Thrifty 
Food Plan by three to establish the poverty threshold, officials 
decided to simply increase the previous year's threshold by the 
change in the Consumer Price Index (CPI).

	In addition to this major change, the Census Bureau made 
minor revisions in its method of estimating the poverty threshold 
four times-in 1966, 1974, 1979, and 1981. These revisions changed 
the estimate of the poverty rate. The first two revisions slightly 
reduced the estimated number of poor, while the more recent revisions 
slightly increased the number. In 1984, the Census Bureau also 
revised its method of imputing missing values for interest income, 
which slightly lowered the estimated poverty rate.

	Data on income and poverty after 1987 may not be comparable 
to data in earlier years because of changes in the methods used by 
the Census Bureau to process survey results. This new processing 
system was applied to 1987 data so that 1988 and 1987 data are 
comparable. Revised 1987 data are denoted as 1987R. The new 
processing system increased aggregate income by 0.9 percent and 
lowered the poverty rate for 1987 by 0.1 percent.

	The tables in this subsection provide poverty data calculated 
using the official Census definition of poverty. The Census 
definition of poverty has remained fairly standard over time and is 
useful for measuring progress against poverty. Under this definition, 
poverty is determined by comparing pretax cash income with the 
poverty threshold.

	Table H-1 shows the population, number of persons in poverty, 
and the poverty rate in 2002 by age, race, region and family type. 
In 2002, 12.1 percent (34.6 million persons) of the total U.S. 
population lived in poverty. Of all demographic groups shown, 
poverty was second highest among female-headed families with 
children (33.1 percent). Among children under age 18, 16.7 
percent, or 12.1 million children, lived in poverty in 2002.

	
	The weighted average poverty thresholds for families of 
various sizes for selected years between 1959 and 2002 are presented 
in Table H-2.

TRENDS IN THE OVERALL POVERTY RATE 

	In 1959, the overall poverty rate for individuals in the 
United States was 22 percent, representing 39.5 million poor persons 
(Tables H-3 and H-4). Between 1959 and 1969, the poverty rate 
declined dramatically and steadily to 12.1 percent. As a result of a 
sluggish economy, the rate increased slightly to 12.5 percent by 
1971. In 1972 and 1973, however, it began to decrease again. The 
lowest rate over the entire 24-year period occurred in 1973, when 
the poverty rate was 11.1 percent. At that time roughly 23 million 
people were poor, 42 percent less than were poor in 1959.

TABLE H-1 -- POVERTY STATUS OF PERSONS BY AGE, ETHNICITY, REGION,  
AND FAMILY TYPE, 2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-2 -- WEIGHTED AVERAGE POVERTY THRESHOLD FOR NONFARM FAMILIES 
OF SPECIFIED SIZE, SELECTED YEARS 1960-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-3 -- NUMBER OF PERSONS IN POVERTY BY DEMOGRAPHIC GROUPS, 
SELECTED YEARS 1959-2002  

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	The poverty rate increased by 1975 to 12.3 percent, and 
after 1978 the poverty rate rose steadily, reaching 15.2 percent in 
1983. Between 1983 and 1993, the poverty rate moved up and down 
within a narrow range of about 2.5 percentage points, declining 
somewhat during economic recoveries and rising somewhat during 
economic downturns. However, poverty declined every year between 
1993 and 2000, reaching a low of 11.3 percent, the lowest rate since 
1974.  The rate rebounded slightly in 2001 and 2002, rising to 12.1 
percent, which absent recent years would have been lower than any 
year since the 1970s.  The poverty rate for children followed a 
similar path, falling prior to 1969, fluctuating between about 15 and 
17 percent in the 1970s, and then remaining between about 20 and 
23 percent during the 1981 to 1996 period.  Since 1996, the 
children's poverty rate fell from 20.5 percent in 1996 to 16.2 
percent  in 2000 - a 21 percent decline.  The rate rose slightly in 
2001 and 2002, but remained in the 16 percent range last seen in 1979.

TABLE H-4-- POVERTY RATES FOR DEMOGRAPHIC GROUPS, SELECTED 
YEARS 1959-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

POVERTY RATES FOR INDIVIDUALS IN SELECTED SUBGROUPS OF THE POPULATION

	As Table H-4 illustrates, there are substantial differences 
between the overall poverty rate and the poverty rates of individuals 
in certain demographic subgroups. Most notably, blacks, individuals 
in female-headed households, and Hispanics have poverty rates that 
greatly exceed the average. The poverty rates for individuals in 
female-headed households remained above 35 percent over the 1959-97 
period. However, it declined every year after 1991 and in 2000 
reached its lowest level ever at 28.5. The poverty rate for blacks 
and Hispanics has remained near 30 percent during the 1980s and mid 
1990s. However, both rates declined every year after the early 1990s 
and for blacks it reached its lowest level ever in 2000 at 22.5 
percent, and for Hispanics reached a record low of 21.4 percent in 
2001. The poverty rate for the aged, which exceeded the overall 
poverty rate in 1959, fell quickly beginning in the 1960s. By 1999 
it had reached the remarkably low level of 9.7, a decline of over 
70 percent since 1959. The poverty rate for whites was below the 
overall poverty rate throughout the entire 1959-2002 period. It was 
10.4 percent in 2002.  The poverty rate for children exceeded the 
overall poverty rate every year between 1959 and 2002.

POVERTY RATES FOR FAMILIES 

	Table H-5 shows the composition of the poverty population 
for various demographic groups for selected years between 1959 and 
2002. Table H-6 presents poverty data for families and unrelated 
individuals (individuals living alone). Female-headed families with 
children and unrelated individuals are more likely to be poor than 
other families with children or families with aged members. In 2002, 
33.6 percent of female-headed families with children were poor, 
compared with 7.6 percent of male-present families. Although only 
6.7 percent of all families with an aged member were poor, 19.5 
percent of all aged unrelated individuals were poor. About 20.7 
percent of nonaged unrelated individuals were poor.

POVERTY UNDER ALTERNATIVE MEASURES OF INCOME AND PRICE INFLATION 

	The Census Bureau publishes data that reflect two adjustments 
in the official definition of poverty. The first of these is an 
alternative inflation adjustment. The official poverty line is based 
on a procedure developed in 1965 with yearly adjustments for 
inflation using the CPI. The CPI, in turn, is based on the yearly 
change in prices of goods used by most Americans. Prior to 1983, the 
CPI measured housing prices using a procedure that included changes 
in the asset value of owned homes. Because the asset value of houses 
was growing so much faster than the consumption value, the inflation 
rate that included asset values was excessive.
	In 1983 the Bureau of Labor Statistics began using a rental 
equivalence approach to measure the value of housing. The official 
CPI-U inflation rate is based on the asset value of housing prior 
to 1983 and rental equivalence in 1983 and later. To provide a 
consistent time series, the Bureau constructed an experimental 
series, the CPI-U-X1, for 1967-82 based on rental equivalence.
	The general effect of using the CPI-U-X1 is to lower 
inflation in past years which in turn has the effect of lowering 
poverty thresholds for those years. A lower threshold means that 
fewer people are poor. As can be seen by comparing the first two 
columns in Table H-7, adjusting the poverty threshold using the 
CPI-U-X1 reduced the official poverty rate by between 1.3 and 1.5 
percentage points in most years between 1979 and 2002. In 2002, 
the CPI-U-X1 reduced the poverty rate by 1.3 percentage points 
(11 percent or 3.8 million persons).
	The second adjustment in the official poverty rate made by 
the Census Bureau is to expand the definition of income to take into 
account some noncash income, including government benefits. Under 
the procedures by which the official poverty rate is calculated, only 
cash is counted in determining whether a family is poor; income from 
cash welfare programs counts, but benefits from food programs, 
medical care, social services, education and training, and housing 
are not included in the calculation. Moreover, because government 
spending on means-tested noncash benefits has increased more rapidly 
than spending on means-tested cash benefits over the years, ignoring 
noncash benefits may be an increasingly serious omission if we want 
a broad picture of the impact of government programs on poverty.
	The question of how to value noncash benefits raises a 
variety of substantive and technical issues. The Census Bureau has 
been working on these issues, consulting with academic experts, 
sponsoring conferences, and issuing technical reports for many years. 
In 1997, the Bureau published a consistent historical data series, 
covering the years 1979-91, to trace the impact of a variety of taxes 
and noncash benefits on poverty and income. The measurement of 
noncash benefits extended beyond government spending for the poor 
to include government spending programs such as Medicare that are not 
means tested as well as to employer contributions to employee health 
plans.
	To examine the impact on income and poverty of various State 
and Federal taxes, government noncash programs, employer-provided 
benefits, and so forth, the Bureau has adopted a framework that 
includes 15 definitions of income. By comparing income under these 
multiple definitions, it is possible to estimate the impact of the 
various income sources on the average income and the poverty rates of 
individuals and families.
	Income definition 14 is of interest to those concerned with 
the impact of government means-tested, noncash benefits on poverty 
rates. Unlike the official poverty rate, which includes only cash 
government benefits, definition 14 includes the effects of State and 
Federal taxes, employer-provided benefits, non-means-tested 
government benefits, and means-tested noncash benefits including 
food stamps, housing, school lunch, and the fungible value of 
Medicaid.

TABLE H-5--COMPOSITION OF POVERTY POPULATION FOR SELECTED DEMOGRAPHIC 
GROUPS, SELECTED YEARS 1959-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-6--POVERTY RATES BY FAMILY TYPE, SELECTED YEARS 1987-2002, 
AND PERCENTAGE OF FAMILIES AND UNRELATED INDIVIDUALS BY RATIO OF 
TOTAL INCOME TO POVERTY THRESHOLD, 2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-7 -- POVERTY UNDER ALTERNATIVE MEASURES OF PRICE INCOME AND 
INFLATION, SELECTED YEARS 1980-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	The question of whether to include medical benefits when 
measuring poverty has great implications on poverty rates. The 
valuation of medical benefits is particularly difficult. Most poverty 
experts believe that medical coverage should not by itself raise poor 
individuals above the poverty line or constitute a major portion of 
the poverty threshold. The development of the poverty thresholds did 
not take into account medical costs. Although poor persons are 
clearly better off with medical coverage, such benefits cannot be 
used by recipients to meet other needs of daily living. Also, since 
health insurance costs are not imputed to the incomes of those above 
poverty, it seems inappropriate to count health benefits as income 
for those below the poverty line.

POVERTY BY METRO AREA AND STATE

	Tables H-8 and H-9 present poverty rates for non-metro and 
metro areas and by race in non-metro and metro areas respectively. 
Table H-8 shows that over the period depicted poverty rates in 
nonmetro areas have consistently been several percentage points 
higher than in metro areas, but several percentage points lower 
than in central cities only, which consistently have had the highest 
poverty rates.  For all three areas, poverty rates in 2002 are well 
below their most recent 1993 peak rates in all three areas.  For 
nonmetro areas, the 2002 poverty rate was 17 percent below its 1993 
value; for metro areas, 21 percent below; and for central cities 
only, 22 percent below. 

TABLE H-8 -- POVERTY RATES IN NONMETRO AND METRO AREAS, SELECTED 
YEARS 1980-2002 

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Table H-9 shows that despite recent progress, poverty among 
blacks and Hispanics remains much higher than poverty among whites in 
metro areas, non-metro areas, and inner cities.
	Table H-10 presents poverty rates by State for 1988-2002, 
based on 3-year averages. The data are shown as 3-year averages due 
to poor statistical reliability of State poverty rates in a single 
year, resulting from small sample sizes.

TABLE H-9 -- PERCENTAGE OF PERSONS IN POVERTY BY RACE, BY METRO AND 
NONMETRO RESIDENCE, 2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TRENDS IN FAMILY COMPOSITION AND INCOME, 1967-2002/1/

	In the past 30 years, the level of and inequality among 
family incomes has changed significantly according to all income 
measures. Between 1967 and 1973, income increased for all quintiles, 
and income inequality went down. As measured by the Congressional 
Budget Office, over this time period the lowest quintile experienced 
an increase in mean adjusted family income (AFI; family income 
divided by the poverty threshold for the appropriate family size) 
of 30 percent, while income for the highest quintile grew by 
21 percent. Since 1973, income of the bottom quintile declined 
through the remainder of the 1970s and the 1980s, and rose modestly 
in the 1990s. Income for the highest quintile has risen through this 
period.
	While the general trends in families' economic well-being are 
similar regardless of how measured, varying results for the 
distribution of family incomes are obtained depending on which income 
measure is used. Three commonly used income measures (all adjusted 
for inflation) are family cash income, family cash income per capita, 
and AFI. While no measure perfectly captures the economic well-being 
of families, AFI most accurately accounts for differences in family 
size by incorporating the scale implicit in the official Federal 
poverty thresholds.
	Family composition in the United States has undergone 
pronounced changes since 1973 (Table H-11). The number of married 
couples with children has been almost flat since 1973. By contrast, 
the number of families headed by a single mother grew by 93 percent 
over the entire 1973-2000 period, the number of non-elderly childless 
units grew by 105 percent, and the number of elderly childless units 
grew by 61 percent.
	Changes in family composition also are reflected in the 
number of persons and earners per family. The average family has 
become smaller, reflecting in part relatively fewer families with 
children (and fewer children in those families). The average family 
also had fewer earners in 2000 than in 1973.

TABLE H-10 -- STATE POVERTY RATES: 3-YEAR AVERAGES, 1988-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

DEFINITIONS AND METHODS

	Analyzing trends in the distribution of family incomes over 
time requires making decisions about a number of variables: How 
should variation in incomes be measured? What is the appropriate 
timeframe over which to examine changes? How should inflation be 
taken into account? And, finally, what is the appropriate measure 
of income to use?

Measuring Variation
	Most of the data in this section are presented for income 
quintiles, each of which represents one-fifth of the income 
distribution (either families or persons, as indicated). Quintiles 
are calculated by ordering all relevant family units from those with 
the lowest income to those with the highest. For the analysis of 
changes in incomes among different types of families, quintiles are 
defined separately for each family type.
	The analysis of changes in the distribution of family incomes 
over time is done by examining average incomes, adjusted for 
inflation, by income quintile for specific types of families.

Timeframe
	Most of the analysis focuses on data for 4 years: 1973, 1979, 
1989, and 2000. The first 3 years reflect peaks in the business 
cycle, and allow comparisons to be made across time periods in which 
general economic conditions were broadly similar. Information also 
is presented for 2000, the most recent year for which data are 
available.
	Income data provided by the Census Bureau to outside 
researchers are frequently limited in certain ways both to protect 
confidentiality and to reduce the impact of reporting and coding 
errors on statistical calculations. Beginning with information for 
1995, the Census Bureau substantially increased the maximum earnings 
it reports for individuals on public-use computer files. As a result, 
comparisons of incomes for high-income individuals and families in 
years before and after 1995 may reflect actual differences in their 
economic circumstances, differences in the way their income is coded, 
or both.
	To account for this reporting change, income data for 2000 
are presented here in two ways. First, individuals' earnings for 2000 
are limited to (or  top-coded at) the same inflation-adjusted value 
they were limited to in 1989 ($99,999 in 1989; $138,870 in 2000.) 
Second, individuals' earnings in 2000 are presented the same way they 
are reported on the Census Bureau's public-use files ($1 million 
upper limit).

Adjustment for inflation
	To examine changes in family income over time, the dollar 
amounts must be adjusted for inflation to compare actual buying 
power. Adjustment for inflation is done here using the CPI-U-X1, a 
revised version of the official Consumer Price Index that provides a 
consistent treatment of the costs of home ownership over the years 
examined. The CPI-U-X1 is an index of the cost of a market basket of 
goods and services representing the average consumption of the urban 
population (Table H-7).

INCOME MEASURE

	The purpose of examining the distribution of family incomes 
over time is to analyze changes in family economic well-being. Two 
important issues in choosing an appropriate income measure are how 
to adjust for differences in family size and what to include as 
income.
	One measure is real family cash income, which is the sum of 
wage, salary, and self-employment earnings, private pension and 
retirement income, interest and dividends, and government cash 
transfers received by each family member. By this measure, which 
takes inflation into account but not changes in family size, noncash 
transfers, or taxes, the average income of families increased 
throughout the 1973-2000 period (Table H-12, top panel). However, the 
increases were uneven over time and among families with different 
levels of income. Regarding the former, the period from 1973 to 1979 
was one of relatively slow growth in family income while the period 
from 1979 to 1989 saw more rapid growth. The period from 1989 to 2000 
saw growth roughly comparable to the prior decade under one measure 
and more robust growth under the income measure that allows more 
income in the top quintile. It is notable that for the 60 percent of 
American families in the middle- and upper-income quintiles, average 
income growth over the decade of the 1980s is stronger than growth 
during the preceding period, when a similar method of computing 
income in the upper quintile is used for both periods. Further, 
average income growth during the period 1989-2000 exceeded growth 
during the 1980s across all income quintiles, with the exception of 
the highest, when using this comparable measure.
	These figures for mean family growth over the three periods 
mask very large differences in the patterns of growth in the five 
income quintiles. The table shows clearly that progress in family 
income over the 1973-89 period was negative for the bottom two income 
quintiles. This was reversed by modest increases in income for these 
two quintiles from 1989 through 2000. By contrast, growth was 
consistently substantial for the upper two income quintiles, 
especially after 1979. 

TABLE H-11-FAMILY COMPOSITION AND NUMBER OF EARNERS PER FAMILY, 
SELECTED YEARS 1973-2000

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-12 -- ALTERNATIVE MEASURES OF FAMILY INCOME BY INCOME 
QUINTILE AND CHANGE OVER TIME, SELECTED YEARS 1967-2000 FOR ALL 
FAMILIES  

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Examining the income data by quintiles also shows why the two 
measures of computing family income for the 1989 through 2000 period 
yield such different estimates of income growth; namely, $45,797 to 
$48,955 or 6.9 percent under one definition versus $45,797 to $51,701 
or 12.9 percent under the other. Not surprisingly, the decision to 
allow more income at the top of the distribution has an impact only 
on the top income quintile (see the last two columns of the top 
panel). More specifically, income growth in the top quintile under 
the more restricted income definition is only from $107,925 to 
$118,760 or 10.0 percent, whereas growth under the broader income 
definition used by the Congressional Budget Office starting in 1995 
is from $107,925 to $132,487 or 22.8 percent. Thus, the difference 
in the two measures of average family income growth over the 
1989-2000 period is accounted for entirely by the top quintile.
	Family cash income has several shortcomings as a measure of 
change in economic well-being. Most notably, it fails to take into 
account change in family size and composition: a family of one with 
$30,000 in income is treated as being as well off as a family of 
four with $30,000 in income. This assumption is inappropriate, 
however, as a family of four requires more income to attain the 
same standard of living as a single person.
	An alternative approach to measuring family economic well-
being is to take advantage of the family size adjustment implicit 
in the official Federal poverty thresholds. This scale assumes, for 
example, that a family of four needs about twice as much income as a 
single person to attain an equivalent standard of living (Table 
H-13). The equivalence scale implicit in the poverty thresholds may 
not perfectly capture the disparate needs of families of different 
sizes, but it yields a better assessment of relative economic 
well-being than making no adjustment (mean family cash income) or 
assuming no economies of scale (mean family cash income per capita).
	The AFI measure shown in the second panel of Table H-12 
incorporates the equivalence scale underlying the poverty thresholds. 
Each family's pretax cash income is divided by its poverty threshold, 
yielding family income as a multiple of poverty. Thus, for example, 
the average family in the middle quintile in 2000 had an income of 
3.49 times its poverty threshold. 
	By taking family size into account, the AFI measure greatly 
reduces the income losses in the bottom two quintiles over the 
1973-89 period. In fact, it completely eliminates income losses in 
the second quintile. It also increases the income gains experienced 
by the top three income quintiles. The obvious conclusion to be drawn 
from the comparison of the two income definitions is that taking 
family size into account substantially improves the picture of family 
income changes over the years since 1973. However, as Chart H-1 
shows, the difference in income between the top and bottom quintiles, 
even under the AFI measure, grew substantially throughout the 
1973-2000 period.
		

CHART H-1--RATIO OF AVERAGE ADJUSTED FAMILY INCOME OF HIGHEST 
QUINTILE TO AVERAGE ADJUSTED FAMILY INCOME OF LOWEST QUINTILE, 
1973-2000

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

INCOME SHARES

	Another way of tracking income trends is to look at changes 
in the percentage share of income received by families in each 
quintile. Income shares measure whether families have gained or lost 
in relative terms. That is, a given quintile may receive a smaller 
share of real income even as its average income has increased.
	All three income measures (family cash income, AFI, family 
income per capita) show broadly similar trends in the share of income 
received by each quintile (Table H-14). In general, between 1973 and 
2000, the shares of the lowest four quintiles fell, and the share of 
the top quintile rose. The measures show somewhat different patterns 
of shares at any point in time, however. For example, in 2000 the top 
quintile had 48.5 percent of income under the family cash income 
definition, but 45.5 percent under the AFI definition. In that same 
year, the bottom quintile had 3.4 percent under the family cash income 
definition, but 4.2 percent under the AFI definition. Even so, the 
income shares analysis, like the other analyses in this section, 
generally shows that the top quintile had an increasing percentage of 
the income pie over the period 1973-2000.

TABLE H-13 -- POVERTY THRESHOLDS AND EQUIVALENCE VALUES FOR DIFFERENT 
FAMILY SIZES, 2000

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-14 -- SHARES OF FAMILY INCOME BY INCOME QUINTILE FOR ALL 
FAMILIES, SELECTED YEARS 1967-2000      

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TRENDS IN PRETAX CASH INCOMES BY TYPE OF FAMILY

	As we have seen (Table H-11), the composition of the typical 
family has changed over time. Compared with 1973 and 1979, there were 
fewer persons in each family in 2000, on average, and married couples 
with children made up a smaller fraction of all families (Table H-15). 
Additional insights can therefore be gained by looking at changes in 
incomes for specific family types. This analysis distinguishes six 
types of family units:

1.	Married couples with children, which are families composed 
of a married couple living only with their own or related children, 
at least one of whom is under age 18;

2.	Single mothers with children, which are families composed 
of unmarried, divorced, separated, or widowed mothers living only 
with their own or related children, at least one of whom is 
under age 18;

3.	Non-elderly childless families, which are families composed 
of two or more related people living together, in which the family 
head and the spouse of the head are both under age 65 and there are 
no children under age 18;

4.	Non-elderly unrelated individuals, which are people over 
age 17 and under age 65 who are not living with relatives;

5.	Elderly childless families, which are families composed of 
two or more related people living together, in which either the 
family head or the spouse of the head is 65 or older and there are 
no children under age 18; and

6.	Elderly unrelated individuals, which are people 65 or older 
who are not living with relatives.
	
TABLE H-15--AVERAGE FAMILY SIZE AND NUMBER OF FAMILIES BY FAMILY 
TYPE, WEIGHTED BY FAMILIES, SELECTED YEARS 1973-2000

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	In addition, results also are presented for four aggregates:

1.	All families with children, which comprises married couples, 
single mothers, and other families with children;

2.	Nonelderly childless units, which comprises nonelderly 
childless families and non-elderly unrelated individuals;

3.	Elderly childless units, which comprises elderly childless 
families and elderly unrelated individuals; and

4.	All families, which comprises all families and unrelated 
individuals (i.e., the noninstitutional U.S. population).

	Unless otherwise noted, the analysis of changes in income 
for each family type listed above is based on quintiles computed for 
that family type. This procedure permits comparisons within, but not 
across, family types; the quintile in which a particular family is 
found says nothing about its place among all families, but measures 
its position in relation to families of the same type. For example, 
individuals in the middle quintile of single mothers with children 
may be in the lowest quintile of the all-families grouping.

	Comparisons over time show how the incomes of families of a 
given type compare with similar families at another time, not how 
incomes have changed for a particular type of family. Families may 
move among income quintiles as their incomes-or the incomes of other 
families-rise or fall; they also may change types as their members 
grow older, have children, marry, or divorce. In addition, the 
average number of members and earners within a given type of family 
may change over time, as may the characteristics of those persons.
	
	PRETAX ADJUSTED FAMILY INCOME
	
	Trends in incomes for different family types show more 
variation than trends for families overall. Between 1973 and 1979, 
adjusted family income (AFI) grew 12.2 percent, on average, for all 
families with children (Table H-16). This compares with an income 
gain of only 7.9 percent for all families. For families with 
children, average AFI fell 4.5 percent during this period for the 
lowest quintile, from 88 percent of poverty to 84 percent of poverty. 
For the highest quintile, average AFI rose 7.3 percent, compared with 
7.6 percent for all families. During the 1979-89 period, the bottom 
two quintiles of families with children experienced reduced income, 
by 11.7 percent and 4.1 percent respectively for the lowest and 
second quintiles; meanwhile, the highest quintile had an income 
increase of 17.0 percent. These losses at the bottom were greater 
for families with children than for all families.

	Most of the divergence in incomes among families with 
children reflects compositional change, as families of single 
mothers with children became increasingly common (Table H-11). The 
lowest quintile of married couples with children had a 3.0-percent 
decline in average AFI between 1979 and 1989; the lowest quintile of 
single mothers with children fared much worse, with a  22.0-percent 
decline during the same period. These two family types as a whole, 
however, showed income gains over the period: 11.2 percent for 
married couples with children and 3.3 percent for single mothers 
with children. More recently, during the 1989-2000 period, all 
quintiles of both family types have experienced rising incomes. 
Single mothers in the bottom experienced the greatest increases in 
income, far exceeding increases among married families with children 
during this period.  These developments in the bottom quintiles are 
almost certainly due to increased work by poor and low-income mothers 
in general and by mothers leaving welfare in particular (see 
Appendix L).

TABLE H-16 -- AVERAGE PRETAX ADJUSTED FAMILY INCOME (INCOME AS A 
MULTIPLE OF POVERTY) BY FAMILY TYPE AND INCOME QUINTILE, WEIGHTED 
BY PERSONS, SELECTED YEARS 1967-2000

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Elderly persons experienced income gains across the board 
between 1973 and 2000. For elderly childless units, which include 
both single persons and married couples, average AFI rose 10.5, 13.4, 
and 1.8 percent respectively for the lowest quintile across the three 
periods shown in the last panel of table H-16 and 4.7, 26.0, and 
12.7 percent respectively over the same periods for the highest 
quintile (using the new method of income coding). Despite their 
gains, the elderly generally had much lower incomes than the non-
elderly. In 2000, for example, the average income of elderly 
childless units was about 3.9 times poverty; the average income of 
non-elderly childless units, by comparison, was about 5.6 times 
poverty (not shown in table).
	
	AVERAGE FAMILY CASH INCOME BY FAMILY TYPE
	
	For all families, average cash income grew more slowly than 
average pretax AFI between 1973 and 2000. This was also generally 
true for specific family types. At the same time, those groups of 
families whose average cash incomes declined had more pronounced 
decreases than occurred in pretax AFI.
	Average family cash income grew throughout the 1973-2000 
period for families with children (Table H-17, second panel). However, 
families at the bottom of the income distribution lost ground during 
the 1973-89 period, with income declines of 11.0 percent during the 
1973-79 period and 17.7 percent during the 1979-89 period. The 
decline stopped between 1989 and 2000 when the income of families 
with children in the bottom quintile increased at a faster pace than 
all quintiles except for the highest. As was the case with all the 
measures we have examined, average family cash income of families 
in the top two quintiles improved substantially throughout the 
entire period after 1973.
	As compared with the cash family income losses in the bottom 
quintile for all families, the pattern of losses in the bottom 
quintile was even greater for single mothers with children before 
1989 (Table H-17, fourth panel). From 1979 to 1989, for example, 
these mothers lost almost a quarter of their income. However, between 
1989 and 2000 this group made up for at least some of the lost ground 
as their income increased by 28.0 percent.  During this period, which 
included strengthened efforts to encourage and support low-income 
parents, many of them single mothers, in work, income gains by single 
mothers with children in the lowest, second, and middle quintiles far 
exceeded gains at the top of the income spectrum for this group. It 
is also interesting that during both the 1973-79 and the 1989-2000 
periods, income gains in the second, third, and fourth income 
quintiles of single mothers with children were usually greater than 
income gains in the top quintile.
	Because the change in family size among elderly persons was 
almost negligible over the period, their trend in average family cash 
incomes is almost identical to the trend in average pretax AFI. 
Elderly childless units and elderly childless families experienced 
income gains in every quintile during every period between 1973 
and 2000.
	

TABLE H-17--AVERAGE FAMILY CASH INCOME BY FAMILY TYPE AND INCOME 
QUINTILE, SELECTED YEARS 1973-2000

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H-18 -- FAMILY CASH INCOME LIMITS1 BY QUINTILE AND FAMILY TYPE,  
SELECTED YEARS 1973-2000  

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Table H-18 shows family cash income limits (the income 
cutoffs between quintiles) by quintile and family type. Between 1973 
and 1989, income limits among families with children declined or grew 
slowly while those for the elderly increased, in some cases 
significantly. This pattern reversed itself in the 1989-2000 period, 
as income limits for families with children grew at roughly twice 
the pace as among elderly childless units.  In general during the 
1973-2000 period, income limits among the higher quintiles increased 
more than among the lower quintiles. In fact, income limits for the 
lower quintiles have decreased for several family types during 
several periods.  A notable exception involves the limits among 
single mothers with children.  Following declines in the 1979-1989 
period, income limits for this group rose sharply in the 1990s, 
with especially steep increases at the bottom of the income ladder.   
For example, the 36.8 percent increase noted for the lowest quintile 
of single mothers with children was the greatest for any group during 
any period from 1973-2000.
	
     ANTIPOVERTY EFFECTIVENESS OF VARIOUS CASH AND NONCASH TRANSFERS
	
	Tables H-19 through H-21 provide estimates of the number and 
percentage of individuals removed from poverty by market income and 
by social insurance programs (Social Security, unemployment 
compensation, and workers' compensation), means-tested cash programs 
(Aid to Families with Dependent Children, Supplemental Security 
Income, and general assistance), means-tested noncash programs (food 
stamps, housing benefits, and school lunch), and Federal payroll and 
income taxes and the earned income credit (EIC). Tables are provided 
separately for elderly persons, for children, and for persons in 
units with an unmarried head and children under age 18, for selected 
years between 1979 and 2002.
	The tables present alternative measures of poverty to the 
official measure. They include counts of the number of people below 
the poverty line before any government benefits are taken into 
account, after each type of benefit is added to income, and after 
the government cash and noncash benefits and Federal taxes and the 
EIC are added to (or subtracted from) income.
	The tables also measure the effect of these government 
programs on the "poverty gap" - the gap between a poor family's 
income and the poverty line. The poverty gap represents the degree of 
poverty by showing the amount of money that would be needed to lift 
every poor person exactly to the poverty line.

TABLE H-19 -- ANTIPOVERTY EFFECTIVENESS OF CASH AND NON-CASH 
TRANSFERS (INCLUDING FEDERAL INCOME AND PAYROLL TAXES) FOR ALL 
PERSONS AGE 65 AND OLDER, SELECTED YEARS 1979-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Table H-19 shows the anti-poverty effectiveness of market 
income and government programs for the elderly. Based both on cash 
income before transfers and on post-transfer income, the poverty 
rates among the elderly in 2002 were among the lowest on record. As 
compared with 1979, when over 54 percent of the elderly were poor 
before transfers, by 2002 only about 50 percent of the elderly were 
poor before transfers. The comparable figures for the percentage of 
the elderly in poverty after transfers were 13.5 in 1979 and 9.0 in 
2002. The impact of Social Security transfers is by the far the 
greatest reason so many of the poor are removed from poverty by 
government transfers. In 1979 the poverty rate was dropped from 
54.2 to 17.4 by Social Security payments; in 2002 the comparable 
figures were 49.9 to 11.5 percent. In 1979, a total of 8.9 million 
elderly persons were removed from poverty by Social Security; in 
2002, the number had jumped to 13.1 million. The figures for the 
poverty gap for the elderly are not quite as impressive as the 
overall figures. Both the total number of dollars required to 
close the poverty gap and the size of the poverty gap per person 
in poverty have been almost stagnant in recent years. Even so, in 
2002 the poverty gap is only $7.0 billion or $2,284 per person in 
poverty. As we will see, no other government program has as huge 
an impact on poverty among any group as does Social Security 
among the elderly.

	The impact of market income and the safety net on children's 
poverty are shown in Table H-20. The poverty rate among children 
before transfers was 19.7 percent in 2002, among the lowest levels 
since 1979 and more than 6 percentage points lower than in 1993. 
Similarly, the child poverty rate after transfers in 2002 was 
12.6, its lowest level since 1979 and 7.4 percentage points or 
37 percent below its level in 1993. These figures show substantial 
progress against children's poverty, both before and after 
government transfers. That the pre-transfer level is so low 
suggests that the substantial increase in work by former welfare 
mothers after the 1996 welfare reform legislation (see Appendix 
L) has played an important role in poverty reduction among 
children.
	The important role of work by single mothers in reducing 
child poverty is also shown by the data on percentage of children 
removed from poverty due to Federal taxes. The row of figures for 
taxes in all the panels of Table H-20 show that Federal tax policy 
is having a major and growing effect in reducing child poverty. 
In 1983, Federal taxes actually increased the poverty level among 
children by 5.1 percent. However, as the Federal Government reduced 
taxes and increased the EIC for low-income families with children 
by enacting reform legislation in 1986, 1990, 1993, and 2001, 
the impact of taxes actually became positive. By 2002, EIC 
payments to families reduced the child poverty rate from 14.8 
percent to 12.6 percent. It seems reasonable to conclude that 
the effectiveness of the EIC in fighting poverty can be 
attributed to two factors-the increasing generosity of EIC 
policy itself and the increase in work by low-income families 
with children, especially families headed by mothers.

TABLE H-20 -- ANTIPOVERTY EFFECTIVENESS OF CASH AND NON-CASH 
TRANSFERS (INCLUDING FEDERAL INCOME AND PAYROLL TAXES) FOR ALL 
CHILDREN UNDER 18, SELECTED YEARS 1979-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

TABLE H -21 -- ANTIPOVERTY EFFECTIVENESS OF CASH AND NON-CASH 
TRANSFERS (INCLUDING FEDERAL INCOME AND PAYROLL TAXES) FOR PERSONS 
IN UNITS WITH AN UNMARRIED HEAD AND RELATED CHILDREN UNDER 18, 
SELECTED YEARS 1979-2002

[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

	Data on the poverty gap for children are somewhat mixed. Data 
on the pre-transfer poverty gap are uniformly positive. Despite the 
fact that the number of children grew by over 10 million or nearly 
17 percent between 1983 and 2002, the poverty gap before transfers 
nonetheless fell from almost $49 billion to about $37 billion, in 
constant 2002 dollars, a real decline of 23 percent. Similarly, the 
pre-transfer poverty gap per poor child in 2002 continued to fall to 
$2,615, its lowest level during this period.  However, the post-tax, 
post-transfer poverty gap per poor child rose during this period.  
This period saw significant declines in receipt of cash and other 
welfare benefits, and means-tested cash (and, especially in recent 
years, non-cash) benefits have become generally less effective in 
removing children from poverty; as shown in the middle two rows 
of the last panel of Table H-20, taken together these policies 
reduced by only 29.5 percent in 2002 as compared with 46.3 percent 
in 1979, 45.3 percent in 1989, 43.0 percent in 1996, and 34.3 
percent in 1999.  The effect of the EIC in reducing the poverty 
gap, however, remained potent; in fact, at 6.2 percent it was 
greater than in any previous year shown other than 1999. Despite 
the effectiveness of the EIC, the overall impact of government 
programs reduced the poverty gap less than in any previous year. 
The major reason for the reduced effectiveness of government programs 
in reducing the poverty gap seems to be a decline in the impact of 
means-tested cash benefits. In 1979 these benefits reduced the 
poverty gap by 28.8 percent. By contrast, in 2002 they reduced the 
poverty gap by only 10.9 percent. Undoubtedly, the decline in the 
welfare rolls and in cash benefits from the Temporary Assistance 
for Needy Families Program play an important role here.
	Poverty data for persons in units headed by single parents 
is generally consistent with the data for children. The first point 
to emphasize with these data (see the top row of Table H-21), which 
simply reinforces the conclusion from the data on single mothers in 
Table H-15, is that there has been a very large increase in the 
number of persons in families with unmarried heads. The number 
jumped from 23.5 million in 1979 to 38.4 million in 2002, an 
increase of more than 60 percent. By contrast, the number of persons 
in married couple families increased from 101.3 million to only 
104.7 million in 2000 (see Table H-11), an increase of about 
3 percent. Thus, the family type with the highest poverty rate 
has been increasing more than 10 times as fast as the family type 
with the lowest poverty rate. These demographic developments make 
progress against poverty somewhat difficult.
	Even so, the pre-transfer poverty rate among persons in 
families with an unmarried head nearly matched its lowest level 
ever in 2002 at 37.6 percent. Compared with the 53.8 percent pre-
transfer rate in 1983, that's a drop of over 30 percent. Progress 
against pre-transfer poverty among these families was continuous and 
rapid during the 1990s economic expansion, with a drop of 21 percent 
from 49.5 percent in 1990 to 39.3 percent in 1999.  Despite the 2001 
recession, this figure continued to fall, to 37.6 percent in 2002.  
Again, as we saw in the case of children, progress against pre-
transfer poverty has been substantial in recent years, in all 
likelihood due to the increase in work by single mothers.
	On the other hand, again as was the case with children, 
progress against poverty as measured by the poverty gap has been 
uneven. Although the pre-transfer poverty gap at $42.8 billion for 
these families nearly matches its low since 1979, and although the 
gap has fallen 22 percent just since 1995, means-tested cash programs 
have been increasingly less effective in reducing the poverty gap. By 
contrast, as with children, Federal tax policy has been more 
effective at reducing the poverty gap. Even so, the combination of 
the reduced pre-transfer poverty gap and the increased effectiveness 
of the EIC in reducing the poverty gap failed to outweigh the 
declining effectiveness of means-tested cash and noncash transfers 
in reducing the poverty gap. As a result, the reduction in the post-
tax, post-transfer poverty gap for these families was lower than in 
the past as measured either by dollars or percentage reduction.
	
	REFERENCES
	
U.S. Census Bureau. (1986). Money income and poverty status of 
families and persons in the United States: 1985. Current Population 
Reports (Series P-60, No. 154). Washington, DC: U.S. Government 
Printing Office.

U.S. Census Bureau. (1993). Money income of households, families, and 
persons in the United States: 1991. Current Population Reports 
(Series P-60, No. 180). Washington, DC: U.S. Government Printing 
Office.

U.S. Census Bureau. (1996 and various years). Income, poverty, and 
evaluation of noncash benefits, 1994. Current Population Reports 
(Series P-60, No. 189). Washington, DC: U.S. Government Printing 
Office. [Several publications from the P-60 Series were used in 
preparing the tables for this chapter. These include numbers 124, 
140, 145, 149, 154, 157, 161, 166, 168, 174, and 180.]
	
	
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