Social Security’s Effect on Child Poverty
Released: 2015-01-23T00:00:00

Social Security plays an important role in reducing poverty, not only among the aged but among children as well. Children may be eligible for Social Security benefits when a parent who is a covered worker dies, becomes disabled, or retires. In addition to receiving Social Security benefits in their own right, children may economically benefit from Social Security by living with other family members who receive benefits. This report examines the effects of Social Security on child poverty. The estimates presented in this report are based on a CRS analysis of U.S. Census Bureau Survey of Income and Program Participation (SIPP) data in April 2013.

Children and Social Security

Unlike welfare programs, in which eligibility is determined on the basis of limited income, Social Security is a work-related entitlement, in which benefits are determined on the basis of workers' employment and earnings history, without respect to current income. Children may be eligible for Social Security benefits when a parent who is a covered worker dies, becomes disabled, or retires. For children of disabled or retired workers, the child's benefit is generally equal to 50% of the parent's primary insurance amount (PIA) before adjustments. (The PIA is based on the parent's Social Security earnings record.) Children of deceased workers are generally entitled to benefits equal to 75% of the deceased parent's PIA before adjustments. A maximum family benefit applies, varying from 150% to 188% of the PIA of the retired, disabled, or deceased parent. The family maximum cannot be exceeded regardless of the number of recipients entitled to benefits under the deceased or retired worker's earnings record. Child benefits generally apply to all biological children of a worker (assuming that paternity/maternity has been established) and to legally adopted children. Stepchildren may be eligible in some cases, as may some legally adopted grandchildren, with their benefits being determined on the basis of their grandparents' earnings record. Children may receive benefits until they reach age 18, and if in high school, through age 19. Disabled children may receive benefits indefinitely as long as the disability was incurred before reaching age 22. In addition to receiving Social Security benefits in their own right, children may economically benefit from Social Security by living with other family members who receive benefits.

Social Security Administrative Data: Child Beneficiaries

As noted above, children may qualify for Social Security benefits by being a child of a retired or disabled worker receiving Social Security or a survivor of a deceased worker who met the program's insured status requirements. Social Security Administration (SSA) data indicate that in December 2012, 3.3 million Social Security beneficiaries (5.7% of all beneficiaries) were children under the age of 18. (See Table 1 .) Among child beneficiaries, 1.2 million (37.2% of all child beneficiaries) were children of deceased workers, 1.7 million (52.9% of all child beneficiaries) were children of disabled workers, and about 322,000 (8.9% of all child beneficiaries) were dependent children of retired workers. The average monthly benefit among child beneficiaries in December 2012 was $525. Average monthly benefits of children of disabled workers were lowest, about $323 in December 2012, compared to about $601 for children of retired workers, and about $793 for children of deceased workers (i.e., children receiving survivor's benefits).

In total, aggregate Social Security benefits paid on behalf of children in December 2012 amounted to about $1.712 billion, or about $20.5 billion on an annualized basis, based on SSA administrative data. Social Security benefits paid on behalf of children exceed federal dollars spent on cash welfare to families with children under the Temporary Assistance for Needy Families (TANF) program. In FY2013, combined federal and state TANF expenditures, in the form of cash aid to families, amounted to an estimated $8.7 billion, of which approximately $4.3 billion (49%) was from federal funds.

Survey of Income and Program Participation Data: Children in Families Receiving Social Security

While SSA administrative data provide a broad overview of the numbers of individuals receiving Social Security benefits and the type and amount of benefits received, they provide little information about the characteristics of individuals receiving benefits or the importance of Social Security to individual and family economic well-being. In order to address questions relating to the income and poverty status of families in which children live, and the impact of Social Security benefits on income and poverty status of families with children, other data sources must be used. For this analysis, U.S. Census Bureau Survey of Income and Program Participation (SIPP) data are used in this report.

The most recent SIPP data are from the 2008 panel, which is designed to interview a representative sample of families every four months over a 64-month period, from September 2008 through December 2013. The SIPP collects detailed information on family composition, labor force participation, income, and program participation among families and their members in each of the 64 months they are included in the survey. The analysis presented in this report relies on SIPP data for April 2013, the latest month in common from data released for the full SIPP sample. An Appendix further describes the methodology used in this report.

CRS analysis of SIPP data for April 2013 indicates that among an estimated 73.0 million children under age 18, an estimated 8.5 million (11.6%) lived in families in which one or more family members received Social Security—over two and one-half times the number of children estimated to receive Social Security benefits based on the administrative data discussed above from four months earlier (3.3 million in December 2012). As discussed in greater detail in the Appendix , which describes the methodology used in this report, it is not possible to precisely identify the Social Security beneficiary status of children on the SIPP. Among the estimated 8.5 million children living in families that received Social Security in April 2013 based on SIPP data, an estimated 3.2 million (37%) were in families in which Social Security was reported as having been received on behalf of at least one of the children in the family—a number quite close to the 3.3 million child recipients reported by administrative data, four months earlier. (See Figure 1 .) As noted in the Appendix , most, but not all, of these 3.2 million children from the SIPP are probably child beneficiaries. Another 1.9 million (22%) lived in families where a parent or guardian reported receiving Social Security benefits, though not directly on behalf of a child. These 5.1 million children are grouped together in analyses that follow as child beneficiaries and children of parents or guardians that receive Social Security. The remaining 3.4 million children (40%) lived in families where Social Security was received by someone other than a child or the children's parent(s) or guardian(s); in such cases Social Security benefits may have been received by an extended family member (e.g., grandparent, aunt or uncle, cousin, niece or nephew) or an older adult sibling. For this latter group, children may incidently be affected by Social Security, but not directly as a matter of policy aimed at them.

Children's Poverty Status by Family Social Security Receipt

At first appearance, there is little difference in the overall poverty status of children living in families that receive Social Security and those living in families that do not. However, differences become more apparent between children living in families in which Social Security is received on behalf of children and/or parents/guardians, and those living in families in which Social Security is received only by extended or other family members. Also, the after-the-fact comparison of poverty status by family Social Security receipt doesn't take into account the effect that Social Security itself has in reducing poverty. For such purposes, poverty status of children must be estimated both before and after counting families' income from Social Security.

Figure 2 shows the poverty status of children based on total family income as multiples of U.S. Census Bureau poverty income thresholds. The figure shows, for example, that 23.5% of all children were poor in April 2013. Children living in families who received Social Security were about equally as likely to be poor in April 2013 as children living in families who didn't—24.8% compared to 23.3% (the third and second bars, respectively). However, among child beneficiaries and children of a parent or guardian who received Social Security (the 5.1 million children in the two combined pie slices shown in Figure 1 ), 27.2% were poor, compared to 21.3% where Social Security was received by extended or other family members (other than children, parents, or guardians).

Antipoverty Effectiveness of Social Security Among Children

One way to gauge the effect of Social Security on children's poverty status is to estimate poverty by excluding Social Security from family income and comparing the result to the extent of poverty when Social Security is added back into family income. Figure 3 , Figure 4 , and Figure 5 depict children's "pre- and post-transfer poverty status" for children in families that receive Social Security compared to children in families that don't. Figure 3 , for example, compares all children, whereas Figure 4 compares only children who are child beneficiaries or live in families where the parent(s) or guardian(s) received Social Security. Figure 5 compares children who are in families where only extended or other family members (other than children, parents, or guardians) reported receiving Social Security with children in families where no Social Security was reported. The comparison of "pre-transfer poverty status," based on a measure of family income that excludes the amount families received from Social Security, to "post-transfer poverty status," which includes the Social Security benefits families received, provides one indication of Social Security's effect on reducing child poverty.

Figure 3 shows, for example, that 47.8% of children living in families that received Social Security would have been considered poor based on their families' incomes from sources other than Social Security. When Social Security is added back into these families' incomes, child poverty is cut by nearly half, to 24.8%—a level about equal to that of children living in families that do not receive Social Security (23.3%). On this basis, Social Security lifted nearly 2.0 million children (1.952 million) above the poverty line in April 2013. (See Table 2 .) It should be noted that this effect is limited to just the 8.5 million children that are in families that received Social Security, which noted earlier, amounts to just about 11.6% of all children.

If one examines the relative effect of Social Security on the poverty status of all 73.0 million children in the U.S., overall, the effect appears much more modest. (See Table 2 .) In all, 19.082 million children were estimated as being poor in April 2013, on a pre-transfer basis, or 26.2% of all children. The 1.952 million reduction in the number of poor children as a result of counting Social Security benefits reduces the total number of poor children to about 17.130 million, resulting in 23.5% of all children being considered poor—a 2.7 percentage point, or 10.2% decline.

While Social Security benefits received by families with children have the effect of reducing the incidence of child poverty to nearly the same level as that of children in families that don't receive benefits, their equalizing effect is attenuated at somewhat higher income levels. Among children in families that receive Social Security, 34.4% have family income below 125% of the poverty line , compared to 29.8% of children in families that don't receive benefits. Among children in families that receive Social Security, 43.7% have family incomes below 150% of the poverty line , compared to 36.4% of children in families that do not receive Social Security. (See Figure 3 .)

Figure 4 focuses on just the 5.1 million children who are classified as either child beneficiaries and/or children whose parent(s) or guardian(s) received Social Security, whereas Figure 5 shows the other 3.4 million children who are in families in which Social Security is received only by extended family members other than a parent or guardian. Comparing the two groups, the former group ( Figure 4 ) has a much higher pre-transfer poverty rate (54.2%) than does the latter group ( Figure 5 ) (38.4%). In families where Social Security benefits are received on behalf of children or by parents or guardians, Social Security reduces their poverty rate from 54.2% to 27.2%, a rate that is still significantly higher than that of children in families that don't receive Social Security (23.3%). In contrast, for children living in families where Social Security is received only by extended or other family members, Social Security reduces their poverty rate from 38.4% to 21.3%—slightly below that of children in families that don't receive Social Security (23.2%).

Figure 6 shows the relative share of estimated aggregate dollars going to children's families, based on their families' pre-transfer poverty status (i.e., poverty based on total income, excluding Social Security income that the family reports receiving). The figure shows, for example, that based on SIPP data, families with children reported receiving about $6.053 billion in Social Security benefits in April 2013, or about $72.635 billion on an annualized basis. Of these benefits, an estimated 44.1% (about $2.671 billion, or about $32.050 billion on an annualized basis) went to families who were poor based on their total cash income, excluding any Social Security benefits they received . (See Table 3 .) Thus, over two-fifths of Social Security dollars paid to families with children goes to children who would otherwise be counted as poor. Among families with child beneficiaries, about $3.847 billion in Social Security benefits were reported in April 2013 (about $46.167 billion on an annualized basis). Of this amount, nearly half (49.2% , $1.892 billion, or $22.702 billion on an annualized basis), went to families that had total incomes, excluding Social Security , below the poverty line, which is more than five times the estimated $4.485 billion in federal cash welfare spending under the Temporary Assistance for Needy Families (TANF) program in FY2013. Whereas TANF may be considered "target efficient," in terms of targeting the poor, in that nearly all TANF dollars go to families that are poor on a pre-transfer (pre-TANF) basis, Social Security plays a much greater role in reducing poverty among children than does TANF.

Limitations

The estimates presented in this report are based on survey data and are subject to respondent misreporting. Additionally, the SIPP data do not provide the comprehensive detail to precisely identify child beneficiaries. It should also be noted that estimates of the pre-transfer poverty status of children (i.e., poverty status excluding Social Security from total income) provide one measure of the relative importance of Social Security in combating poverty. The pre-transfer poverty estimates should not be confused with the full effects on poverty of eliminating the Social Security program, as some individuals would alter their behavior in absence of the program.

Appendix. Methodology

Identifying Child Social Security Beneficiaries on the SIPP

It is not possible to precisely identify the Social Security beneficiary status of children on the SIPP. The SIPP collects information on Social Security receipt and the reasons for receipt for persons age 15 and over. Additionally, it collects information about whether an adult (defined as a person age 15 and over) collects Social Security on behalf of children under age 21. In such cases, however, it does not identify the specific children in the family for whom Social Security benefits are received, nor the specific reason(s) benefits are received on children's behalf. In such cases it is uncertain whether all or only some children under 21 in the family are direct beneficiaries. Moreover, some adults may include the child's portion of their Social Security benefit as their own, without explicitly indicating that they received Social Security on behalf of a child.

In total, about 8.5 million children under age 18 were identified on the SIPP in April 2013 as living in families in which Social Security benefits were reported, either on their own behalf, or on behalf of another family member.

In this analysis, all children of a parent (or guardian) who are under the age of 18 are identified as Social Security child beneficiaries if the child's parent or guardian reported that he/she received Social Security on behalf of a child under age 21 in the family. To some extent, this method will overstate the number of children under age 18 who received Social Security, as potentially some, but not all, children of the parent may be beneficiaries in their own right. In April 2013, an estimated 3.148 million children under age 18 on the SIPP were identified as Social Security child beneficiaries on the basis of a parent or guardian indicating that they had received Social Security benefits on behalf of a child. Another 27,000 children ages 15 to 17 reported directly receiving Social Security on the SIPP in April 2013. Thus, an estimated 3.175 million children were identified on the SIPP as potential Social Security child beneficiaries.

An additional 1.893 million children lived with a parent or guardian who reported receiving Social Security on the SIPP in April 2013, but who did not indicate that benefits were received on behalf of a child. In some cases the benefits received by these parents or guardians may contain an allowance for beneficiary children that is not separately identified.

Because of issues in identifying child beneficiaries on the SIPP and the avenues by which they receive Social Security (e.g., child survivor, dependent of a retiree or disabled worker), the two groups mentioned above are combined for purposes of analysis as "child beneficiaries and children of parents or guardians that receive Social Security." These 5.068 million children are differentiated from the remaining 3.430 million children who live in families in which Social Security was received only by extended family (e.g, grandparents, aunts, uncles, nieces or nephews) or other family members (adult sibling). For the former group, Social Security's effect on child poverty is more directly related to Social Security policy, whereas for the latter group, Social Security's effect on child poverty is incidental, being more directly related to children's incidental family living arrangements.