The State of Wisconsin's (Working) Poor and How Policy Helps

Pathways to Financial Success

June 17, 2011

Julia Isaacs Joanna MarksKatherine ThorntonTimothy Smeeding

Acknowledgements

Thanks to co-authors Support from ASPE/HHS and Census Bureau Assistance from experts in national and state

and local organizations working on new poverty measures

Input from stakeholders in the state Access to Wisconsin’s rich administrative data

housed at IRP

Objectives of Wisconsin Poverty Project and This Lecture

Develop an updated and more comprehensive measure of poverty that includes the effects of a wider range of federal and state policies on economic well-being than does the current federal only measure

Examine poverty at state and sub-state levels and among different demographic groups

Provide a transparent, straightforward model for other states and localities to emulate

Methods: An OverviewOfficial (Fed/State) Measure Our Wisconsin Measure

Official poverty line Developed in 1960s, based on food costs and expected share for food budget, since adjusted for prices only

Cash income (pre-tax)

Census “Family” Unit

NAS-Based, SPM-Like Threshold Basic expenses food, clothing, shelter, utilities (FCSU)Adjusted for Wisconsin cost of living, housing tenure & medical expenses

Cash income +/-- Taxes & tax credits+ Non-cash benefits -- Work expenses (incl childcare)

Family expanded to include unmarried partner & foster children

Building Thresholds: Adjust for Wisconsin Cost of Living

Ratio 2009 Threshold (family of 4)

NAS-Type Threshold for U.S. (2-adult, 2-child, no medical expenses)

$26,778

WI COLA 0.9177 $24,575Official Poverty Line (for comparison)

$21,756

Adjust for Housing Tenure

Source: Garner and Betson (2010) and authors’ calculations

Housing Tenure

Ratio 2009 Threshold (family of 4)

Base Rate -- $24,575

Renter 1.03 $25,587

Owner with mortgage

1.01 $25,312

Owner with no mortgage

0.78 $19,169

Adjust for Within-State Differences in Cost of Living

Region Ratio 2009 Threshold,

4-person,

Renters

Statewide -- $25,312

1. Inner Milwaukee 1.00 $25,312

2. Outer Milwaukee and Waukesha 1.05 $26,578

3. Dane County (Madison) 1.04 $26,324

4. Other Metro areas 0.99 $25,059

5. Rural 1 + Marathon 0.92 $23,287

6. Rural 2 0.98 $24,806

Source: IRP tabulations of ACS data.

Adjust for Out-of Pocket Medical Expenses

Selected Examples Adjustment 2009 Threshold,

4-person,

Renters in Inner

Milwaukee

Before medical expenses -- $25,312Non-elderly, private insurance, good health

+$1,946 $27,258

Non-elderly, public insurance, good health

+$58 $25,370

Elderly, public insurance, fair/poor health

+$1,965 $27,277

Official Poverty Line $21,756

Methods: Resources

Cash income

+/- Taxes & credits (federal, state, payroll)

+ Food stamps (SNAP)

+ Energy assistance (LIHEAP)

+ Public housing

- Work expenses (including child care)

= Resources

Methods: Imputing Resources

Data used for SPM (the CPS) do not produce reliable state-level estimates (unless pool 2 yrs)

American Community Survey (ACS) allows reliable state-level (and sub-state level) estimates but does not have all necessary data (e.g., taxes, non-cash benefits, work expenses)

Our estimates based on imputations of taxes, SNAP benefits, energy assistance, housing, work and child care expenses.

Results

Change in poverty 2008 to 2009 Child and elderly poverty Effects of public policies Poverty by geographic region Note: Because of the way ACS collects data,

“2008” covers 2007-2008, and “2009” covers “2008-2009.” So, we’re looking at early effects of recession here, more next year

Poverty Rates: 2008 & 2009

Official Poverty Rates in Wisconsin : 2008 & 2009

Note: All poverty rates measured with WPM thresholds and include adjustments for work expenses. Source: IRP tabulations of ACS 2008 and 2009 data (IPUMS)

Poverty Rates by Income Definition, 2008 and 2009

21.3

23.8

13.2

15.2

11.2 11.5

0

5

10

15

20

25

2008 2009

Market Income(Income fromearnings & privatesources)

Cash Income(includes SocialSecurity & othercash benefits)

Full WPMDisposable Income(includes non-cashbenefits & taxes)

Change in Poverty Rate, 2008 to 2009 (percentage points)

Child and Elderly Poverty Rates in Wisconsin : 2008 & 2009

Child and Elderly Poverty Rates In Wisconsin : 2008 & 2009

Child and Elderly Poverty Rates: 2008 & 2009

Child and Elderly Poverty Rates: 2008 & 2009

Note: All poverty rates measured with WPM thresholds and include adjustments for work expenses. Source: IRP tabulations of 2009 ACS data. (IPUMS)

Poverty Rates in 2009 by Income Definition and By Age, in 2009

25

18

51

21

1411

1311 10

0

10

20

30

40

50

60

Child <18 18-64 '65 and older

Market Income(Income fromearnings & privatesources)

Cash Income(Includes SocialSecurity and othercash benefits)

Full WPMDisposable Income(Includes non-cashbenefits & taxes)

Marginal Effects of Public Policies in Wisconsin

SNAP and EITC have big poverty reduction effects (in 2008, and bigger ones in 2009)

Work-related expenses and medical expenses tend to increase poverty

State and federal policies that either increase resources or reduce costs for basic needs are both important aspects of anti-poverty policy

Marginal Effects of Public Policies

Marginal Effects of Public Policies

Marginal Effects on Child Poverty

Marginal Effects on Elderly Poverty

Effects Within Wisconsin and Its Localities

The State picture—what stands out ? --The ‘white’ ring north of and almost surrounding

Milwaukee

--Poverty in the south and northwest

--Poverty highest in Milwaukee County, then Dane County.

Then look within Milwaukee county –WOW ! The economic segregation is very large

Source: IRP Tabulations of 2009 ACS Data (IPUMS-USA)

Milwaukee County--

Implications for Financial Security

The long run solution to poverty is a good job and some savings for a rainy day

Still, the safety net worked well in 2009 Wisconsin has to work on BOTH keeping

its safety net and on financial self sufficiency for families

BUT the jobs part will be a long time coming, I am afraid

Conclusions

Conventional – Official measure shows increase in Wisconsin poverty between 2008 & 2009.

WPM demonstrates that public policies offset the declines in earnings/cash income.

– Built-in responses to recession (e.g., rise in SNAP caseloads)

– Congressional action (e.g., ARRA’s expansion of tax credits)

– State’s actions (e.g., success in enrolling families on SNAP) Net effect was that poverty did not increase, under

our more comprehensive measure

Next Steps

Reports available at http://www.irp.wisc.edu (3 levels of detail)

Repeat in 2010 to see how things worked out We will share Wisconsin concepts and code

with any state so that anyone can benefit from our work to date – and we are continuing to work to model the SPM at the state level using ACS data

See: http://www.irp.wisc.edu/research/wipoverty.htm

Next Financial Steps for WPM

This is the ‘Wisconsin Idea’ in practice We need to find state funding (non-profits or

other) to continue on with the measure Ideas welcome

smeeding@lafollette.wisc.edu

Questions and Comments?

THANKS for Listening --