Who is poor in Wisconsin?

In order to identify who is poor in Wisconsin, and how earnings and public policy affect poverty, a poverty measure that accounts for market income and the full range of social welfare transfers is most useful. The official poverty measure (OPM) used by the Census Bureau is useful for looking at long-term trends in cash income, but does not provide a timely, inclusive analysis of needs and resources that is essential to an accurate assessment of poverty.

The OPM does not indicate, for example, the antipoverty effects of noncash benefits such as the Supplemental Nutrition Assistance Program (SNAP; called FoodShare in Wisconsin), nor of tax transfers such as the Earned Income Tax Credit (EITC). Without the right tool, state policymakers cannot gauge the antipoverty effectiveness of FoodShare, on which the state spent more than $1 billion in 2015, according to the Wisconsin Department of Health Services.[1] Nor does the OPM indicate to state legislators the antipoverty effects of the Wisconsin Earned Income Tax Credit (EITC), which 252,918 tax filers claimed in tax year 2014 for a total of about $100 million in credits (the average credit was $394), according to the Wisconsin Department of Revenue.[2]

To address some of the official measure's shortcomings, the Census Bureau introduced an additional measure, the Supplemental Poverty Measure or SPM. The SPM is designed to account for the contemporary needs and resources of American families, counting noncash benefits and tax credits and using a poverty threshold that represents modern standards of living. The SPM considers childcare, work, and variation in medical expenses, and adjusts for geographic differences in prices. But the SPM is designed to provide information on combined levels of economic need at the national level or within large subpopulations or areas, and it uses data from the Current Population Survey, which is best used for large-area estimates. For the most accurate estimates of Wisconsin poverty, researchers developed the Wisconsin Poverty Measure, described in the next section.

The Wisconsin Poverty Project

To better understand how earnings, benefits, and certain expenditures (e.g., childcare, work transportation, medical costs) affect poverty in Wisconsin, and with the goal of providing a model for other states and localities seeking to better understand economic need in their area by building their own place-specific poverty measure, researchers at the Institute for Research on Poverty (IRP) launched the Wisconsin Poverty Project and started developing the Wisconsin Poverty Measure (WPM) in 2008.

The WPM follows the SPM design in many respects, but goes beyond it to reflect the characteristics and policy interests of the state, and it uses data from the American Community Survey (ACS), which has relatively large sample sizes and is recommended by researchers for more accurate state- and sub-state-level poverty estimates than can be obtained by the SPM or OPM. [3] WPM researchers' most recent findings, for 2014, are detailed below.

The Wisconsin Poverty Report Findings

In June 2016 researchers released the eighth annual Wisconsin Poverty Report: Poverty Levels Flat on Average but More Diverse within State in 2014, by Timothy M. Smeeding and Katherine A. Thornton.[4]

The report charts the antipoverty effects—for the entire population overall, for children, and for the elderly—of taxes, SNAP, housing programs, and energy assistance from 2008 through 2014. The report also shows the poverty-increasing effects of work expenses such as childcare, and out-of-pocket medical costs for the same time period.

The Wisconsin Poverty Report shows that using the Wisconsin Poverty Measure—which counts market income, cash benefits, and noncash benefits such as FoodShare and tax credits such as the EITC—overall poverty in the state in 2014 was 10.8 percent, which is not statistically different from the overall poverty rate of 10.9 percent in 2013.

Market-income-only poverty—which counts as resources only earnings, investment income, private retirement income, and child support (excluding federal and state noncash antipoverty benefits such as FoodShare and tax credits such as the EITC)—dropped slightly from 24.4 percent in 2013 to 24.2 percent in 2014, not a statistically significant decrease.

By contrast, poverty in Wisconsin using the OPM, which adds in the value of public cash benefits (excluding FoodShare and tax credits such as the EITC), dropped significantly, from 13.4 percent in 2013 to 12.1 percent in 2014, but still remained more than a percentage point above the WPM rate of 10.8 percent. Comparing the WPM, market-income-only, and OPM poverty measures provides a nuanced picture of economic hardship in the state (see Figure 1).

Figure 1. Overall Wisconsin poverty rates under three measures, 2008–2014, reveal consistently lower WPM rates as compared to the official and market-income-only poverty measures.

Wisconsin Poverty Measure researchers' main conclusions from analyzing the data are as follows:

  • The Wisconsin poverty rate for the overall population as measured by the WPM was flat between 2013 and 2014 at about 10.8 percent, up from 10.2 percent in 2012.
  • Child poverty under the WPM also remained flat from 2013 to 2014, at 11.8 percent.
  • Elderly poverty rates using the WPM dropped from 10.0 percent in 2013 to 8.3 percent in 2014, mostly due to cost-of-living increases in Social Security benefits.
  • Although Wisconsin added almost 60,000 jobs from January 2013 through November 2014, there was no reduction in poverty as measured by the WPM.
  • Despite the rise in employment, decreases in benefit levels from programs that help people who would otherwise be poor, such as FoodShare assistance and the EITC refundable tax credit, in 2014, resulted in no change in overall or child poverty with the WPM.
  • Market-income poverty (which reflects employment levels and wages, and is therefore a helpful gauge of economic health) decreased overall by 0.2 percentage points and the official poverty rate fell significantly, from 13.4 percent in 2013 to 12.1 percent in 2014.

The next section explores Wisconsin Poverty Report findings on poverty among children in Wisconsin.

Child Poverty in Wisconsin

Child poverty rates, shown from 2008 to 2014 in Figure 2, decreased significantly from 2013 to 2014 under the market-income-only (24.4 to 23.0 percent) and official (19.2 to 17.6 percent) poverty measures, while the WPM for children (11.8 percent) remained flat. Wisconsin Poverty Project researchers note that changes in market income, which are essentially changes in employment and earnings, appear to account for the trends in market and official child poverty between 2010 and 2014.

Families with children benefited somewhat from the recovering economy in 2014, and using the official poverty measure that translated into a significant decline in official child poverty. However, the WPM child poverty rate stayed the same despite an increase in employment, which researchers think is because the WPM counts benefit levels of antipoverty programs such as FoodShare and the EITC refundable tax credit, which dropped in 2014.

Figure 2. Child poverty rates in Wisconsin decreased significantly from 2013 to 2014 under the market-income and official poverty measures, whereas the WPM rate was flat

The official Wisconsin child poverty rate in 2014 was 17.6 percent. However, under the WPM, child poverty in Wisconsin was significantly lower (11.8 percent). Researchers suggest several primary reasons why the child poverty was lower under the WPM than in official statistics. The first is that the WPM, unlike the official measure, counts the income of unmarried partners as contributing to family resources, which makes a substantial difference in estimating child poverty because many poor children live with single mothers and their unmarried partners.

Another reason why the WPM finds a lower child poverty rate than the OPM is because families with kids are eligible for a broader range of tax credits (e.g., the Earned Income Tax Credit is primarily for families with children) and also have high take-up rates of SNAP and other noncash safety net programs, which are counted by the WPM but not the OPM. In other words, the WPM shows that Wisconsin's safety net enhances low earnings for families with children, puts food on the table, and encourages self-reliance, and in doing so makes a big difference in combatting poverty. The next section looks at elderly poverty in Wisconsin.

Elderly Poverty in Wisconsin

Elderly poverty in the state, depicted from 2008 through 2014 in Figure 3, is consistently higher under the WPM (8.3 percent in 2014) than the official measure (6.8 percent in 2014), mainly because elderly individuals often have out-of-pocket medical expenses that are not considered by the official measure and which exceed the noncash benefits they receive. However, despite high medical expenditures, the poverty rate among the elderly under both the official and WPM measures dropped significantly from 2013 to 2014, mainly due to cost-of-living adjustments (COLA) in Social Security benefits, and WPM inflation adjustments to the WPM poverty threshold, which were less than the COLA.

The significant increases and decreases in elderly poverty in the past few years shown in Figure 3, are explained by a number of factors. First, there are a fairly large number of elderly individuals and couples whose incomes are just slightly above or below the poverty line, which causes small changes in inflation adjustments to move them from one side of the poverty line to the other, as appears to have happened in 2013 and 2014 in Wisconsin. In addition, the 2014 rise in medical out-of-pocket expenses was less than the benefit increase in 2013, hence using a smaller fraction of elder incomes. These factors contributed to the WPM poverty rate among the elderly bouncing jaggedly from 2012 to 2014, rising to its highest level since 2009 under the WPM in 2013 (10.0 percent), but then falling back in line with the 2011 WPM poverty rate in 2014 (8.3 percent). In all cases, the WPM rate is higher than the OPM.

Figure 3. Elderly poverty rates in Wisconsin under the WPM and official poverty measure, 2008–2014, show statistically significant decreases from 2013 to 2014 under both measures.

The next section explores what the WPM indicates about the effects of Wisconsin policies on poverty.

Using the WPM to Assess the Effect of Policies on Wisconsin Poverty

This section describes what poverty rates would have been if noncash and tax benefits or work-related resources/expenses and medical resources/expenses had not been taken into account. Noncash and tax benefits lower poverty rates under the WPM by increasing disposable income. Meanwhile, higher expenses for childcare, work, and medical care move in the opposite direction to raise poverty. Thus it is important to consider the impact of policies designed to reduce these expenses on poverty, because they are as important as safety net programs in improving the economic well-being of low-income families, as well as unavoidable work-related expenses, which may decrease the economic well-being of these families.

Among the benefit programs examined in this analysis and depicted in Figure 4, SNAP/FoodShare benefits had the greatest impact in 2014, reducing the percentage of people in poverty by approximately 1.9 percentage points. However, this effect has fallen over the past few years as FoodShare benefits have contracted in Wisconsin. The second largest antipoverty effect was from tax provisions such as the EITC. These effects were smaller in 2014 than in 2010/2011. In earlier years, there was the Making Work Pay tax credit (which boosted earnings for the majority of workers and was in effect in 2009 and 2010) and a 2 percentage point reduction in payroll taxes (which was in effect in 2011 and 2012). Neither the work tax credit nor the cut in payroll taxes were in effect in 2012/2013 or 2014, and as a result, the net effect of taxes and tax credits was less likely to lift the working poor out of poverty than in 2010/2011.

Figure 4. For the overall population of Wisconsin, SNAP (FoodShare) and taxes (including the EITC) had the largest antipoverty effects in 2014, whereas work expenses and medical out-of-pocket expenses had the greatest poverty-increasing effects

The WPM indicates that both SNAP/FoodShare and taxes had a larger effect on reducing child poverty than overall poverty, but the impact of both programs was smaller in 2012 to 2014 than 2010/2011, as can be seen by comparing Figures 4 and 5. In 2014, tax-related provisions reduced child poverty by 4.5 percentage points and SNAP/FoodShare benefits reduced child poverty by 3.3 percentage points.

Figure 5. For children in Wisconsin, the antipoverty effects of taxes and public benefits dropped in 2014 as compared to 2008–2013, whereas work expenses dropped slightly from 2013–2014

Although the net impact of the EITC and other tax provisions decreased in 2014 as compared to earlier years shown in Figure 5, it was still substantial, reducing child poverty by 4.5 percentage points. The relative increased impact of work-related expenses on poverty since 2010/2011 is consistent with rising costs for work-related expenses like childcare in an economy with more people working but earning flat or falling wages, especially low-skill workers. Researchers noted a steady decline in public spending on childcare subsidies under the Wisconsin Shares program since 2008, which also may contribute to families' rising out-of-pocket work expenses.

Taxes had a negligible effect on elderly poverty, as shown in Figure 6, and SNAP/FoodShare reduced elderly poverty by 0.9 percentage points in 2014, much less than for children (Figure 5). This pattern is expected because the largest tax credits are focused on working individuals who are parents of minor children. SNAP and housing and energy assistance provide modest assistance to all groups, each of them reducing poverty by 1.0 percentage point or less in any year.

Medical expenses increased poverty for all groups, but the effects of medical expenses were felt most acutely by the elderly, who are more likely to be in need of costlier and sustained medical care. In general, out-of-pocket medical expenses (e.g., insurance premiums, co-payments for medical services, prescription and over-the-counter drugs, and uninsured medical expenses) present a significant challenge for the low-income elderly and these costs continue to rise in Wisconsin and elsewhere. Medical costs increased elderly poverty rates by 2.8 percentage points in 2014, less than in earlier years, but still by a large amount (Figure 6).

For elders, medical cost increases swamped the sum of all noncash benefits and led to a 1.5 percentage point higher WPM rate than that found in the official measure (Figure 3, compare 8.3 percent to 6.8 percent in 2014) .This suggests that public policies designed to increase the coverage of medical expenses for the low-income elderly can do more to alleviate the economic hardship felt by this group than most any other policy.

Poverty Rates by County or Multicounty Area

A significant strength of the WPM is its ability to portray poverty across regions within the state. In 2014, researchers found high poverty rates in some areas, especially central Milwaukee and Kenosha, but with many more substate areas doing much better than the rest of Wisconsin compared to previous reports, as shown in Table 1.

WPM researchers' labeling of substate areas includes 13 large counties and 15 multicounty areas that encompass the remaining areas of the state. While some of the multicounty areas comprise only two counties (e.g., Sauk and Columbia), others require as many as 7 to 10 of the more-rural counties in order to reach a sufficient sample size to obtain reliable estimates.

Table 1. Wisconsin WPM overall poverty rates by county or multicounty area with upper and lower bounds, 2014, reveal significant variation in poverty throughout the state

 

Wisconsin Poverty Measure (%)
Confidence Interval: Lower Bound (%)
Confidence Interval: Upper Bound (%)
Difference from State Average

County

Milwaukee

17.3
15.9
18.7
Higher

Dane (Madison)

13.5
11.6
15.4
Higher

Waukesha

6.4
4.9
7.9
Lower

Brown (Green Bay)

10.9
8.5
13.2
NS

Racine

8.7
6.0
11.4
NS

Kenosha

16.7
12.8
20.6
Higher

Rock (Janesville)

10.3
7.2
13.4
NS

Marathon (Wausau)

5.4
3.2
7.6
Lower

Sheboygan

5.4
3.2
7.6
Lower

La Crosse

10.6
8.2
13.0
NS

Outagamie (Appleton)

10.1
7.7
12.5
NS

Winnebago (Oshkosh)

9.4
7.0
11.8
NS

Walworth (Whitewater)

16.6
12.6
20.7
Higher

Multi-County Area

Washington & Ozaukee (West Bend)

4.4
3.0
5.8
Lower

Sauk & Columbia (Baraboo)

8.5
5.9
11.1
NS

Dodge & Jefferson

8.0
5.5
10.6
NS

Manitowoc & Kewaunee

12.5
9.1
15.9
NS

Fond du Lac & Calumet

5.5
3.3
7.7
Lower

St. Croix & Dunn

5.8
4.2
7.3
Lower

Eau Claire & Chippewa (South)

11.1
8.5
13.8
NS

Barron, Polk, Clark & Chippewa (North)

9.8
7.4
12.1
NS

Marinette, Oconto, Door & Florence

7.2
5.0
9.5
Lower

Central Sands—Wood, Portage, Juneau & Adams

10.7
8.5
12.8
NS

Oneida, Lincoln, Vilas, Langlade & Forest

9.9
7.6
12.2
NS

Grant, Green, Iowa, Richland & Lafayette

8.7
6.9
10.5
NS

East Central Wisconsin

7.4
5.9
8.9
Lower

West Central Wisconsin—Northern Mississippi Region

11.5
9.3
13.8
NS

Northwest Wisconsin

8.8
7.2
10.4
NS

State Total

10.8
10.3
11.3
 

Source: IRP tabulations of 2014 American Community Survey data.
Notes: NS = Not statistically significant. In this analysis, each region's difference from the state average was assessed as not statistically significant if the 90% confidence intervals for each region's statistics and the state's overall statistics overlap.

Estimates for poverty rates using the WPM for these substate areas (Table 1) range from 17.3 percent in Milwaukee County (and 16.7 percent in Kenosha) to 4.4 percent in the Washington/Ozaukee multicounty area.

As shown in Map 1, Milwaukee, Dane, Kenosha and Walworth counties were the places with rates significantly higher than the state average of 10.8 percent. Meanwhile, eight areas have rates that are significantly lower than the statewide rate, including the counties of Washington/Ozaukee, Fond du Lac/Calumet, St. Croix/Dunn, Marathon and Sheboygan, which Table 1 shows are all below 6 percent, Waukesha at 6.4 percent, and with several others in northeastern Wisconsin below 8 percent.

Map 1. Wisconsin counties and multicounty areas with 2014 WPM poverty rates above or below the state rate of 10.8 percent shows that four southern counties—Dane, Milwaukee, Walworth, and Kenosha—were the only counties with poverty rates above the state rate

Poverty estimates for some regions within the state's largest counties (not shown) can also be assessed by taking advantage of relatively large sample sizes for ACS data. Poverty rates examined across subcounty regions show variations that are more dramatic within counties than across the 28 areas in the state. For instance, within Milwaukee County, overall poverty rates ranged from about 8.0 percent in one southern subcounty area to 33.5 percent in the central city of Milwaukee in 2014, suggesting significant segregation by income within that county. Furthermore, Milwaukee is surrounded by wealthy suburban counties to the north and west, where overall poverty rates are also notably below the state average (e.g., Waukesha County at 6.4 percent and Washington/Ozaukee counties at 4.4 percent). The next section summarizes the antipoverty policy recommendations of Wisconsin Poverty Report author Timothy Smeeding, Lee Rainwater Distinguished Professor of Public Affairs and Economics and former Director of IRP at the University of Wisconsin–Madison.

Antipoverty Policy Recommendations

"We believe that the long-term solution to poverty for the able-bodied non-elderly is a secure job that pays well, not an indefinite income support program," notes Wisconsin Poverty Report author Timothy Smeeding. However, much employment is on a low-wage, part-time basis, and does not provide enough income for low-educated parents to stay out of poverty. This reality, Smeeding says, "underscores the importance of 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—and in so doing makes a big difference in combatting poverty."

Smeeding lists the following policies as essential to an adequate safety net:

  • Earned Income Tax Credit
  • Child Tax Credit
  • Supplemental Nutrition Assistance Program (FoodShare in Wisconsin)
  • Medicaid / State Children's Health Insurance Program
  • Public policies designed to increase the coverage of medical expenses for the low-income elderly

Smeeding also notes, "It is important for researchers and policymakers to ask not only whether an income support policy was effective in reducing poverty, but also what better solutions might alleviate longer-term poverty as we emerge from the recession." Suggestions in this area in the Wisconsin Poverty Report include the following:

  • Provide better employment opportunities and higher-quality jobs with wages and employer benefits that can meet family needs and increase economic self-sufficiency.
  • Continue work supports such as BadgerCare (Medicaid) and FoodShare, as well as childcare and other policies to reduce work-related expenses for families with children.
  • Monitor medical costs and the adequacy of Social Security benefits for low-income seniors.

Conclusion

This FAQ reports findings from the 2016 Wisconsin Poverty Report, showing that the Wisconsin Poverty Measure provides important insights into poverty in Wisconsin that the official poverty measure cannot. By including noncash benefits such as SNAP/FoodShare and refundable tax credits such as the EITC, which the OPM leaves out, the WPM gauges the effects of earnings, benefits, and some expenditures (e.g., childcare, work transportation, medical costs) on poverty in Wisconsin.

To summarize, key Wisconsin Poverty Report findings for 2014 include the following:

  • Although employment rose by almost 60,000 jobs in Wisconsin from 2013 to 2014, there was no reduction in poverty as measured by the WPM: the overall poverty rate remained flat at 10.8 percent.
  • The WPM child poverty rate also stayed the same from 2013 to 2014, at 11.8 percent. WPM researchers think that this lack of change, despite an increase in employment, is due to decreases in benefit levels of antipoverty programs such as FoodShare and the EITC refundable tax credit in 2014.
  • The OPM Wisconsin child poverty rate in 2014 was 17.6 percent. However, under the WPM, child poverty in Wisconsin was significantly lower. Reasons for this difference include that the WPM, unlike the OPM, counts the income of unmarried partners as contributing to family resources, which makes a substantial difference in estimating child poverty because many poor children live with single mothers and their unmarried partners.
  • Another reason why the WPM finds a lower child poverty rate than the OPM is because families with children are eligible for a range of tax credits (e.g., the Earned Income Tax Credit is primarily for families with children) and also have high take-up rates of SNAP and other noncash safety net programs, which are counted by the WPM but not the OPM.
  • In contrast to child poverty, which is lower under the WPM than the OPM, elderly poverty in the state is higher under the WPM (8.3 percent in 2014) than the OPM (6.8 percent), mainly because elderly individuals often have out-of-pocket medical expenses that are not considered by the official measure and which exceed the noncash benefits they receive.
  • However, the poverty rate among the elderly under both the official and WPM measures dropped significantly from 2013 to 2014, despite high medical expenditures, mainly due to cost-of-living adjustments (COLA) in Social Security benefits, and WPM inflation adjustments to the WPM poverty threshold, which were less than the COLA.
  • A significant strength of the WPM is its ability to portray poverty across regions within the state. In 2014, the WPM found high poverty rates in some areas, especially central Milwaukee and Kenosha, but many more substate areas doing much better than the rest of Wisconsin. Estimates for poverty rates using the WPM for these substate areas range from 17.3 percent in Milwaukee County (and 16.7 percent in Kenosha) to 4.4 percent in the Washington/Ozaukee multicounty area.

[1] Wisconsin Department of Health Services, FoodShare Wisconsin Data, FoodShare Benefit Payments by Calendar Year: 2015. Available at https://www.dhs.wisconsin.gov/foodshare/rsdata.htm.

[2] Wisconsin Department of Revenue, Wisconsin Earned Income Tax Credit Summary for tax year 2014. Available at: https://www.revenue.wi.gov/report/e.html.

[3] For a more thorough academic discussion of the Wisconsin Poverty Project and its importance, see Y. Chung, J. Isaacs, and T. M. Smeeding, 2013, "Advancing Poverty Measurement and Policy: Evidence from Wisconsin during the Great Recession," Social Service Review 87(3, September): 525–555.

[4] See also the short summary of the 2014 Wisconsin Poverty Report, available at: http://www.irp.wisc.edu/research/WisconsinPoverty/pdfs/WI-PovertyReport2016-Summary.pdf.