- Timothy M. Smeeding, Julia B. Isaacs, and Katherine Thornton
- May 2014
- Link to WI-PovertyReport2014 (PDF)
On May 7, 2014, IRP released the sixth annual Wisconsin Poverty Report, which reveals that the state economy is slowly improving, but that support programs are still needed. Researchers Timothy Smeeding, Julia Isaacs, and Katherine Thornton found that jobs, earnings, and wages are beginning to rise again in Wisconsin. They also found that jobs in the state have not returned to pre-recession levels, and many of the new jobs are part-time and low-wage service sector jobs, so work-support programs, especially refundable tax credits and food assistance, are still needed to raise many working families with children above the poverty threshold.
The study, sponsored by the Wisconsin Community Action Program Association (WISCAP), which is celebrating its 40th year in 2014, uses the Wisconsin Poverty Measure (WPM), a state-specific poverty measure devised by the researchers that provides a more accurate picture of want in the state than is reflected in the official measure. The WPM also provides researchers and policymakers with an assessment of the influence of both the economy and public policies on poverty.
Researchers found that while about half or fewer of the jobs lost during the recession have been recovered, the upward trend in market income has led to a small reduction in the impact of social safety net programs on poverty, as higher earnings replace the need for public assistance. However, pockets of poverty remain well above average for the state, especially in Milwaukee’s central city, but also in Madison and the Superior region.
Smeeding and colleagues found that the overall poverty rate in 2012, as calculated using the Wisconsin Poverty Measure (WPM), declined, to 10.2 percent, the lowest poverty rate since the WPM was first utilized in 2009. The official poverty rate for Wisconsin in 2012 was much higher, at 12.8 percent. The positive difference for child poverty is more dramatic: 11 percent using the WPM and 17.9 percent using the official measure. Elderly poverty, on the other hand, was higher with the WPM at 7.4 percent than the official rate of 6.2 percent.
What accounts for the differences between the WPM and the official poverty rates? Knowing that the official measure was devised in the 1960s and has not essentially changed since then other than adjustments for inflation provides a clue. In addition to using a threshold based on 1960 consumption patterns, the official measure also ignores noncash public assistance such as Supplemental Nutrition Assistance Program (SNAP, called FoodShare in Wisconsin) benefits and refundable tax credits, the nation’s largest and most effective antipoverty programs. The official measure also ignores health care costs and work-related expenses such as childcare and fails to adjust for geographic differences in the cost of living.
The WPM addresses these shortcomings. It determines poverty status by comparing a measure of economic need that includes childcare and out-of-pocket medical expenses to a measure of the economic resources available to meet that need that includes SNAP benefits and the refundable Earned Income Tax Credit. In the WPM, the resource-sharing unit is also modernized, to include all persons who share the same residence and are also assumed to share income and consumption (called family); in the official poverty measure, family is restricted to married couples and their children.