The US Welfare State Cut Poverty by Two-Thirds in 2018

The Census released its 2018 poverty report last week, which showed no change in the poverty rate from the prior year. What follows is a novel rundown of the state of poverty and welfare in the US based on my own calculations of the report’s underlying data.

When you want to determine how much poverty is reduced by the nation’s welfare programs, what you normally do is determine how many people are in poverty based on the distribution of market income and then compare that number to how many people are in poverty when you include taxes and welfare benefits, i.e. the distribution of disposable income.

Using this approach, we see in the below graph that there are 77.9 million poor people based on market income and 42.4 million poor people based on disposable income. This is equal to a 24 percent market income poverty rate and a 13.1 percent disposable income poverty rate. According to this headcount poverty approach, the welfare state cut the amount of poverty by 46 percent.

People’s Policy Project