Growth of Extreme Poverty in the US: Is Welfare Reform Largely to Blame?

As the debate over deficit reduction wages on, entitlement programs continue to face increased scrutiny by American lawmakers. Exempt from budgetary restrictions on discretionary spending, many worry that entitlement programs grow in size each year while proving unsuccessful at promoting independence among recipients. The passage of the Personal Responsibility and Work Opportunity Act (PRWORA) of 1996 ended direct cash transfers and more closely linked benefits to work status.  Two decades later, the impact of these reforms remains hotly debated.

A recent study published in the Social Service Review in June 2013 examines growth in extreme poverty in the United States. The study’s authors find that extreme poverty among families with children in any given month grew by 159.1 percent between 1996 and 2011. Furthermore, the authors argue that a major cause of the growth in extreme poverty was the implementation of PRWORA and the resulting end of cash transfers.

“Rising Extreme Poverty in the United States and the Response of Federal Means-Tested Transfer Programs” is the first American study to examine the impact of PRWORA on people living in extreme poverty. In the paper, researchers H. Luke Shaefer and Kathryn Edin focus on households with children, and define extreme poverty as those households living on two dollars or less per person each day. The government defines poverty for a family of three as living on approximately $17 per person, per day–households in extreme poverty are earning, on average, approximately 12 percent of the income of a family living just below the poverty line.