Deep Poverty Among Children Worsened in Welfare Law’s First Decade

Since the mid-1990s, when policymakers made major changes in the public assistance system, the proportion of children living in poverty has declined, but the harshest extremes of child poverty have increased.  After correcting for the well-known underreporting of safety net benefits in the Census data, we estimate that the share of children in deep poverty — with family income below half of the poverty line — rose from 2.1 percent to 3.0 percent between 1995 and 2005.  The number of children in deep poverty climbed from 1.5 million to 2.2 million.

The Rise in Deep Poverty

In the mid-1990s, policymakers dramatically shifted income assistance policies for low-income families with children toward helping workingfamilies.  They replaced Aid to Families with Dependent Children (AFDC), which had chiefly served families with little or no earnings, with Temporary Assistance for Needy Families (TANF), which offers less assistance and includes stricter work requirements and time limits.  At the same time, policymakers expanded assistance for moderate-income working families, such as by strengthening the Earned Income Tax Credit (EITC) and medical and child care programs and creating and later expanding the Child Tax Credit through a partially refundable component of the credit for lower-income families with earnings.