[Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Green Book)]
[Appendices]
[Appendix H. Data on Poverty]
[From the U.S. Government Printing Office, www.gpo.gov]




 
                      APPENDIX H. DATA ON POVERTY

                                CONTENTS

Measuring Poverty
Trends in the Overall Poverty Rate
Poverty Rates for Individuals in Selected Subgroups of the 
        Population
  Poverty Rates for Families
  Poverty Under Alternative Measures of Income and Price 
            Inflation
  Poverty by Metro Area and State
Trends in Family Composition and Income, 1967-98
  Definitions and Methods
  Income Measure
  Income Shares
Trends in Pretax Cash Incomes by Type of Family
  Pretax Adjusted Family Income
  Average Family Cash Income By Family Type
Antipoverty Effectiveness of Various Cash and Noncash Transfers
References

                           MEASURING POVERTY

    When the Federal Government began measuring poverty in the 
early 1960s, the continued existence of poor people in a time 
of the ``Affluent Society'' seemed anomalous. Official concern 
soon translated into efforts to measure the size of the poverty 
population, and the search began for programmatic ways to 
alleviate poverty. The first rough estimates of the incidence 
of poverty were based on survey data indicating that families 
generally spent about one-third of their income on food. A 
poverty level income was then calculated by using as a 
yardstick the amount of money necessary to purchase the lowest 
cost ``nutritionally adequate'' diet calculated by the 
Department of Agriculture (roughly equivalent to the current 
Thrifty Food Plan). This price tag was multiplied by three to 
produce a poverty threshold. The assumption underlying this 
procedure is that if a family did not have enough income to buy 
the lowest cost nutritionally adequate diet, and twice that 
amount to buy other goods and services, it was ``poor.'' 
Adjustments were made for the size of the family, the sex of 
the family head, and for whether the family lived on a farm. 
Farm families were assumed to need less cash income because 
their needs could be met partially by farm products, 
particularly food. The adjustments for sex of the family head 
and for farm-nonfarm residence were abolished in 1981. Policy 
officials made a major change to the basic approach for 
calculating the poverty threshold in 1969. Rather than 
multiplying the cost of the Thrifty Food Plan by three to 
establish the poverty threshold, officials decided to simply 
increase the previous year's threshold by the change in the 
Consumer Price Index (CPI).
    In addition to this major change, the Census Bureau made 
minor revisions in its method of estimating the poverty 
threshold four times--in 1966, 1974, 1979, and 1981. These 
revisions changed the estimate of the poverty rate. The first 
two revisions slightly reduced the estimated number of poor, 
while the more recent revisions slightly increased the number. 
In 1984, the Census Bureau also revised its method of imputing 
missing values for interest income, which slightly lowered the 
estimated poverty rate.
    Data on income and poverty after 1987 may not be comparable 
to data in earlier years because of changes in the methods used 
by the Census Bureau to process survey results. This new 
processing system was applied to 1987 data so that 1988 and 
1987 data are comparable. Revised 1987 data are denoted as 
1987R. The new processing system increased aggregate income by 
0.9 percent and lowered the poverty rate for 1987 by 0.1 
percent.
    The tables in this subsection provide poverty data 
calculated using the official Census definition of poverty. The 
Census definition of poverty has remained fairly standard over 
time and is useful for measuring progress against poverty. 
Under this definition, poverty is determined by comparing 
pretax cash income with the poverty threshold.
    Table H-1 shows the population, number of persons in 
poverty, and the poverty rate in 1998 by age, race, region and 
family type. In 1998, 12.7 percent (34.5 million persons) of 
the total U.S. population lived in poverty. Of all demographic 
groups shown, poverty was second highest among female-headed 
families with children (33.1 percent). Among children under age 
18, 18.9 percent, or 13.5 million children, lived in poverty in 
1998.
    The weighted average poverty thresholds for families of 
various sizes for selected years between 1959 and 1998 are 
presented in table H-2.

                 TRENDS IN THE OVERALL POVERTY RATE \1\
---------------------------------------------------------------------------

    \1\ All poverty trend information is based upon published Census 
Bureau data contained in Current Population Reports, Series P-60, Nos. 
124, 140, 145, 149, 154, 157, 161, 166, 168, 174, 180, and 185. These 
figures may differ with other parts of this report which provide a more 
refined breakdown of this age category. Data for blacks, the aged, and 
nonaged population were not available for the years 1961-65.
---------------------------------------------------------------------------
    In 1959, the overall poverty rate for individuals in the 
United States was 22 percent, representing 39.5 million poor 
persons (tables H-3 and H-4). Between 1959 and 1969, the 
poverty rate declined dramatically and steadily to 12.1 
percent. As a result of a sluggish economy, the rate increased 
slightly to 12.5 percent by 1971. In 1972 and 1973, however, it 
began to decrease again. The lowest rate over the entire 24-
year period occurred in 1973, when the poverty rate was 11.1 
percent. At that time roughly 23 million people were poor, 42 
percent less than were poor in 1959.

                                 TABLE H-1.--POVERTY STATUS OF PERSONS BY AGE, ETHNICITY, REGION, AND FAMILY TYPE, 1998
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                     Poverty                Percent of   Number of   Percent of    Poverty
                             Category                                  rate     Population     total        poor       poverty    difference  Percent of
                                                                    (percent)  (thousands)  population  (thousands)  population    1997-98    difference
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age:
    Under 18......................................................       18.9      71,378         26.3      13,467         39.0         -647        -1.0
    18-64.........................................................       10.5     167,327         61.7      17,623         51.1         -462        -0.4
    65 and older..................................................       10.5      32,394         12.0       3,386          9.8           10        -0.1
Race/ethnicity:
    White.........................................................       10.5     222,837         82.0      23,454         68.0         -942        -0.5
    Black.........................................................       26.1      34,877         12.9       9,091         26.4          -25        -0.4
    Hispanic \1\..................................................       25.6      31,515         11.6       8,070         23.4         -238        -1.5
Region:
    Northeast.....................................................       12.3      51,472         19.1       6,357         18.4         -117        -0.4
    Midwest.......................................................       10.3      63,155         23.3       6,501         18.9            8        -0.1
    South.........................................................       13.7      94,640         34.9      12,992         37.7         -757        -0.9
    West..........................................................       14.0      61,522         22.7       8,625         25.0         -233        -0.6
Family type: \2\
    Unrelated individuals.........................................       19.9      42,539         15.7       8,478         24.6         -209        -0.9
    Female-headed families........................................       33.1      39,000         14.4      12,907         37.4         -164        -1.6
    Married-couple families.......................................        6.2     177,042         65.3      10,982         31.9           58         0.1
    Unrelated subfamilies.........................................       48.8       1,288          4.8         628          1.8         -152         2.3
                                                                   -------------------------------------------------------------------------------------
        Total.....................................................       12.7     271,059         26.3      34,476        100.0       -1,098       -0.5
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Persons of Hispanic origin may be of any race.
\2\ About 1.5 million families are in categories other than the ones listed here.

 Source: U.S. Census Bureau (1999).


                     TABLE H-2.--WEIGHTED AVERAGE POVERTY THRESHOLDS FOR NONFARM FAMILIES OF SPECIFIED SIZE, SELECTED YEARS 1959-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                Unrelated individuals              Two persons                  Families of more than two persons
                                           -------------------------------------------------------------------------------------------------------------
               Calendar year                                                          Head    Head age                                            Seven
                                               All      Under     Age 65  All ages    under     65 or     Three     Four      Five       Six     persons
                                              ages     age 65   or older             age 65     older    persons   persons   persons   persons   or more
--------------------------------------------------------------------------------------------------------------------------------------------------------
1959......................................    $1,467    $1,503    $1,397    $1,894    $1,952    $1,761    $2,324    $2,973    $3,506    $3,944    $4,849
1960......................................     1,490     1,526     1,418     1,924     1,982     1,788     2,359     3,022     3,560     4,002     4,921
1965......................................     1,582     1,626     1,512     2,048     2,114     1,906     2,514     3,223     3,797     4,264     5,248
1970......................................     1,954     2,010     1,861     2,525     2,604     2,348     3,099     3,968     4,680     5,260     6,468
1975......................................     2,724     2,797     2,581     3,506     3,617     3,257     4,293     5,500     6,499     7,316     9,022
1980......................................     4,190     4,290     3,949     5,363     5,537     4,983     6,565     8,414     9,966    11,269  \1\ 12,7
                                                                                                                                                      61
1983......................................     5,061     5,180     4,775     6,483     6,697     6,023     7,938    10,178    12,049    13,630  \1\ 15,5
                                                                                                                                                      00
1984......................................     5,278     5,400     4,979     6,762     6,983     6,282     8,277    10,609    12,566    14,207  \1\ 16,0
                                                                                                                                                      96
1985......................................     5,469     5,593     5,156     6,998     7,231     6,503     8,573    10,989    13,007    14,696  \1\ 16,6
                                                                                                                                                      56
1986......................................     5,572     5,701     5,255     7,138     7,372     6,630     8,737    11,203    13,259    14,986  \1\ 17,0
                                                                                                                                                      49
1987......................................     5,778     5,909     5,447     7,397     7,641     6,872     9,056    11,611    13,737    15,509  \1\ 17,6
                                                                                                                                                      49
1988......................................     6,022     6,155     5,674     7,704     7,958     7,157     9,435    12,092    14,304    16,146  \1\ 18,2
                                                                                                                                                      32
1989......................................     6,310     6,451     5,947     8,076     8,343     7,501     9,885    12,674    14,990    16,921  \1\ 19,1
                                                                                                                                                      62
1990......................................     6,652     6,800     6,268     8,509     8,794     7,905    10,419    13,359    15,792    17,839  \1\ 20,2
                                                                                                                                                      41
1991......................................     6,932     7,086     6,532     8,865     9,165     8,241    10,860    13,924    16,456    18,587  \1\ 21,0
                                                                                                                                                      58
1992......................................     7,143     7,299     6,729     9,137     9,443     8,487    11,186    14,335    16,952    19,137  \1\ 21,5
                                                                                                                                                      94
1993......................................     7,363     7,518     6,930     9,414     9,728     8,740    11,522    14,763    17,449    19,718  \1\ 22,3
                                                                                                                                                      83
1994......................................     7,547     7,710     7,108     9,661     9,976     8,967    11,821    15,141    17,900    20,235  \1\ 22,9
                                                                                                                                                      23
1995......................................     7,763     7,929     7,309     9,933    10,259     9,219    12,158    15,569    18,408    20,804  \1\ 23,5
                                                                                                                                                      52
1996......................................     7,995     8,163     7,525    10,145    10,507     9,484    12,273    16,183    19,516    22,447  \1\ 25,8
                                                                                                                                                      28
1997......................................     8,183     8,350     7,698    10,473    10,805     9,712    12,802    16,400    19,380    21,886  \1\ 24,8
                                                                                                                                                      02
1998......................................     8,316     8,480     7,818    10,634    10,972     9,862    13,003    16,660    19,680    22,228  \1\ 25,2
                                                                                                                                                     57
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Poverty threshold for seven persons, not seven persons or more.

 Source: U.S. Census Bureau, technical papers.


        TABLE H-3.--NUMBER OF PERSONS IN POVERTY FOR INDIVIDUALS IN SELECTED DEMOGRAPHIC GROUPS, 1959-98
                                             [Numbers in thousands]
----------------------------------------------------------------------------------------------------------------
                                                                  Individuals in
              Year                Overall    Aged   Children \1\   female-headed    Black    Hispanic     White
                                                                   families \2\             origin \3\
----------------------------------------------------------------------------------------------------------------
1959............................   39,490    5,481      17,552             7,014     9,927         NA     28,484
1960............................   39,851       NA      17,634             7,247        NA         NA     28,309
1961............................   39,628       NA      16,909             7,252        NA         NA     27,890
1962............................   38,625       NA      16,963             7,781        NA         NA     26,672
1963............................   36,436       NA      16,005             7,646        NA         NA     25,238
1964............................   36,055       NA      16,051             7,297        NA         NA     24,957
1965............................   33,185       NA      14,676             7,524        NA         NA     22,496
1966............................   28,510    5,114      12,389             6,861     8,867         NA     19,290
1967............................   27,769    5,388      11,656             6,898     8,486         NA     18,983
1968............................   25,389    4,632      10,954             6,990     7,616         NA     17,395
1969............................   24,147    4,787       9,691             6,879     7,095         NA     16,659
1970............................   25,420    4,793      10,440             7,503     7,548         NA     17,484
1971............................   25,559    4,273      10,551             7,797     7,396         NA     17,780
1972............................   24,460    3,738      10,284             8,114     7,710      2,414     16,203
1973............................   22,973    3,354       9,642             8,178     7,388      2,366     15,142
1974............................   23,370    3,085      10,156             8,462     7,182      2,575     15,736
1975............................   25,877    3,317      11,104             8,846     7,545      2,991     17,770
1976............................   24,975    3,313      10,273             9,029     7,595      2,783     16,713
1977............................   24,720    3,177      10,288             9,205     7,726      2,700     16,416
1978............................   24,497    3,233       9,931             9,269     7,625      2,607     16,259
1979............................   26,072    3,682      10,377             9,400     8,050      2,921     17,214
1980............................   29,272    3,871      11,543            10,120     8,579      3,491     19,699
1981............................   31,822    3,853      12,505            11,051     9,173      3,713     21,553
1982............................   34,398    3,751      13,647            11,701     9,697      4,301     23,517
1983............................   35,303    3,625      13,911            12,072     9,882      4,633     23,984
1984............................   33,700    3,330      13,420            11,831     9,490      4,806     22,955
1985............................   33,064    3,456      13,010            11,600     8,926      5,236     22,860
1986............................   32,370    3,477      12,876            11,944     8,983      5,117     22,183
1987............................   32,221    3,563      12,843            12,148     9,520      5,422     21,195
1988............................   31,745    3,481      12,455            11,972     9,356      5,357     20,715
1989............................   31,528    3,363      12,590            11,668     9,302      5,430     20,785
1990............................   33,585    3,658      13,431            12,578     9,837      6,006     22,326
1991............................   35,708    3,781      14,341            13,824    10,242      6,339     23,747
1992 \4\........................   38,014    3,928      15,294            14,205    10,827      7,592     25,259
1993............................   39,265    3,755      15,727            14,636    10,877      8,126     26,226
1994............................   38,059    3,663      15,289            14,380    10,196      8,416     25,379
1995............................   36,425    3,318      14,665            14,205     9,872      8,574     24,423
1996............................   36,529    3,428      14,463            13,796     9,694      8,697     24,650
1997............................   35,574    3,376      14,113            13,494     9,116      8,308     24,396
1998............................   34,476    3,386      13,467            12,907     9,091      8,070    23,454
----------------------------------------------------------------------------------------------------------------
\1\ All children including unrelated children.
\2\ Does not include females living alone.
\3\ Hispanic origin may be of any race; it is an overlapping category.
\4\ For 1992, figures are based on 1990 Census population controls.

 NA--Not available.

 Source: U.S. Census Bureau (1996, 1999).


                TABLE H-4.--POVERTY RATES FOR INDIVIDUALS IN SELECTED DEMOGRAPHIC GROUPS, 1959-98
----------------------------------------------------------------------------------------------------------------
                                                                    Individuals in
               Year                 Overall    Aged   Children \1\   female-headed   Black    Hispanic    White
                                                                     families \2\            origin \3\
----------------------------------------------------------------------------------------------------------------
1959..............................     22.4     35.2        27.3              49.4     55.1         NA      18.1
1960..............................     22.2       NA        26.9              48.9       NA         NA      17.8
1961..............................     21.9       NA        25.6              48.1       NA         NA      17.4
1962..............................     21.0       NA        25.0              50.3       NA         NA      16.4
1963..............................     19.5       NA        23.1              47.7       NA         NA      15.3
1964..............................     19.0       NA        23.0              44.4       NA         NA      14.9
1965..............................     17.3       NA        21.0              46.0       NA         NA      13.3
1966..............................     14.7     28.5        17.6              39.8     41.8         NA      11.3
1967..............................     14.2     29.5        16.6              38.8     39.3         NA      11.0
1968..............................     12.8     25.0        15.6              38.7     34.7         NA      10.0
1969..............................     12.1     25.3        14.0              38.2     32.2         NA       9.5
1970..............................     12.6     24.6        15.1              38.1     33.5         NA       9.9
1971..............................     12.5     21.6        15.3              38.7     32.5         NA       9.9
1972..............................     11.9     18.6        15.1              38.2     33.3       22.8       9.0
1973..............................     11.1     16.3        14.4              37.5     31.4       21.9       8.4
1974..............................     11.2     14.6        15.4              36.5     30.3       23.0       8.6
1975..............................     12.3     15.3        17.1              37.5     31.3       26.9       9.7
1976..............................     11.8     15.0        16.0              37.3     31.1       24.7       9.1
1977..............................     11.6     14.1        16.2              36.2     31.3       22.4       8.9
1978..............................     11.4     14.0        15.9              35.6     30.6       21.6       8.7
1979..............................     11.7     15.2        16.4              34.9     31.0       21.8       9.0
1980..............................     13.0     15.7        18.3              36.7     32.5       25.7      10.2
1981..............................     14.0     15.3        20.0              38.7     34.2       26.5      11.1
1982..............................     15.0     14.6        21.9              40.6     35.6       29.9      12.0
1983..............................     15.2     13.8        22.3              40.2     35.7       28.0      12.1
1984..............................     14.4     12.4        21.5              38.4     33.8       28.4      11.5
1985..............................     14.0     12.6        20.7              37.6     31.3       29.0      11.4
1986..............................     13.6     12.4        20.5              38.3     31.1       27.3      11.0
1987..............................     13.4     12.5        20.3              38.1     32.4       28.1      10.4
1988..............................     13.0     12.0        19.5              37.2     31.3       26.7      10.1
1989..............................     12.8     11.4        19.6              35.9     30.7       26.2      10.0
1990..............................     13.5     12.2        20.6              37.2     31.9       28.1      10.7
1991..............................     14.2     12.4        21.8              39.7     32.7       28.7      11.3
1992 \4\..........................     14.8     12.9        22.3              39.0     33.4       29.6      11.9
1993..............................     15.1     12.2        22.7              38.7     33.1       30.6      12.2
1994..............................     14.5     11.7        21.8              38.6     30.6       30.7      11.7
1995..............................     13.8     10.5        20.8              36.5     29.3       30.3      11.2
1996..............................     13.7     10.8        20.5              35.8     28.4       29.4      11.2
1997..............................     13.3     10.5        19.9              35.1     26.5       27.1      11.0
1998..............................     12.7     10.5        18.9              33.1     26.1       25.6     10.5
----------------------------------------------------------------------------------------------------------------
\1\ All children including unrelated children.
\2\ Does not include females living alone.
\3\ Hispanic origin may be of any race; it is an overlapping category.
\4\ For 1992, figures are based on 1990 Census population controls.

 NA--Not available.

 Source: U.S. Census Bureau (1996, 1999).

    The poverty rate increased by 1975 to 12.3 percent, and 
then oscillated around 11.5 percent through 1979. After 1978, 
however, the poverty rate rose steadily, reaching 15.2 percent 
in 1983. Between 1983 and 1993, the poverty rate moved up and 
down within a narrow range of about 2.5 percentage points, 
declining somewhat during economic recoveries and rising 
somewhat during economic downturns. However, poverty declined 
every year after 1993, reaching 12.7 percent in 1998, the last 
year for which data are available. The 1998 rate was the lowest 
since 1979. The children's rate of 18.9 percent was the lowest 
since 1980.

 POVERTY RATES FOR INDIVIDUALS IN SELECTED SUBGROUPS OF THE POPULATION

    As table H-4 illustrates, there are substantial differences 
between the overall poverty rate and the poverty rates of 
individuals in certain demographic subgroups. Most notably, 
blacks, individuals in female-headed households, and Hispanics 
have poverty rates that greatly exceed the average. The poverty 
rates for individuals in female-headed households remained 
above 35 percent over the 1959-97 period. However, it declined 
every year after 1991 and in 1998 reached its lowest level ever 
at 33.1. The poverty rate for blacks and Hispanics has remained 
near 30 percent during the 1980s and mid 1990s. However, both 
rates declined every year after the early 1990s and for blacks 
it reached its lowest level ever in 1998 at 26.1. The poverty 
rate for the aged, which exceeded the overall poverty rate in 
1959, fell quickly beginning in the 1960s. By 1998 it had 
reached the remarkably low level of 10.5, a decline of over 70 
percent since 1979. The poverty rate for whites was below the 
overall poverty rate throughout the entire 1959-98 period. It 
was 10.5 percent in 1998. Unfortunately, the poverty rate for 
children exceeded the overall poverty rate every year between 
1959 and 1998.

                     Poverty Rates for Families \2\
---------------------------------------------------------------------------

    \2\ Income figures reported in this subsection were from the March 
Current Population Survey (CPS) computer data tapes. There is a 
tendency in surveys, such as the CPS, for respondents to underreport 
their incomes by both source and amount. Reporting of income from 
earnings is usually more accurate than reporting of income from other 
sources. In general, CPS estimates of amounts or numbers of recipients 
of various cash and noncash transfer programs tend to be lower than 
administrative program totals. As a result, the data are a better 
reflection of general trends and patterns than of absolute numbers with 
income from a particular source, or the amount received. Unrelated 
subfamilies are included as families in this analysis. The Census 
Bureau excludes such families from its poverty counts.
---------------------------------------------------------------------------
    Table H-5 shows the composition of the poverty population 
for various demographic groups for selected years between 1959 
and 1998. Table H-6 presents poverty data for families and 
unrelated individuals (individuals living alone). Female-headed 
families with children and unrelated individuals are more 
likely to be poor than other families with children or families 
with aged members. In 1998, 39.2 percent of female-headed 
families with children were poor, compared with 7.8 percent of 
male-present families. Although only 6.4 percent of all 
families with an aged member were poor, 20.4 percent of all 
aged unrelated individuals were poor. About 19.8 percent of 
nonaged unrelated individuals were poor.

                       TABLE H-5.--COMPOSITION OF POVERTY POPULATION FOR SELECTED DEMOGRAPHIC GROUPS,\1\ SELECTED YEARS 1959-1997
                                                             [Percent of poverty population]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Year
                Demographic group                -------------------------------------------------------------------------------------------------------
                                                   1959    1966    1975    1985    1987    1988    1990    1991    1992    1993    1994    1996    1998
--------------------------------------------------------------------------------------------------------------------------------------------------------
Aged............................................    13.9    17.9    12.8    10.5    10.9    11.0    10.9    10.6    10.3     9.6     9.6     9.4     9.8
Children........................................    43.6    42.6    42.1    38.8    39.4    38.7    39.5    39.5    39.7    39.5    39.6    38.8    38.3
Nonaged adults..................................    42.5    39.5    45.1    50.7    49.7    50.3    49.7    49.9    49.9    50.9    50.8    51.8    51.9
Individuals in female-headed families \2\.......    26.3    36.0    47.4    49.5    52.6    52.9    53.4    54.0    52.6    52.4    52.8    53.5    53.5
Individuals in all other families \2\...........    73.7    64.0    52.6    50.5    47.4    47.1    46.6    46.0    47.4    47.6    47.2    46.5    46.5
Blacks..........................................    25.1    31.1    29.2    27.0    29.8    29.5    29.3    28.7    28.5    27.7    26.8    26.5    26.4
Whites..........................................    72.1    67.7    68.7    69.1    65.6    65.3    66.5    66.5    66.4    66.8    66.7    67.5    68.0
Other races.....................................     2.8     1.2     2.1     3.9     4.7     5.3     4.2     4.8     5.1     5.5     6.5     6.0     5.6
Hispanic origin \3\.............................      NA      NA    11.6    15.8    16.9    16.9    17.9    17.8    20.0    20.7    22.1    23.8    23.4
Individuals in families with children \4\.......      NA      NA      NA      NA      NA      NA    68.0    68.4    68.4    68.7    68.0    66.7    65.1
    Male present................................      NA      NA      NA      NA      NA      NA    30.7    30.3    31.4    32.0    31.2    30.1    28.9
    Female head.................................      NA      NA      NA      NA      NA      NA    37.2    38.1    37.0    36.7    36.9    36.5    36.2
Individuals in all other families...............      NA      NA      NA      NA      NA      NA    32.0    31.6    31.6    31.3    32.0    33.3   34.9
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Demographic data are for March of the following year.
\2\ Includes unrelated or single individuals.
\3\ Hispanic origin may be of any race; therefore numbers add to more than 100 percent.
\4\ Family includes related children under 18.

 NA--Not available.

 Note.--Estimates for 1987-94 are not comparable to prior years due to processing changes in the Current Population Survey.

 Source: Table prepared by the Congressional Research Service. 1959-85 estimates based on data from U.S. Census Bureau (1986); 1986-98 data from March
  Current Population Survey.


       TABLE H-6.--POVERTY RATES BY FAMILY TYPE, SELECTED YEARS 1987-97, AND PERCENTAGE OF FAMILIES AND UNRELATED INDIVIDUALS BY RATIO OF TOTAL INCOME TO POVERTY THRESHOLD, 1997 \1\ \2\
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                       Poverty rate, 1987-98                             Ratio of total income to poverty threshold, 1998
                                                     -------------------------------------------------------------------------------------------------------------------------------- 1998 total
                     Family type                                                                                                                                               3.00       (in
                                                       1987    1990    1991    1993    1996    1997    1998    Under  0.50-0.99  1.00-1.24  1.25-1.49  1.50-1.99  2.00-2.99    and    thousands)
                                                                                                               0.50                                                            over
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Total:
    Families........................................    11.0    11.1    11.8    12.7    11.3    10.6    10.3     4.2       6.1        3.6        3.9        8.6       17.1      56.6     72,075
    Unrelated individuals...........................    20.4    20.7    21.1    22.1    20.8    20.8    19.9     8.6      11.4        6.6        6.0       10.6       17.9      38.9     42,539
No members age 65 or older:
    Families........................................    11.9    12.2    13.0    14.0    12.4    11.7    11.2     4.8       6.5        3.5        3.7        8.0       15.7      57.9     58,273
    Unrelated individuals...........................    19.1    19.1    19.6    21.3    20.7    20.8    19.8    10.2       9.6        4.8        4.3        8.4       18.0      44.7     31,975
Any member age 65 or older:
    Families........................................     7.2     6.4     6.7     7.0     6.4     6.1     6.4     1.8       4.6        3.7        4.8       11.2       22.8      51.1     13,803
    Unrelated individuals...........................    23.9    24.7    24.9    24.1    20.9    21.0    20.4     3.5      16.9       12.2       11.2       17.3       17.3      21.6     10,564
Families with children:
    Female-headed family, no husband present........    46.3    45.3    47.6    46.7    42.3    41.5    39.2    18.9      20.3        9.0        6.8       12.4       16.9      15.8      9,342
    Male-present families...........................     8.1     8.5     9.0     9.9     8.5     8.0     7.8     2.4       5.4        3.3        4.2        9.4       19.0      56.4    28,414
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Based on Census (``Orshansky'') poverty levels.
\2\ Unrelated subfamilies are treated as separate families. Related subfamilies are not treated as separate families but as members of the family with whom they reside.

 Source: Table prepared by the Congressional Research Service based on March Current Population Survey for selected years.

    Poverty Under Alternative Measures of Income and Price Inflation

    The Census Bureau publishes data that reflect two 
adjustments in the official definition of poverty. The first of 
these is an alternative inflation adjustment. The official 
poverty line is based on a procedure developed in 1965 with 
yearly adjustments for inflation using the CPI. The CPI, in 
turn, is based on the yearly change in prices of goods used by 
most Americans. Prior to 1983, the CPI measured housing prices 
using a procedure that included changes in the asset value of 
owned homes. Because the asset value of houses was growing so 
much faster than the consumption value, the inflation rate that 
included asset values was excessive.
    In 1983 the Bureau of Labor Statistics began using a rental 
equivalence approach to measure the value of housing. The 
official CPI-U inflation rate is based on the asset value of 
housing prior to 1983 and rental equivalence in 1983 and later. 
To provide a consistent time series, the Bureau constructed an 
experimental series, the CPI-U-X1, for 1967-82 based on rental 
equivalence.
    The general effect of using the CPI-U-X1 is to lower 
inflation in past years which in turn has the effect of 
lowering poverty thresholds for those years. A lower threshold 
means that fewer people are poor. As can be seen by comparing 
the first two columns in table H-7, adjusting the poverty 
threshold using the CPI-U-X1 reduced the official poverty rate 
by about 1.4 or 1.5 percentage points in most years between 
1979 and 1998. In 1998, the CPI-U-X1 reduced the poverty rate 
by 1.4 percentage points (11 percent or 3.8 million persons).
    The second adjustment in the official poverty rate made by 
the Census Bureau is to expand the definition of income to take 
into account some noncash income, including government 
benefits. Under the procedures by which the official poverty 
rate is calculated, only cash is counted in determining whether 
a family is poor; income from cash welfare programs counts, but 
benefits from food programs, medical care, social services, 
education and training, and housing are not included in the 
calculation. Moreover, because government spending on means-
tested noncash benefits has increased more rapidly than 
spending on means-tested cash benefits over the years, ignoring 
noncash benefits may be an increasingly serious omission if we 
want a broad picture of the impact of government programs on 
poverty.
    The question of how to value noncash benefits raises a 
variety of substantive and technical issues. The Census Bureau 
has been working on these issues, consulting with academic 
experts, sponsoring conferences, and issuing technical reports 
for many years. In 1997, the Bureau published a consistent 
historical data series, covering the years 1979-91, to trace 
the impact of a variety of taxes and noncash benefits on 
poverty and income. The measurement of noncash benefits 
extended beyond government spending for the poor to include 
government spending programs such as Medicare that are not 
means tested as well as to employer contributions to employee 
health plans.
    To examine the impact on income and poverty of various 
State and Federal taxes, government noncash programs, employer-
provided benefits, and so forth, the Bureau has adopted a 
framework that includes 15 definitions of income. By comparing 
income under these multiple definitions, it is possible to 
estimate the impact of the various income sources on the 
average income and the poverty rates of individuals and 
families.

              TABLE H-7.--POVERTY UNDER ALTERNATIVE MEASURES OF INCOME AND PRICE INFLATION, 1979-98
----------------------------------------------------------------------------------------------------------------
                                                                Poverty rate             Percentage reduction in
                                                    ------------------------------------     official poverty
                                                                                             associated with:
                        Year                                                 CPI-U-X1   ------------------------
                                                      Official    Using    with noncash               CPI-U-X1
                                                      (CPI-U)    CPI-U-X1  benefits \1\   CPI-U-X1  with noncash
                                                                                                    benefits \1\
----------------------------------------------------------------------------------------------------------------
1979...............................................       11.7       10.6          7.9         9.4         32.5
1980...............................................       13.0       11.5          8.6        11.5         33.8
1981...............................................       14.0       12.2          9.8        12.9         30.0
1982...............................................       15.0       13.2         10.6        12.0         29.3
1983...............................................       15.2       13.7         11.0         9.9         27.6
1984...............................................       14.4       12.8         10.4        11.1         27.8
1985...............................................       14.0       12.5         10.1        10.7         27.9
1986...............................................       13.6       12.2          9.8        10.3         27.9
1987...............................................       13.4       12.0          9.5        10.4         29.1
1988...............................................       13.0       11.7          9.5        10.0         26.9
1989...............................................       12.8       11.4          8.9        10.9         30.5
1990...............................................       13.5       12.1          9.5        10.4         29.6
1991...............................................       14.2       12.7          9.9        10.6         30.3
1992...............................................       14.8       13.4         10.5         9.5         29.1
1993...............................................       15.1       13.7         10.7         9.3         29.1
1994...............................................       14.5       13.2          9.8         9.0         29.7
1995...............................................       13.8       12.3          9.0        10.9         34.8
1996...............................................       13.7       12.2          8.9        10.9         35.0
1997...............................................       13.3       11.8          8.8        11.3         33.8
1998...............................................       12.7       11.3          8.2        11.0         35.4
Percent change:
    1979-89........................................        9.4        7.5         12.7          NA           NA
    1979-98........................................        8.5        6.6          3.8          NA          NA
----------------------------------------------------------------------------------------------------------------
\1\ Including income from capital gains, health insurance supplements to wage or salary income, non-means-tested
  and means-tested government cash transfers, other means-tested government noncash transfers, the value of
  Medicare, the value of regular-price school lunches, the value of Medicaid, the earned income credit (EIC),
  less Social Security payroll taxes, less Federal income taxes (excluding the EIC), less State income taxes.

 NA--Not available.

 Source: U.S. Census Bureau (1998 and various years).

    Income definition 14 is of interest to those concerned with 
the impact of government means-tested, noncash benefits on 
poverty rates. Unlike the official poverty rate, which includes 
only cash government benefits, definition 14 includes the 
effects of State and Federal taxes, employer-provided benefits, 
non-means-tested government benefits, and means-tested noncash 
benefits including food stamps, housing, school lunch, and the 
fungible value of Medicaid.
    By comparing the official poverty rate with the definition 
14 poverty rate, we can determine the impact on poverty of 
noncash benefits and government taxes. The third column in 
table H-7 is the poverty rate for years 1979-98 based on 
definition 14 and using the CPI-U-X1 deflator. Compared with 
the rate based on CPI-U-X1 (column 2), including taxes and 
noncash benefits (and a few other types of income that have 
little impact on poverty) in the poverty calculation reduces 
the poverty rate in 1998 by 3.1 percentage points. Compared 
with the official poverty rate, the reduction is 4.5 percentage 
points or 35 percent.
    The question of whether to include medical benefits when 
measuring poverty has great implications on poverty rates. The 
valuation of medical benefits is particularly difficult. Most 
poverty experts believe that medical coverage should not by 
itself raise poor individuals above the poverty line or 
constitute a major portion of the poverty threshold. The 
development of the poverty thresholds did not take into account 
medical costs. Although poor persons are clearly better off 
with medical coverage, such benefits cannot be used by 
recipients to meet other needs of daily living. Also, since 
health insurance costs are not imputed to the incomes of those 
above poverty, it seems inappropriate to count health benefits 
as income for those below the poverty line.

                    Poverty by Metro Area and State

    Tables H-8 and H-9 present poverty rates for nonmetro and 
metro areas and by race in nonmetro and metro areas 
respectively. Table H-8 shows that poverty rates have increased 
more in metro than in nonmetro areas (18.3 percent compared to 
6.7 percent, respectively, between 1978 and 1998). Moreover, 
since 1983 poverty has decreased much more in nonmetro areas 
(21.3 percent) than metro areas (10.9 percent). Poverty in 
central cities is higher than in either nonmetro areas or metro 
areas and progress in reducing poverty over the same 1983-98 
period (6.6 percent) is slower. Table H-9 shows that poverty 
among blacks and Hispanics is much higher than poverty among 
whites in metro areas, nonmetro areas, and inner cities.
    Table H-10 presents poverty rates by State for 1988-98, 
based on 3-year averages. The data are shown as 3-year averages 
due to poor statistical reliability of State poverty rates in a 
single year, resulting from small sample sizes.

            TRENDS IN FAMILY COMPOSITION AND INCOME, 1967-98

    In the past 30 years, the level of and inequality among 
family incomes has changed significantly according to all 
income measures. Between 1967 and 1973, income increased for 
all quintiles, and income inequality went down. As measured by 
the Congressional Budget Office, over this time period the 
lowest quintile experienced an increase in mean adjusted family 
income (AFI; family income divided by the poverty threshold for 
the appropriate family size) of 30 percent, while income for 
the highest quintile grew by 21 percent. Since, 1973, however, 
the trend has been markedly different. Income of the bottom 
quintile has declined, while income for the highest quintile 
has risen.

     TABLE H-8.--POVERTY RATES IN NONMETRO AND METRO AREAS, 1978-98
                          [Persons in percent]
------------------------------------------------------------------------
                                                             Metro
                                                     -------------------
                   Year                     Nonmetro             Central
                                                        Total    cities
                                                                  only
------------------------------------------------------------------------
1978......................................      13.5      10.4      15.4
1979......................................      13.8      10.7      15.7
1980......................................      15.4      11.9      17.2
1981......................................      17.0      12.6      18.0
1982......................................      17.8      13.7      19.9
1983......................................      18.3      13.8      19.8
1984......................................        NA        NA        NA
1985......................................      18.3      12.7      19.0
1986......................................      18.1      12.3      18.0
1987......................................      17.0      12.3      18.3
1988......................................      16.0      12.2      18.1
1989......................................      15.7      12.0      18.1
1990......................................      16.3      12.7      19.0
1991......................................      16.1      13.7      20.2
1992 \1\..................................      16.9      14.2      20.9
1993......................................      17.2      14.6      21.5
1994......................................      16.0      14.2      20.9
1995......................................      15.6      13.4      20.6
1996......................................      15.9      13.2      19.6
1997......................................      15.9      12.6      18.8
1998......................................      14.4      12.3      18.5
Percent increase, 1978-98.................       6.7      18.3      20.1
Percent change, 1983-98...................     -21.3     -10.9     -6.6
------------------------------------------------------------------------
\1\ For 1992, figures are based on 1990 Census population controls.

 NA--Not available.

 Source: U.S. Census Bureau (1996 and various years).


   TABLE H-9.--PERCENTAGE OF PERSONS IN POVERTY BY RACE, BY METRO AND
                        NONMETRO RESIDENCE, 1998
------------------------------------------------------------------------
                                                             Metro
                                                     -------------------
                   Race                     Nonmetro             Central
                                                        Total    cities
                                                                  only
------------------------------------------------------------------------
All races.................................      14.4      12.3      18.5
White.....................................      12.4      10.0      14.9
Black.....................................      29.8      25.5      29.3
Hispanic \1\..............................      26.9      25.5     29.7
------------------------------------------------------------------------
\1\ Persons of Hispanic origin may be of any race.

 Source: U.S. Census Bureau (1999).


                   TABLE H-10.--STATE POVERTY RATES: 3-YEAR AVERAGES, 1988-90 THROUGH 1996-98
----------------------------------------------------------------------------------------------------------------
                      State                        1988-90  1990-92  1991-93  1992-94  1993-95  1994-96  1996-98
----------------------------------------------------------------------------------------------------------------
Alabama..........................................     19.1     18.4     17.9     17.0     18.0     16.8     14.7
Alaska...........................................     11.0     11.1     10.4      9.8      8.8      8.5      8.8
Arizona..........................................     14.0     14.5     15.6     15.7     15.8     17.5     18.1
Arkansas.........................................     19.8     18.1     18.3     17.6     16.7     15.8     17.2
California.......................................     13.3     15.1     17.0     17.5     17.6     17.2     16.3
Colorado.........................................     12.8     11.6     10.4      9.9      9.2      9.5      9.3
Connecticut......................................      4.3      8.0      9.1      9.7      9.7     10.7      9.9
 Delaware........................................      8.5      7.3      8.6      8.8      9.6      9.1      9.5
 District of Columbia............................     18.1     20.0     21.8     22.6     23.3     22.5     22.7
Florida..........................................     13.5     15.0     16.4     16.1     16.3     15.1     13.9
Georgia..........................................     14.9     16.9     16.1     15.1     13.2     13.6     14.3
Hawaii...........................................     11.1      9.9      9.0      9.3      9.0     10.4     12.3
Idaho............................................     13.3     14.6     14.1     13.4     13.2     12.8     13.2
Illinois.........................................     13.0     14.2     14.3     13.9     12.8     12.3     11.1
Indiana..........................................     12.3     13.5     13.3     12.6     11.8     10.3      8.6
Iowa.............................................     10.0     10.4     10.5     10.8     11.1     10.8      9.4
Kansas...........................................      9.7     11.2     12.2     13.0     12.9     12.3     10.1
Kentucky.........................................     17.0     18.6     19.6     19.5     17.9     16.7     15.5
Louisiana........................................     23.2     22.3     23.4     25.5     23.9     22.0     18.6
Maine............................................     12.2     13.5     14.4     12.8     12.0     10.6     10.6
Maryland.........................................      9.6     10.2     10.3     10.7     10.2     10.4      8.6
Massachusetts....................................      9.3     10.6     10.8     10.2     10.5     10.3     10.3
Michigan.........................................     13.2     14.0     14.4     14.4     13.9     12.5     10.8
Minnesota........................................     11.6     12.6     12.6     12.1     10.8     10.2      9.9
Mississippi......................................     25.0     24.6     24.4     23.1     22.7     21.3     18.3
Missouri.........................................     12.9     14.6     15.6     15.8     13.7     11.5     10.4
Montana..........................................     15.5     15.1     14.7     13.4     13.9     14.6     16.4
Nebraska.........................................     11.1     10.0     10.2      9.9      9.6      9.5     10.8
Nevada...........................................      9.7     11.9     12.0     11.9     10.7     10.1      9.9
New Hampshire....................................      6.9      7.4      8.7      8.8      7.6      6.5      8.4
New Jersey.......................................      7.9      9.6     10.4     10.1      9.3      8.7      9.0
New Mexico.......................................     21.1     21.4     20.7     20.0     21.3     24.0     22.4
New York.........................................     13.4     15.0     15.9     16.4     16.6     16.7     16.6
North Carolina...................................     12.6     14.4     14.9     14.8     13.7     13.0     12.5
North Dakota.....................................     12.5     13.4     12.7     11.2     11.2     11.1     13.2
Ohio.............................................     11.5     12.4     13.0     13.2     12.9     12.8     11.6
Oklahoma.........................................     15.9     17.0     18.6     18.5     17.9     16.8     14.8
Oregon...........................................     10.3     11.3     12.3     11.7     11.6     11.6     12.8
Pennsylvania.....................................     10.6     11.2     12.1     12.5     12.6     12.1     11.3
Rhode Island.....................................      8.0     10.0     11.4     11.3     10.7     10.6     11.8
South Carolina...................................     16.2     17.2     18.1     17.2     17.5     15.6     13.3
South Dakota.....................................     13.6     14.0     14.5     14.6     14.4     13.6     13.0
Tennessee........................................     17.8     16.5     17.4     17.1     16.6     15.3     14.5
Texas............................................     17.0     17.1     17.9     18.3     18.0     17.7     16.1
Utah.............................................      8.7     10.1     11.0      9.4      9.0      8.0      8.5
Vermont..........................................      9.0     11.3     11.1      9.4      9.3     10.2     10.6
Virginia.........................................     10.9     10.1      9.7     10.0     10.2     11.1     11.3
Washington.......................................      9.1      9.8     11.0     11.7     12.1     12.0     10.0
West Virginia....................................     17.2     19.4     20.8     21.0     19.2     17.9     17.6
Wisconsin........................................      8.5     10.0     11.2     10.8     10.0      8.8      8.6
Wyoming..........................................     10.5     10.4     11.2     11.0     11.6     11.1     12.0
                                                  --------------------------------------------------------------
    Total........................................     13.1     14.1     14.8     14.5     14.5     14.0    13.2
----------------------------------------------------------------------------------------------------------------
Source: U.S. Census Bureau (1999).

    While the general trends in families' economic well-being 
are similar regardless of how measured, varying results for the 
distribution of family incomes are obtained depending on which 
income measure is used. Three commonly used income measures 
(all adjusted for inflation) are family cash income, family 
cash income per capita, and AFI. While no measure perfectly 
captures the economic well-being of families, AFI most 
accurately accounts for differences in family size by 
incorporating the scale implicit in the official Federal 
poverty thresholds.
    Family composition in the United States has undergone 
pronounced changes since 1973 (table H-11). The number of 
married couples with children has been almost flat since 1973. 
By contrast, the number of families headed by a single mother 
grew by 104 percent over the entire 1973-98 period, the number 
of nonelderly childless units grew by 94 percent, and the 
number of elderly childless units grew by nearly 60 percent.
    Changes in family composition are also reflected in the 
number of persons and earners per family. The average family 
has become smaller, reflecting in part relatively fewer 
families with children (and fewer children in those families). 
The average family also had fewer earners in 1998 than in 1973.

                        Definitions and Methods

    Analyzing trends in the distribution of family incomes over 
time requires making decisions about a number of variables: How 
should variation in incomes be measured? What is the 
appropriate timeframe over which to examine changes? How should 
inflation be taken into account? And, finally, what is the 
appropriate measure of income to use?

TABLE H-11.--CHANGES IN POPULATION, FAMILY COMPOSITION, AND NUMBER OF EARNERS PER FAMILY, SELECTED YEARS 1973-98
----------------------------------------------------------------------------------------------------------------
                                                           Year                            Percent change
             Family group              -------------------------------------------------------------------------
                                           1973       1979       1989       1998     1973-79   1979-89   1989-98
----------------------------------------------------------------------------------------------------------------
Distribution of families by family
 type (in thousands):
    Families with children............     31,098     32,166     34,768     37,758       3.4       8.1       8.6
        Married couples with children.     24,798     24,166     24,378     24,872      -2.5       0.9       2.0
        Single mothers with children..      4,126      5,650      7,123      8,425      36.9      26.1      18.3
    Nonelderly childless units \1\....     28,183     35,730     46,467     54,780      26.8      30.1      17.9
    Elderly childless units \2\.......     13,884     16,331     20,428     22,058      17.6      25.1       8.0
                                       -------------------------------------------------------------------------
            Total number of families..     73,166     84,229    101,663    114,596      15.1      20.7      12.7
                                       =========================================================================
Distribution of persons by family type
 (in thousands):
    Families with children............    134,248    130,426    135,381    147,486      -2.8       3.8       8.9
        Married couples with children.    108,976    101,318     99,471    102,603      -7.0      -1.8       3.1
        Single mothers with children..     14,240     18,132     21,504     25,657      27.3      18.6      19.3
    Nonelderly childless units \1\....     50,148     60,514     77,025     87,276      20.7      27.3      13.3
    Elderly childless units \2\.......     23,129     26,778     33,440     36,279      15.8      24.9       8.5
                                       -------------------------------------------------------------------------
            Total number of persons...    207,525    217,718    245,846    271,040       4.9      12.9      10.2
                                       =========================================================================
Average number of persons per family:
    Under 18..........................       0.94       0.75       0.63       0.62     -20.2     -16.1      -1.5
    18 to 64..........................       1.64       1.55       1.50       1.46      -5.5      -3.4      -2.5
    65 and older......................       0.30       0.28       0.29       0.28      -6.7       3.9      -3.7
                                       -------------------------------------------------------------------------
        Total.........................       2.87       2.59       2.42       2.37      -9.8      -6.6      -2.0
                                       =========================================================================
Average number of earners per family:
    Male earners......................       0.81       0.75       0.69       0.66      -7.4      -8.5      -4.4
    Female earners....................       0.57       0.59       0.58       0.58       3.5      -1.1       0.0
                                       -------------------------------------------------------------------------
        Total.........................       1.39       1.34       1.27       1.24      -3.6      -5.2     -2.4
----------------------------------------------------------------------------------------------------------------
\1\ Families in which both the head and spouse are under age 65 and there are no children under 18, and
  unrelated individuals under age 65.
\2\ Families in which either the head or spouse of head is 65 or older and there are no children under 18, and
  unrelated individuals 65 and older.

 Source: Congressional Budget Office based on data from the March 1974, 1980, 1990 and 1999 Current Population
  Surveys.

Measuring variation
    Most of the data in this section are presented for income 
quintiles, each of which represents one-fifth of the income 
distribution (either families or persons, as indicated). 
Quintiles are calculated by ordering all relevant family units 
from those with the lowest income to those with the highest. 
For the analysis of changes in incomes among different types of 
families, quintiles are defined separately for each family 
type.
    The analysis of changes in the distribution of family 
incomes over time is done by examining average incomes, 
adjusted for inflation, by income quintile for specific types 
of families.
Timeframe
    Most of the analysis focuses on data for 4 years: 1973, 
1979, 1989, and 1998. The first 3 years reflect peaks in the 
business cycle, and allow comparisons to be made across time 
periods in which general economic conditions were broadly 
similar. Information is also presented for 1998, the most 
recent year for which data are available.
    Income data provided by the Census Bureau to outside 
researchers are frequently limited in certain ways both to 
protect confidentiality and to reduce the impact of reporting 
and coding errors on statistical calculations. Beginning with 
information for 1995, the Census Bureau substantially increased 
the maximum earnings it reports for individuals on public-use 
computer files. As a result, comparisons of incomes for high-
income individuals and families in years before and after 1995 
may reflect actual differences in their economic circumstances, 
differences in the way their income is coded, or both.
    To account for this reporting change, income data for 1998 
are presented here in two ways. First, individuals' earnings 
for 1998 are limited to (or topcoded at) the same inflation-
adjusted value they were limited to in 1989 ($99,999 in 1989; 
$131,450 in 1998.) Second, individuals' earnings in 1998 are 
presented the same way they are reported on the Census Bureau's 
public-use files ($1 million upper limit).
Adjustment for inflation
    To examine changes in family income over time, the dollar 
amounts must be adjusted for inflation to compare actual buying 
power. Adjustment for inflation is done here using the CPI-U-
X1, a revised version of the official Consumer Price Index that 
provides a consistent treatment of the costs of home ownership 
over the years examined. The CPI-U-X1 is an index of the cost 
of a market basket of goods and services representing the 
average consumption of the urban population (table H-7).

                             Income Measure

    The purpose of examining the distribution of family incomes 
over time is to analyze changes in family economic well-being. 
Two important issues in choosing an appropriate income measure 
are how to adjust for differences in family size and what to 
include as income.
    One measure is real family cash income, which is the sum of 
wage, salary, and self-employment earnings, private pension and 
retirement income, interest and dividends, and government cash 
transfers received by each family member. By this measure, 
which takes inflation into account but not changes in family 
size, noncash transfers, or taxes, the average income of 
families increased throughout the 1973-98 period (table H-12, 
top panel). However, the increases were uneven over time and 
among families with different levels of income. Regarding the 
former, the period from 1973 to 1979 was one of relatively slow 
growth in family income while the period from 1979 to 1989 saw 
more rapid growth. The decade from 1989 to 1998 saw moderate 
growth under one measure and more robust growth under the 
income measure that allows more income in the top quintile. It 
is notable that for the 60 percent of American families in the 
middle- and upper-income quintiles, average income growth over 
the decade of the 1980s is stronger than growth during the 
preceding period and during the following period when a similar 
method of computing income in the upper quintile is used for 
both periods.
    These figures for mean family growth over the three periods 
mask very large differences in the patterns of growth in the 
five income quintiles. The table shows clearly that progress in 
family income over the entire 1973-98 period was negative for 
the bottom two income quintiles. The drop in income was 
especially large for the bottom quintile over the period 1989-
98. By contrast, growth was substantial for the upper two 
income quintiles, especially after 1979. Examining the income 
data by quintiles also shows why the two measures of computing 
family income for the 1989 and 1998 period yield such different 
estimates of income growth; namely, $43,350-$45,062 or 3.9 
percent under one definition versus $43,350-$47,209 or 8.9 
percent under the other. Not surprisingly, the decision to 
allow more income at the top of the distribution has an impact 
only on the top income quintile (see the last two columns of 
the top panel). More specifically, income growth in the top 
quintile under the more restricted income definition is only 
from $102,159 to $109,301 or 7.0 percent, whereas growth under 
the broader income definition used by the Congressional Budget 
Office starting in 1995 is from $102,159 to $120,037 or 17.5 
percent. Thus, the difference in the two measures of average 
family income growth over the 1989-98 period is accounted for 
entirely by the top quintile.
    Family cash income has several shortcomings as a measure of 
change in economic well-being. Most notably, it fails to take 
into account change in family size and composition: a family of 
one with $30,000 in income is treated as being as well off as a 
family of four with $30,000 in income. This assumption is 
inappropriate, however, as a family of four requires more 
income to attain the same standard of living as a single 
person.

           TABLE H-12.--ALTERNATIVE MEASURES OF FAMILY INCOME BY INCOME QUINTILE AND CHANGE OVER TIME, SELECTED YEARS 1967-98 FOR ALL FAMILIES
                                                                    [In 1998 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Year                                        Percent change
             Income measure and quintile              --------------------------------------------------------------------------------------------------
                                                        1967    1973     1979     1989    1998 \1\  1998 \2\  1973-79  1979-89  1989-98 \1\  1989-98 \2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Mean family cash income (family weighted):
    Lowest...........................................     NA   $7,967   $7,879    $7,711    $7,247    $7,247     -1.1     -2.1        -6.0         -6.0
    Second...........................................     NA   20,265   20,120    19,858    19,844    19,844     -0.7     -1.3        -0.1         -0.1
    Middle...........................................     NA   34,058   33,663    33,945    34,007    34,007     -1.2      0.8         0.2          0.2
    Fourth...........................................     NA   49,881   50,845    53,072    54,912    54,912      1.9      4.4         3.5          3.5
    Highest..........................................     NA   87,237   89,689   102,159   109,301   120,037      2.8     13.9         7.0         17.5
                                                      --------------------------------------------------------------------------------------------------
        Total........................................     NA   39,884   40,440    43,350    45,062    47,209      1.4      7.2         3.9          8.9
                                                      ==================================================================================================
Mean adjusted family income (person weighted): \3\
    Lowest...........................................   0.69     0.90     0.90      0.86      0.85      0.85      0.0     -4.3        -1.3         -1.3
    Second...........................................   1.54     1.94     2.06      2.09      2.12      2.12      6.2      1.3         1.6          1.6
    Middle...........................................   2.26     2.82     3.07      3.27      3.38      3.38      8.9      6.7         3.2          3.2
    Fourth...........................................   3.16     3.94     4.32      4.77      5.04      5.04      9.6     10.4         5.7          5.7
    Highest..........................................   5.67     6.87     7.39      8.84      9.58     10.63      7.6     19.6         8.4         20.3
                                                      --------------------------------------------------------------------------------------------------
        Total........................................   2.66     3.29     3.55      3.97      4.19      4.40      7.9     11.7         5.8        11.1
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Individual's earnings in 1998 are limited to $131,450. That topcoded value is equal to the 1989 topcoded value ($99,999) adjusted for inflation.
\2\ Individual's earnings in 1998 are as reported on Census public-use files (which use a topcode value of $1 million).
\3\ Family income divided by the poverty threshold. Thresholds are based on the 1989 distribution of family sizes, with no adjustment for the age of the
  head of household or the number of children.

 NA--Not available.

 Note.--Income is pretax income.

 Source: Congressional Budget Office tabulations of data from the March Current Population Survey, 1968, 1974, 1980, 1990, and 1999.

    An alternative approach to measuring family economic well-
being is to take advantage of the family size adjustment 
implicit in the official Federal poverty thresholds. This scale 
assumes, for example, that a family of four needs about twice 
as much income as a single person to attain an equivalent 
standard of living (table H-13). The equivalence scale implicit 
in the poverty thresholds may not perfectly capture the 
disparate needs of families of different sizes, but it yields a 
better assessment of relative economic well-being than making 
no adjustment (mean family cash income) or assuming no 
economies of scale (mean family cash income per capita).

  TABLE H-13.--POVERTY THRESHOLDS AND EQUIVALENCE VALUES FOR DIFFERENT
                           FAMILY SIZES, 1998
------------------------------------------------------------------------
                                        Official   Adjusted
        Family size (persons)           poverty    poverty   Equivalence
                                       threshold  threshold   value \1\
------------------------------------------------------------------------
1....................................     $8,316     $7,633        1.00
2....................................     10,634      9,768        1.28
3....................................     13,003     11,956        1.57
4....................................     16,660     15,330        2.01
5....................................     19,680     18,130        2.37
6....................................     22,228     20,466        2.68
7....................................     25,257     23,176        3.04
8....................................     28,166     25,796        3.37
9 or more............................     33,339     30,818       4.01
------------------------------------------------------------------------
\1\ Equivalence value is calculated based on the official poverty
  thresholds. Values would be slightly different using the adjusted
  poverty threshold because of different numbers of children in a family
  of a given size.

 Note.--Poverty thresholds shown for one- and two-person families are a
  weighted average of the separate official thresholds for elderly and
  nonelderly individuals and families. Adjusted poverty thresholds are
  computed using the CPI-U-X1 to adjust for inflation. The official
  poverty threshold is adjusted for inflation using the Consumer Price
  Index (CPI).


 Source: Congressional Budget Office.

    The AFI measure shown in the second panel of table H-12 
incorporates the equivalence scale underlying the poverty 
thresholds. Each family's pretax cash income is divided by its 
poverty threshold, yielding family income as a multiple of 
poverty. Thus, for example, the average family in the middle 
quintile in 1998 had an income of 3.38 times its poverty 
threshold. \3\
---------------------------------------------------------------------------
    \3\ Poverty thresholds for one- and two-person families in this 
section do not vary by the age of the family head. The 1989 weighted 
averages are adjusted for inflation using the CPI-U-X1.
---------------------------------------------------------------------------
    By taking family size into account, the AFI measure greatly 
reduces the income losses in the bottom two quintiles over the 
1973-98 period. In fact, it completely eliminates income losses 
in the second quintile. It also increases the income gains 
experienced by the top three income quintiles. The obvious 
conclusion to be drawn from the comparison of the two income 
definitions is that taking family size into account 
substantially improves the picture of family income changes 
over the years since 1973. However, as chart H-1 shows, the 
difference in income between the top and bottom quintiles, even 
under the AFI measure, grew substantially throughout the 1973-
98 period.

CHART H-1. RATIO OF AVERAGE ADJUSTED FAMILY INCOME OF HIGHEST QUINTILE 
     TO AVERAGE ADJUSTED FAMILY INCOME OF LOWEST QUINTILE, 1973-98 


    \1\ Individual's earnings in 1998 are limited to $131,450. 
That topcoded value is equal to the 1989 topcoded value 
($99,999) adjusted for inflation.
    \2\ Individual's earnings in 1998 are as reported on Census 
public-use files (which use a topcode value of $1 million).

    Source: Congressional Budget Office.


                             Income Shares

    Another way of tracking income trends is to look at changes 
in the percentage share of income received by families in each 
quintile. Income shares measure whether families have gained or 
lost in relative terms. That is, a given quintile may receive a 
smaller share of real income even as its average income has 
increased.
    All three income measures (family cash income, AFI, family 
income per capita) show broadly similar trends in the share of 
income received by each quintile (table H-14). In general, 
between 1973 and 1998, the shares of the lowest four quintiles 
fell, and the share of the top quintile rose. The measures show 
somewhat different patterns of shares at any point in time, 
however. For example, in 1998 the top quintile had 50.9 percent 
of income under the family cash income definition, but 48.3 
percent under the AFI definition. In that same year, the bottom 
quintile had 3.1 percent under the family cash income 
definition, but 3.9 percent under the AFI definition and 3.6 
percent under the family per capita definition. Even so, the 
income shares analysis, like the other analyses in this 
section, generally shows that the top quintile had an 
increasing percentage of the income pie over the period 1973-
98.

       TABLE H-14.--SHARES OF FAMILY INCOME BY INCOME QUINTILE FOR SELECTED YEARS 1967-98 FOR ALL FAMILIES
                                                  [In percent]
----------------------------------------------------------------------------------------------------------------
                                                                                 Year
             Income measure and quintile             -----------------------------------------------------------
                                                       1967    1973    1979    1989    1994   1998 \1\  1998 \2\
----------------------------------------------------------------------------------------------------------------
Family cash income (family weighted):
    Lowest..........................................      NA     4.0     3.9     3.6     3.3      3.2       3.1
    Second..........................................      NA    10.2    10.0     9.2     8.8      8.8       8.4
    Middle..........................................      NA    17.1    16.6    15.7    15.2     15.1      14.4
    Fourth..........................................      NA    25.0    25.1    24.5    24.6     24.4      23.3
    Highest.........................................      NA    43.7    44.4    47.1    48.1     48.5      50.9
Adjusted family income (person weighted): \3\
    Lowest..........................................     5.2     5.5     5.1     4.3     4.0      4.1       3.9
    Second..........................................    11.6    11.8    11.6    10.5    10.2     10.1       9.6
    Middle..........................................    16.9    17.1    17.3    16.5    16.3     16.1      15.3
    Fourth..........................................    23.7    23.9    24.3    24.0    24.3     24.0      22.9
    Highest.........................................    42.6    41.7    41.7    44.6    45.2     45.7      48.3
Family cash income per capita (person weighted): \4\
    Lowest..........................................      NA     5.2     4.9     4.1     3.8      3.8       3.6
    Second..........................................      NA    11.0    11.0    10.0     9.7      9.5       9.1
    Middle..........................................      NA    16.1    16.3    15.6    15.5     15.2      14.5
    Fourth..........................................      NA    23.1    23.6    23.4    23.5     23.4      22.3
    Highest.........................................      NA    44.6    44.3    46.9    47.5     48.1     50.5
----------------------------------------------------------------------------------------------------------------
\1\ Individual's earnings in 1998 are limited to $131,450. That topcoded value is equal to the 1989 topcoded
  value ($99,999) adjusted for inflation.
\2\ Individual's earnings in 1998 are as reported on Census public-use files (which use a topcode value of $1
  million).
\3\ Family income divided by the poverty threshold. Thresholds are based on the 1989 distribution of family
  sizes, with no adjustment for the age of the head of household or the number of children.
\4\ Total family income divided by the number of persons in the family.

 Source: Congressional Budget Office tabulations of data from the March Current Population Survey, 1968, 1974,
  1980, 1990, 1995, and 1999.

            TRENDS IN PRETAX CASH INCOMES BY TYPE OF FAMILY

    As we have seen (table H-11), the composition of the 
typical family has changed over time. Compared with 1973 and 
1979, there were fewer persons in each family in 1998, on 
average, and married couples with children made up a smaller 
fraction of all families (table H-15). Additional insights can 
therefore be gained by looking at changes in incomes for 
specific family types. This analysis distinguishes six types of 
family units:
 1. Married couples with children, which are families composed 
        of a married couple living only with their own or 
        related children, at least one of whom is under age 18;
 2. Single mothers with children, which are families composed 
        of unmarried, divorced, separated, or widowed mothers 
        living only with their own or related children, at 
        least one of whom is under age 18;
 3. Nonelderly childless families, which are families composed 
        of two or more related people living together, in which 
        the family head and the spouse of the head are both 
        under age 65 and there are no children under age 18;
 4. Nonelderly unrelated individuals, which are people over age 
        17 and under age 65 who are not living with relatives;
 5. Elderly childless families, which are families composed of 
        two or more related people living together, in which 
        either the family head or the spouse of the head is 65 
        or older and there are no children under age 18; and
 6. Elderly unrelated individuals, which are people 65 or older 
        who are not living with relatives.

 TABLE H-15.--AVERAGE FAMILY SIZE AND NUMBER OF FAMILIES, \1\ BY FAMILY
           TYPE, WEIGHTED BY FAMILIES, SELECTED YEARS 1973-98
------------------------------------------------------------------------
                                                 Number of
       Family type and year        Persons per    families    Percent of
                                      family    (thousands)    families
------------------------------------------------------------------------
All families: \1\
    1973.........................         2.87       73,166        100.0
    1979.........................         2.59       84,229        100.0
    1989.........................         2.42      101,663        100.0
    1994.........................         2.41      108,522        100.0
    1998.........................         2.37      114,596        100.0

All families with children:
    1973.........................         4.35       31,098         42.5
    1979.........................         4.09       32,166         38.2
    1989.........................         3.89       34,768         34.2
    1994.........................         3.90       37,413         34.5
    1998.........................         3.91       37,758         32.9

Married couples with children
    1973.........................         4.42       24,798         33.9
    1979.........................         4.23       24,166         28.7
    1989.........................         4.08       24,378         24.0
    1994.........................         4.11       25,079         23.1
    1998.........................         4.13       24,872         21.7

Single mothers with children:
    1973.........................         3.50        4,126          5.6
    1979.........................         3.24        5,650          6.7
    1989.........................         3.02        7,123          7.0
    1994.........................         3.04        8,351          7.7
    1998.........................         3.05        8,425          7.4

Nonelderly childless units:
    1973.........................         1.76       28,183         38.5
    1979.........................         1.68       35,730         42.4
    1989.........................         1.66       46,467         45.7
    1994.........................         1.62       49,580         45.7
    1998.........................         1.59       54,780         47.8

Nonelderly childless families:
    1973.........................         2.32       16,363         22.4
    1979.........................         2.35       17,931         21.3
    1989.........................         2.44       21,257         20.9
    1994.........................         2.43       21,473         19.8
    1998.........................         2.42       22,823         19.9

Nonelderly unrelated individuals:
    1973.........................         1.00       11,820         16.2
    1979.........................         1.00       17,799         21.1
    1989.........................         1.00       25,210         24.8
    1994.........................         1.00       28,106         25.9
    1998.........................         1.00       31,956         27.9

Elderly childless units:
    1973.........................         1.64       13,884         19.0
    1979.........................         1.62       16,331         19.4
    1989.........................         1.64       20,428         20.1
    1994.........................         1.65       21,530         19.8
    1998.........................         1.64       22,058         19.2

Elderly childless families:
    1973.........................         2.17        7,590         10.4
    1979.........................         2.16        8,676         10.3
    1989.........................         2.23       10,600         10.4
    1994.........................         2.26       11,100         10.2
    1998.........................         2.24       11,494         10.0

Elderly unrelated individuals:
    1973.........................         1.00        6,294          8.6
    1979.........................         1.00        7,655          9.1
    1989.........................         1.00        9,828          9.7
    1994.........................         1.00       10,430          9.6
    1998.........................         1.00       10,564         9.2
------------------------------------------------------------------------
\1\ Corresponds more closely to Census definition of household. Includes
  families of one person.

 Source: Congressional Budget Office tabulations of data from the March
  Current Population Survey, 1974, 1980, 1990, 1995, and 1999.

    In addition, results are also presented for four 
aggregates:
 1. All families with children, which comprises married 
        couples, single mothers, and other families with 
        children;
 2. Nonelderly childless units, which comprises nonelderly 
        childless families and nonelderly unrelated 
        individuals;
 3. Elderly childless units, which comprises elderly childless 
        families and elderly unrelated individuals; and
 4. All families, which comprises all families and unrelated 
        individuals (i.e., the noninstitutional U.S. 
        population).
    Unless otherwise noted, the analysis of changes in income 
for each family type listed above is based on quintiles 
computed for that family type. This procedure permits 
comparisons within, but not across, family types; the quintile 
in which a particular family is found says nothing about its 
place among all families, but measures its position in relation 
to families of the same type. For example, individuals in the 
middle quintile of single mothers with children may be in the 
lowest quintile of the all-families grouping.
    Comparisons over time show how the incomes of families of a 
given type compare with similar families at another time, not 
how incomes have changed for a particular type of family. 
Families may move among income quintiles as their incomes--or 
the incomes of other families--rise or fall; they may also 
change types as their members grow older, have children, marry, 
or divorce. In addition, the average number of members and 
earners within a given type of family may change over time, as 
may the characteristics of those persons.

                     Pretax Adjusted Family Income

    Trends in incomes for different family types show more 
variation than trends for families overall. Between 1973 and 
1979, adjusted family income (AFI) grew 12.2 percent, on 
average, for all families with children (table H-16). This 
compares with an income gain of only 7.9 percent for all 
families. For families with children, average AFI fell 4.5 
percent during this period for the lowest quintile, from 88 
percent of poverty to 84 percent of poverty. For the highest 
quintile, average AFI rose 7.3 percent, compared with 7.6 
percent for all families. During the 1979-89 period, the bottom 
two quintiles of families with children experienced reduced 
income, by 11.7 percent and 4.1 percent respectively for the 
lowest and second quintiles; meanwhile, the highest quintile 
had an income increase of 17 percent. These losses at the 
bottom were greater for families with children than for all 
families.
    Most of the divergence in incomes among families with 
children reflects compositional change, as families of single 
mothers with children became increasingly common (table H-11). 
The lowest quintile of married couples with children had a 3.0-
percent decline in average AFI between 1979 and 1989; the 
lowest quintile of single mothers with children fared much 
worse, with a 22.0-percent decline during the same period. 
These two family types as a whole, however, showed income gains 
over the period: 11.2 percent for married couples with children 
and 3.3 percent for single mothers with children. More 
recently, during the 1989-98 period, all quintiles of both 
family types have experienced rising incomes. Single mothers in 
the bottom quintile had a modest increase of 0.2 percent, and 
mother-headed families in the second and third quintiles 
enjoyed more than twice the percentage increases of the top two 
quintiles. These developments in the bottom quintiles are 
almost certainly due to increased work by poor and low-income 
mothers in general and by mothers leaving welfare in particular 
(see Appendix L).

 TABLE H-16.--AVERAGE PRETAX ADJUSTED FAMILY INCOME (INCOME AS A MULTIPLE OF POVERTY) BY FAMILY TYPE AND INCOME QUINTILE, WEIGHTED BY PERSONS, SELECTED
                                                                      YEARS 1967-98
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                 Year                                       Percent change
                Family type and quintile                ------------------------------------------------------------------------------------------------
                                                          1967    1973    1979     1989   1998 \1\  1998 \2\  1973-79  1979-89  1989-98 \1\  1989-98 \2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All families:
    Lowest.............................................    0.69    0.90    0.90     0.85     0.85      0.85       0.0     -4.3       -1.3         -1.3
    Second.............................................    1.54    1.94    2.06     2.09     2.12      2.12       6.2      1.3        1.6          1.6
    Middle.............................................    2.26    2.82    3.07     3.27     3.38      3.38       8.9      6.7        3.2          3.2
    Fourth.............................................    3.16    3.94    4.32     4.77     5.04      5.04       9.6     10.4        5.7          5.7
    Highest............................................    5.67    6.87    7.39     8.84     9.58     10.63       7.6     19.6        8.4         20.3
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    2.66    3.29    3.55     3.97     4.19      4.40       7.9     11.7        5.8         11.1
                                                        ================================================================================================
All families with children:
    Lowest.............................................    0.74    0.88    0.84     0.74     0.76      0.76      -4.5    -11.7        2.5          2.5
    Second.............................................    1.54    1.88    1.95     1.87     1.91      1.91       3.7     -4.1        2.2          2.2
    Middle.............................................    2.13    2.65    2.84     2.93     3.03      3.03       7.2      3.3        3.3          3.3
    Fourth.............................................    2.84    3.54    3.85     4.14     4.45      4.45       8.8      7.5        7.5          7.5
    Highest............................................    4.77    5.73    6.15     7.20     8.00      9.04       7.3     17.0       11.1         25.6
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    2.40    2.94    3.30     3.38     3.63      3.84      12.2      2.3        7.5         13.7
                                                        ================================================================================================
Married couples with children:
    Lowest.............................................    0.89    1.16    1.18     1.14     1.19      1.19       1.7     -3.0        3.9          3.9
    Second.............................................    1.66    2.12    2.29     2.34     2.47      2.47       8.0      2.0        5.7          5.7
    Middle.............................................    2.23     .84    3.12     3.34     3.61      3.61       9.9      7.1        8.0          8.0
    Fourth.............................................    2.93    3.71    4.11     4.52     5.04      5.04      10.8     10.1       11.4         11.4
    Highest............................................    4.88    5.94    6.41     7.67     8.71     10.12       7.9     19.7       13.5         31.9
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    2.52    3.15    3.42     3.80     4.20      4.49       8.6     11.2       10.5         17.9
                                                        ================================================================================================
Single mothers with children:
    Lowest.............................................    0.21    0.33    0.32     0.25     0.25      0.25      -3.0    -22.0        0.2          0.2
    Second.............................................    0.59    0.71    0.75     0.64     0.74      0.74       5.6    -14.0       14.8         14.8
    Middle.............................................    0.91    1.03    1.22     1.14     1.30      1.30      18.4     -6.1       13.5         13.5
    Fourth.............................................    1.45    1.67    2.01     2.03     2.16      2.16      20.4      0.9        6.5          6.5
    Highest............................................    2.78    3.29    3.65     4.14     4.34      4.42      10.9     13.6        4.7          6.6
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    1.19    1.41    1.59     1.64     1.76      1.77      12.8      3.3        7.0          8.0
                                                        ================================================================================================
Nonelderly childless units:
    Lowest.............................................    0.80    1.22    1.24     1.19     1.07      1.07       1.6     -3.7      -10.4        -10.4
    Second.............................................    2.19    2.81    2.91     2.94     2.91      2.91       3.6      1.0       -1.0         -1.0
    Middle.............................................    3.28    4.09    4.27     4.45     4.48      4.48       4.4      4.3        0.6          0.6
    Fourth.............................................    4.47    5.49    5.78     6.29     6.46      6.46       5.3      8.8        2.7          2.7
    Highest............................................    7.42    8.95    9.35    10.94    11.69     13.02       4.5     17.0        6.8         19.0
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    3.63    4.51    4.71     5.16     5.32      5.59       4.4      9.6        3.1          8.2
                                                        ================================================================================================
Nonelderly childless families:
    Lowest.............................................    1.03    1.74    1.85     1.80     1.83      1.83       6.3     -2.8        1.8          1.8
    Second.............................................    2.47    3.31    3.59     3.68     3.80      3.80       8.5      2.4        3.3          3.3
    Middle.............................................    3.52    4.53    4.89     5.20     5.40      5.40       7.9      6.4        3.8          3.8
    Fourth.............................................    4.70    5.88    6.33     7.03     7.40      7.40       7.7     11.1        5.2          5.2
    Highest............................................    7.65    9.33    9.94    11.72    12.79     14.55       6.5     17.9        9.1         24.1
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    3.87    4.96    5.32     5.89     6.24      6.60       7.3     10.7        6.1         12.1
                                                        ================================================================================================
Nonelderly unrelated individuals:
    Lowest.............................................    0.32    0.51    0.61     0.61     0.49      0.49      19.6     -0.3      -19.4        -19.4
    Second.............................................    1.14    1.49    1.72     1.83     1.74      1.74      15.4      6.6       -5.1         -5.1
    Middle.............................................    2.12    2.53    2.78     3.00     3.04      3.04       9.9      7.9        1.3          1.3
    Fourth.............................................    3.23    3.82    4.03     4.46     4.51      4.51       5.5     10.7        1.1          1.1
    Highest............................................    5.88    7.00    7.11     8.48     8.89      9.47       1.6     19.3        4.8         11.6
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    2.54    3.07    3.25     3.68     3.73      3.85       5.9     13.1        1.5          4.7
                                                        ================================================================================================
Elderly childless units:
    Lowest.............................................    0.48    0.76    0.84     0.95     0.97      0.97      10.5     13.4        1.8          1.8
    Second.............................................    0.95    1.34    1.50     1.73     1.84      1.84      11.9     15.2        6.5          6.5
    Middle.............................................    1.48    1.97    2.26     2.64     2.74      2.74      14.7     16.7        3.9          3.9
    Fourth.............................................    2.40    3.02    3.38     4.02     4.14      4.13      11.9     19.0        2.9          2.6
    Highest............................................    5.32    6.54    6.85     8.63     9.27      9.68       4.7     26.0        7.4         12.1
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    2.13    2.73    2.97     3.59     3.79      3.87       8.8     21.0        5.5          7.7
                                                        ================================================================================================
Elderly childless families:
    Lowest.............................................    0.60    0.96    1.06     1.20     1.24      1.24      10.4     13.1        3.5          3.5
    Second.............................................    1.16    1.63    1.86     2.15     2.28      2.28      14.1     15.4        6.2          6.2
    Middle.............................................    1.77    2.34    2.67     3.14     3.25      3.25      14.1     17.5        3.6          3.6
    Fourth.............................................    2.76    3.50    3.83     4.61     4.75      4.75       9.4     20.5        2.9          2.9
    Highest............................................    5.73    7.12    7.37     9.54    10.12     10.61       3.5     29.5        6.0         11.2
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    2.40    3.11    3.36     4.13     4.33      4.43       8.0     22.9        4.8          7.2
                                                        ================================================================================================
Elderly unrelated individuals:
    Lowest.............................................    0.35    0.54    0.64     0.73     0.73      0.73      18.5     13.8        0.2          0.2
    Second.............................................    0.63    0.93    1.02     1.17     1.23      1.23       9.7     15.1        4.8          4.8
    Middle.............................................    0.86    1.23    1.37     1.62     1.71      1.71      11.4     18.6        5.3          5.3
    Fourth.............................................    1.29    1.73    2.05     2.46     2.50      2.50      18.5     20.3        1.4          1.4
    Highest............................................    3.44    4.08    4.83     5.58     6.28      6.49      18.4     15.5       12.6         16.3
                                                        ------------------------------------------------------------------------------------------------
      Total............................................    1.31    1.70    1.98     2.31     2.49      2.53      16.5     16.9        7.6         9.4
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Individual's earnings in 1998 are limited to $131,450. That topcoded value is equal to the 1989 topcoded value ($99,999) adjusted for inflation.
\2\ Individual's earnings in 1998 are as reported on Census public-use files (which use a topcode value of $1 million).

 Note.--Poverty thresholds are based on the 1989 distribution of family sizes, with no adjustment for the age of the head of household or the number of
  children. Quintiles are based the number of persons.

 Source: Congressional Budget Office tabulations of data from the March Current Population Survey, 1968, 1974, 1980, 1990, and 1999.

    Elderly persons experienced income gains across the board 
between 1973 and 1998. For elderly childless units, which 
include both single persons and married couples, average AFI 
rose 10.5, 13.4, and 1.8 percent respectively for the lowest 
quintile across the three periods shown in the last panel of 
table H-16 and 4.7, 26.0, and 12.1 percent respectively over 
the same periods for the highest quintile (using the new method 
of income coding). Despite their gains, the elderly generally 
had much lower incomes than the nonelderly. In 1998, for 
example, the average income of elderly childless units was 
about 3.9 times poverty; the average income of nonelderly 
childless units, by comparison, was about 5.6 times poverty 
(not shown in table).

               Average Family Cash Income By Family Type

    For all families, average cash income grew more slowly than 
average pretax AFI between 1973 and 1998. This was also 
generally true for specific family types. At the same time, 
those groups of families whose average cash incomes declined 
had more pronounced decreases than occurred in pretax AFI.
    Average family cash income grew throughout the 1973-98 
period for families with children (table H-17, second panel). 
However, families at the bottom of the income distribution lost 
ground during the 1973-89 period, with income declines of 11.0 
percent during the 1973-79 period and 17.7 percent during the 
1979-89 period. The decline stopped between 1989 and 1999 when 
the income of families with children in the bottom quintile 
actually increased slightly. As was the case with all the 
measures we have examined, average family cash income of 
families in the top two quintiles improved substantially 
throughout the entire period after 1973.
    As compared with the cash family income losses in the 
bottom quintile for all families, the pattern of losses in the 
bottom quintile was even greater for single mothers with 
children before 1989 (table H-17, fourth panel). From 1979 to 
1989, for example, these mothers lost almost a quarter of their 
income. However, between 1989 and 1998 they made up for at 
least some of the lost ground because their income increased by 
3.9 percent. It is also interesting that during both the 1973-
79 and the 1989-98 periods, income gains in the second, third, 
and fourth income quintiles of single mothers with children 
were usually greater than income gains in the top quintile.
    Because the change in family size among elderly persons was 
almost negligible over the period, their trend in average 
family cash incomes is almost identical to the trend in average 
pretax AFI. Elderly childless units and elderly childless 
families experienced income gains in every quintile during 
every period between 1973 and 1998.
    Table H-18 shows family cash income limits (the income 
cutoffs between quintiles) by quintile and family type. Between 
1973 and 1998, except for the top quintile, income limits among 
families with children have declined or grown slowly while 
those for the elderly have increased, in some cases 
significantly. Across all family types except elderly childless 
units and families, income limits among the higher quintiles 
have increased more than among the lower


                           TABLE H-17.--AVERAGE FAMILY CASH INCOME BY FAMILY TYPE AND INCOME QUINTILE, SELECTED YEARS 1973-98
                                                                    [In 1998 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                            Year                                          Percent change
         Family type and income quintile          ------------------------------------------------------------------------------------------------------
                                                      1973       1979       1989     1998 \1\   1998 \2\   1973-79    1979-89   1989-98 \1\  1989-98 \2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All families:
    Lowest.......................................     $7,967     $7,879     $7,711     $7,247     $7,247       -1.1       -2.1        -6.0         -6.0
    Second.......................................     20,265     20,120     19,860     19,844     19,844       -0.7       -1.3        -0.1         -0.1
    Middle.......................................     34,058     33,663     33,947     34,007     34,007       -1.2        0.8         0.2          0.2
    Fourth.......................................     49,881     50,845     53,075     54,912     54,912        1.9        4.4         3.5          3.5
    Highest......................................     87,237     89,689    102,163    109,301    120,037        2.8       13.9         7.0         17.5
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     39,881     40,440     43,351     45,062     47,209        1.4        7.2         3.9          8.9
                                                  ======================================================================================================
All families with children:
    Lowest.......................................     13,841     12,316     10,141     10,181     10,181      -11.0      -17.7         0.4          0.4
    Second.......................................     30,465     29,399     27,166     27,236     27,236       -3.5       -7.6         0.3          0.3
    Middle.......................................     42,874     43,796     43,473     44,782     44,782        2.1       -0.7         3.0          3.0
    Fourth.......................................     57,084     59,074     62,077     66,273     66,273        3.5        5.1         6.8          6.8
    Highest......................................     92,568     95,922    107,760    119,729    134,993        3.6       12.3        11.1         25.3
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     47,366     48,101     50,124     53,640     56,693        1.6        4.2         7.0         13.1
                                                  ======================================================================================================
Married couples with children:
    Lowest.......................................     20,309     19,912     19,203     20,060     20,060       -2.0       -3.6         4.5          4.5
    Second.......................................     35,715     37,193     37,680     40,120     40,120        4.1        1.3         6.5          6.5
    Middle.......................................     46,682     49,548     52,171     56,761     56,761        6.1        5.3         8.8          8.8
    Fourth.......................................     60,182     63,907     69,815     77,907     77,907        6.2        9.2        11.6         11.6
    Highest......................................     95,752    100,622    115,904    131,859    153,767        5.1       15.2        13.8         32.7
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     51,728     54,236     58,955     65,341     69,723        4.8        8.7        10.8         18.3
                                                  ======================================================================================================
Single mothers with children:
    Lowest.......................................      4,607      4,388      3,372      3,502      3,502       -4.8      -23.2         3.9          3.9
    Second.......................................     10,425     10,677      8,861     10,077     10,077        2.4      -17.0        13.7         13.7
    Middle.......................................     15,672     17,267     15,529     17,028     17,028       10.2      -10.1         9.7          9.7
    Fourth.......................................     23,486     26,164     25,563     26,946     26,946       11.4       -2.3         5.4          5.4
    Highest......................................     43,944     46,947     50,503     52,894     53,811        6.8        7.6         4.7          6.6
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     19,627     21,089     20,766     22,089     22,273        7.4       -1.5         6.4          7.3
                                                  ======================================================================================================
Nonelderly childless units:
    Lowest.......................................      7,636      7,707      7,529      6,302      6,302        0.9       -2.3       -16.3        -16.3
    Second.......................................     20,882     20,780     20,825     20,129     20,129       -0.5        0.2        -3.3         -3.3
    Middle.......................................     33,602     33,385     34,382     33,779     33,779       -0.6        3.0        -1.8         -1.8
    Fourth.......................................     49,518     50,237     53,306     53,762     53,762        1.5        6.1         0.9          0.9
    Highest......................................     88,251     90,888    104,577    108,118    118,709        3.0       15.1         3.4         13.5
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     39,978     40,599     44,124     44,418     46,536        1.6        8.7         0.7          5.5
                                                  ======================================================================================================
Nonelderly childless families:
    Lowest.......................................     17,147     18,247     18,027     18,390     18,390        6.4       -1.2         2.0          2.0
    Second.......................................     33,326     36,508     37,970     39,786     39,786        9.5        4.0         4.8          4.8
    Middle.......................................     46,345     50,739     54,847     57,099     57,099        9.5        8.1         4.1          4.1
    Fourth.......................................     62,044     67,117     75,877     79,714     79,714        8.2       13.1         5.1          5.1
    Highest......................................    101,043    109,139    129,385    138,648    157,815        8.0       18.6         7.2         22.0
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     51,981     56,350     63,221     66,727     70,561        8.4       12.2         5.5         11.6
                                                  ======================================================================================================
Nonelderly unrelated individuals:
    Lowest.......................................      3,875      4,606      4,631      3,716      3,716       18.9        0.5       -19.8        -19.8
    Second.......................................     11,331     13,089     13,963     13,283     13,283       15.5        6.7        -4.9         -4.9
    Middle.......................................     19,229     21,118     22,860     23,182     23,182        9.8        8.2         1.4          1.4
    Fourth.......................................     29,057     30,668     33,984     34,428     34,428        5.5       10.8         1.3          1.3
    Highest......................................     53,310     54,178     64,663     67,828     72,295        1.6       19.4         4.9         11.8
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     23,361     24,732     28,020     28,487     29,381        5.9       13.3         1.7          4.9
                                                  ======================================================================================================
Elderly childless units:
    Lowest.......................................      5,453      6,089      6,866      6,954      6,954       11.7       12.8         1.3          1.3
    Second.......................................      9,932     10,999     12,708     13,453     13,453       10.7       15.5         5.9          5.9
    Middle.......................................     15,285     17,516     20,308     21,322     21,322       14.6       15.9         5.0          5.0
    Fourth.......................................     24,418     27,870     32,902     34,271     34,271       14.1       18.1         4.2          4.2
    Highest......................................     59,516     62,541     77,626     83,954     87,303        5.1       24.1         8.2         12.5
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     22,921     25,003     30,082     31,991     32,661        9.1       20.3         6.3          8.6
                                                  ======================================================================================================
Elderly childless families:
    Lowest.......................................      9,311     10,337     11,758     12,312     12,312       11.0       13.7         4.7          4.7
    Second.......................................     15,871     18,194     21,000     22,420     22,420       14.6       15.4         6.8          6.8
    Middle.......................................     22,610     25,962     30,751     32,034     32,034       14.8       18.4         4.2          4.2
    Fourth.......................................     34,340     37,975     45,862     47,887     47,887       10.6       20.8         4.4          4.4
    Highest......................................     73,792     76,193     98,755    104,899    109,889        3.3       29.6         6.2         11.3
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     31,185     33,732     41,625     43,910     44,908        8.2       23.4         5.5          7.9
                                                  ======================================================================================================
Elderly unrelated individuals:
    Lowest.......................................      4,086      4,886      5,549      5,550      5,550       19.6       13.6         0.0          0.0
    Second.......................................      7,089      7,798      8,948      9,411      9,411       10.0       14.8         5.2          5.2
    Middle.......................................      9,351     10,467     12,378     13,087     13,087       11.9       18.3         5.7          5.7
    Fourth.......................................     13,206     15,618     18,786     19,124     19,124       18.3       20.3         1.8          1.8
    Highest......................................     31,057     36,785     42,512     47,984     49,550       18.4       15.6        12.9         16.6
                                                  ------------------------------------------------------------------------------------------------------
      Total......................................     12,958     15,111     17,635     19,031     19,344       16.6       16.7         7.9         9.7
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Individual's earnings in 1998 are limited to $131,450. That topcoded value is equal to the 1989 topcoded value ($99,999) adjusted for inflation.
\2\ Individual's earnings in 1998 are as reported on Census public-use files (which use a topcode value of $1 million).

 Note.--Quintiles are based on the number of families.

 Source: Congressional Budget Office tabulations of data from the March Current Population Survey, 1974, 1980, 1990, and 1999.


                                           TABLE H-18.--FAMILY CASH INCOME LIMITS BY QUINTILE AND FAMILY TYPE
                                                                    [In 1998 dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              Year                                         Percent change
                    Family type                     ----------------------------------------------------------------------------------------------------
                                                        1973       1979       1989     1998 \1\   1998 \2\   1973-79   1979-89  1989-98 \1\  1989-98 \2\
--------------------------------------------------------------------------------------------------------------------------------------------------------
All families:
    Lowest.........................................    $13,883    $13,939    $13,739    $13,600    $13,600       0.4      -1.4        -1.0         -1.0
    Second.........................................     27,072     26,420     26,297     26,271     26,271      -2.4      -0.5        -0.1         -0.1
    Middle.........................................     41,460     41,643     42,130     42,862     42,862       0.4       1.2         1.7          1.7
    Fourth.........................................     60,151     61,718     66,145     69,883     69,883       2.6       7.2         5.7          5.7
All families with children:
    Lowest.........................................     23,369     22,017     19,024     19,000     19,000      -5.8     -13.6        -0.1         -0.1
    Second.........................................     36,871     36,889     35,418     35,483     35,483       0.0      -4.0         0.2          0.2
    Middle.........................................     49,101     50,718     51,792     54,060     54,060       3.3       2.1         4.4          4.4
    Fourth.........................................     66,705     68,862     74,158     81,000     81,000       3.2       7.7         9.2          9.2
Married couples with children:
    Lowest.........................................     29,716     30,163     29,811     31,200     31,200       1.5      -1.2         4.7          4.7
    Second.........................................     41,460     43,681     44,838     48,219     48,219       5.4       2.6         7.5          7.5
    Middle.........................................     52,494     55,670     59,842     65,500     65,500       6.0       7.5         9.5          9.5
    Fourth.........................................     69,587     73,756     81,763     93,000     93,000       6.0      10.9        13.7         13.7
Single mothers with children:
    Lowest.........................................      8,084      7,992      6,270      6,850      6,850      -1.1     -21.5         9.2          9.2
    Second.........................................     13,026     13,659     11,831     13,224     13,224       4.9     -13.4        11.8         11.8
    Middle.........................................     19,003     21,449     19,718     21,320     21,320      12.9      -8.1         8.1          8.1
    Fourth.........................................     28,831     31,924     32,777     34,000     34,000      10.7       2.7         3.7          3.7
Nonelderly childless unit:
    Lowest.........................................     14,511     14,752     14,529     13,310     13,310       1.7      -1.5        -8.4         -8.4
    Second.........................................     27,259     26,470     27,015     26,520     26,520      -2.9       2.1        -1.8         -1.8
    Middle.........................................     40,989     40,764     42,196     42,000     42,000      -0.5       3.5        -0.5         -0.5
    Fourth.........................................     60,444     61,665     66,621     68,300     68,300       2.0       8.0         2.5          2.5
Nonelderly childless families:
    Lowest.........................................     26,565     28,996     29,577     30,500     30,500       9.1       2.0         3.1          3.1
    Second.........................................     39,773     43,875     46,021     48,557     48,557      10.3       4.9         5.5          5.5
    Middle.........................................     53,455     58,124     64,280     66,909     66,909       8.7      10.6         4.1          4.1
    Fourth.........................................     72,553     78,395     90,359     95,885     95,885       8.1      15.3         6.1          6.1
Nonelderly unrelated individuals:
    Lowest.........................................      7,463      8,915      9,465      8,661      8,661      19.5       6.2        -8.5         -8.5
    Second.........................................     15,271     17,173     18,403     18,030     18,030      12.5       7.2        -2.0         -2.0
    Middle.........................................     24,166     25,350     27,631     28,300     28,300       4.9       9.0         2.4          2.4
    Fourth.........................................     34,954     37,319     41,585     42,026     42,026       6.8      11.4         1.1          1.1
Elderly childless units:
    Lowest.........................................      7,978      8,648      9,814     10,317     10,317       8.4      13.5         5.1          5.1
    Second.........................................     12,264     13,884     16,057     16,932     16,932      13.2      15.7         5.5          5.5
    Middle.........................................     18,706     21,654     25,303     26,505     26,505      15.8      16.9         4.7          4.7
    Fourth.........................................     32,131     35,815     42,552     45,050     45,050      11.5      18.8         5.9          5.9
Elderly childless families:
    Lowest.........................................     13,102     14,833     16,782     18,272     18,272      13.2      13.1         8.9          8.9
    Second.........................................     18,799     21,821     25,573     26,776     26,776      16.1      17.2         4.7          4.7
    Middle.........................................     27,225     30,427     36,806     38,250     38,250      11.8      21.0         3.9          3.9
    Fourth.........................................     43,843     47,864     57,050     61,902     61,902       9.2      19.2         8.5          8.5
Elderly unrelated individuals:
    Lowest.........................................      5,852      6,574      7,477      7,773      7,773      12.3      13.7         4.0          4.0
    Second.........................................      8,247      9,018     10,390     10,986     10,986       9.3      15.2         5.7          5.7
    Middle.........................................     10,686     12,479     14,943     15,325     15,325      16.8      19.8         2.6          2.6
    Fourth.........................................     16,418     19,815     23,741     24,525     24,525      20.7      19.8         3.3         3.3
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Individual's earnings in 1998 are limited to $131,450. That topcoded value is equal to the 1989 topcoded value ($99,999) adjusted for inflation.
\2\ Individual's earnings in 1998 are as reported on Census public-use files (which use a topcode value of $1 million).

 Source: Congressional Budget Office tabulations of data from the March Current Population Survey, 1974, 1980, 1990, and 1999.

quintiles. In fact, income limits for the lower quintiles have 
decreased for several family types during several periods.

     ANTIPOVERTY EFFECTIVENESS OF VARIOUS CASH AND NONCASH TRANSFERS

    Tables H-19 through H-21 provide estimates of the number 
and percentage of individuals removed from poverty by market 
income and by social insurance programs (Social Security, 
unemployment compensation, and workers' compensation), means-
tested cash programs (Aid to Families with Dependent Children, 
Supplemental Security Income, and general assistance), means-
tested noncash programs (food stamps, housing benefits, and 
school lunch), and Federal payroll and income taxes and the 
earned income credit (EIC). Tables are provided separately for 
elderly persons, for children, and for persons in units with an 
unmarried head and children under age 18, for selected years 
between 1979 and 1998.
    The tables present alternative measures of poverty to the 
official measure. They include counts of the number of people 
below the poverty line before any government benefits are taken 
into account, after each type of benefit is added to income, 
and after the government cash and noncash benefits and Federal 
taxes and the EIC are added to (or subtracted from) income.
    The tables also measure the effect of these government 
programs on the ``poverty gap''--the gap between a poor 
family's income and the poverty line. The poverty gap 
represents the degree of poverty by showing the amount of money 
that would be needed to lift every poor person exactly to the 
poverty line.
    Table H-19 shows the antipoverty effectiveness of market 
income and government programs for the elderly. Based both on 
cash income before transfers and on posttransfer income, the 
poverty rates among the elderly in 1998 were among the lowest 
on record. As compared with 1979, when over 54 percent of the 
elderly were poor before transfers, by 1998 only a little over 
48 percent of the elderly were poor before transfers. The 
comparable figures for the percentage of the elderly in poverty 
after transfers were 13.5 in 1979 and 8.8 in 1998. The impact 
of Social Security transfers is by the far the greatest reason 
so many of the poor are removed from poverty by government 
transfers. In 1979 the poverty rate was dropped from 54.2 to 
17.4 by Social Security payments; in 1998 the comparable 
figures were 48.2 to 8.8 percent. In 1979, a total of 8.9 
million elderly persons were removed from poverty by Social 
Security; in 1998, the number had jumped to 11.8 million. The 
figures for the poverty gap for the elderly are not quite as 
impressive as the overall figures. Both the total number of 
dollars required to close the poverty gap and the size of the 
poverty gap per person in poverty have been almost stagnant in 
recent years. Even so, in 1998 the poverty gap is only $6.4 
billion or $2,234 per person in poverty. As we will see, no 
other government program has as huge an impact on poverty among 
any group as does Social Security among the elderly.
    The impact of market income and the safety net on 
children's poverty are shown in table H-20. The poverty rate 
among children before transfers was 21.5 percent in 1998, its 
lowest level since 1979 and nearly 5 percentage points lower 
than in 1993. Similarly, the child poverty rate after transfers 
in 1998 was 14.3, its lowest level since 1979 and 5.7 
percentage points or nearly 30 percent below its level in 1993. 
These figures show substantial progress against children's 
poverty, both before and after government transfers. That the 
pretransfer level is so low suggests that the substantial 
increase in work by former welfare mothers after the 1996 
welfare reform legislation (see Appendix L) may be playing an 
important role in poverty reduction among children.
    The important role of work by single mothers in reducing 
child poverty is also shown by the data on percentage of 
children removed from poverty due to Federal taxes. The row of 
figures for taxes in all the panels of table H-20 show that 
Federal tax policy is having a major and growing effect in 
reducing child poverty. In 1983, Federal taxes actually 
increased the poverty level among children by 5.1 percent. 
However, as the Federal Government reduced taxes and increased 
the EIC for low-income families with children by enacting 
reform legislation in 1986, 1990, and 1993, the impact of taxes 
actually became positive. By 1998, EIC payments to families 
reduced the child poverty rate from 16.5 percent to 14.3 
percent. It seems reasonable to conclude that the effectiveness 
of the EIC in fighting poverty can be attributed to two 
factors--the increasing generosity of EIC policy itself and the 
increase in work by low-income families with children, 
especially families headed by mothers.
    Data on the poverty gap for children are somewhat mixed. 
Data on the pretransfer poverty gap is uniformly positive. 
Despite the fact that the number of children grew by over 9 
million or nearly 15 percent between 1983 and 1998, the poverty 
gap before transfers nonetheless fell from $44 billion to about 
$38 billion, a decline of over 13 percent. Similarly, the 
pretransfer poverty gap per poor child in 1998 reached its 
lowest level since 1979. However, perhaps because there were 
fewer children to remove from poverty, social insurance, means-
tested cash transfers, and means-tested noncash transfers were 
generally less effective in removing children from poverty. As 
shown in the last panel of table H-20, taken together these 
policies reduced the poverty gap by only 50.6 percent in 1998 
as compared with 62.4 percent in 1979, 58.1 percent in 1989, 
58.5 percent in 1995, and 53.7 percent in 1997. The effect of 
the EIC in reducing the poverty gap, however, remained potent; 
in fact, at 6.4 percent it was greater than in any previous 
year. Despite the effectiveness of the EIC, the overall impact 
of government programs reduced the poverty gap less than in any 
previous year except 1983. The major reason for the reduced 
effectiveness of government programs in reducing the poverty 
gap seems to be a decline in the impact of means-tested cash 
benefits. In 1979 these benefits reduced the poverty gap by 
28.8 percent. By contrast, in 1998 they reduced the poverty gap 
by only 16.2 percent. Undoubtedly, the decline in the welfare 
rolls and in cash benefits from the Temporary Assistance for 
Needy Families Program play an important role here.
    Poverty data for persons in units headed by single parents 
is generally consistent with the data for children. The first 
point to emphasize with these data (see the top row of table H-
21), which simply reinforces the conclusion from the data on 
single mothers in


TABLE H-19.--IMPACT OF MARKET INCOME AND SAFETY NET PROGRAMS ON POVERTY; ELDERLY PERSONS, SELECTED YEARS 1979-98
----------------------------------------------------------------------------------------------------------------
                                                                       Year
 Number of elderly and poverty  --------------------------------------------------------------------------------
            measure                1979     1983     1989     1993     1994     1995     1996     1997     1998
----------------------------------------------------------------------------------------------------------------
Total population (in thousands)   24,194   26,313   29,094   30,779   31,267   31,658   31,877   32,082   32,394
Number of poor persons (in
 thousands):
    Cash income before            13,120   13,253   13,853   15,640   16,256   15,810   15,977   15,754   15,604
     transfers.................
    Plus social insurance......    4,202    4,095    3,934    4,270    4,114    3,722    3,905    3,831    3,768
    Plus means-tested cash         3,682    3,625    3,312    3,755    3,663    3,318    3,428    3,376    3,386
     benefits (official
     measure)..................
    Plus means-tested noncash      3,261    3,158    2,793    3,123    3,048    2,839    2,936    2,872    2,861
     benefits..................
    Less Federal taxes             3,276    3,177    2,841    3,159    3,062    2,838    2,943    2,876    2,865
     (including EIC)...........
Poverty rate (in percent):
    Cash income before              54.2     50.4     47.6     50.8     52.0     49.9     50.1     49.1     48.2
     transfers.................
    Plus social insurance......     17.4     15.6     13.5     13.9     13.2     11.8     12.3     11.9     11.6
    Plus means-tested cash          15.2     13.8     11.4     12.2     11.7     10.5     10.8     10.5     10.5
     benefits..................
    Plus means-tested noncash       13.5     12.0      9.6     10.1      9.7      9.0      9.2      9.0      8.8
     benefits..................
    Less Federal taxes              13.5     12.1      9.8     10.3      9.8      9.0      9.2      9.0      8.8
     (including EIC)...........
Number (in thousands) removed
 from poverty due to:
    Social insurance...........    8,918    9,158    9,919   11,370   12,142   12,088   12,072   11,923   11,836
    Means-tested cash benefits.      520      470      622      515      451      404      477      455      382
    Means-tested noncash             421      467      519      632      615      479      492      504      525
     benefits..................
    Federal taxes (including         -15      -19      -48      -36      -14        1       -7       -4       -4
     EIC)......................
                                --------------------------------------------------------------------------------
        Total..................    9,844   10,076   11,012   12,481   13,194   12,972   13,034   12,878   12,739
                                ================================================================================
Percent removed from poverty
 due to:
    Social insurance...........     68.0     69.1     71.6     72.7     74.7     76.5     75.6     75.7     75.9
    Means-tested cash benefits.      4.0      3.5      4.5      3.3      2.8      2.6      3.0      2.9      2.4
    Means-tested noncash             3.2      3.5      3.7      4.0      3.8      3.0      3.1      3.2      3.4
     benefits..................
    Federal taxes (including        -0.1     -0.1     -0.3     -0.2     -0.1      0.0     -0.0     -0.0     -0.0
     EIC)......................
                                --------------------------------------------------------------------------------
        Total..................     75.0     76.0     79.5     79.8     81.2     82.0     81.6     81.7     81.6
                                ================================================================================
Poverty gap (in billions of
 1998 dollars):
    Cash income before              59.0     60.4     62.8     70.6     75.2     73.6     74.5     74.5     72.7
     transfers.................
    Plus social insurance......     10.3     10.0      9.5     10.8     11.0      9.4     10.3     10.0      9.8
    Plus means-tested cash           7.0      6.6      6.3      8.0      8.0      6.8      7.2      7.1      7.3
     benefits (official
     measure)..................
    Plus means-tested noncash        5.8      5.7      5.2      6.7      6.8      5.8      6.2      6.2      6.4
     benefits..................
    Less Federal taxes               5.8      5.7      5.2      6.7      6.8      5.8      6.2      6.2      6.4
     (including EIC)...........
Poverty gap per poor person (in
 1998 dollars):
    Cash income before             4,501    4,557    4,536    4,515    4,628    4,654    4,662    4,732    4,660
     transfers.................
    Plus social insurance......    2,458    2,450    2,422    2,528    2,673    2,529    2,634    2,598   2,6043
    Plus means-tested cash         1,890    1,826    1,905    2,124    2,174    2,063    2,091    2,106    2,148
     benefits (official
     measure)..................
    Plus means-tested noncash      1,790    1,803    1,845    2,149    2,223    2,047    2,123    2,157    2,228
     benefits..................
    Less Federal taxes             1,782    1,803    1,825    2,132    2,216    2,052    2,118    2,154    2,234
     (including EIC)...........
Percent reduction in the
 poverty gap due to:
    Social insurance...........     82.5     83.4     84.8     84.7     85.4     87.2     86.2     86.6     86.5
    Means-tested cash benefits.      5.7      5.7      5.1      4.0      4.0      3.5      4.2      3.8      3.5
    Means-tested noncash             1.9      1.5      1.8      1.8      1.6      1.4      1.3      1.2      1.2
     benefits..................
    Federal taxes (including         0.0     -0.1     -0.1     -0.0     -0.0     -0.0      0.0      0.0     -0.0
     EIC)......................
                                --------------------------------------------------------------------------------
        Total..................     90.1     90.5     91.7     90.5     91.0     92.1     91.6     91.7    91.2
----------------------------------------------------------------------------------------------------------------
Source: Table prepared by the U.S. Department of Health and Human Services and the Congressional Budget Office
  based on Current Population Survey data. Poverty gaps are based on calculations by the U.S. Census Bureau.


    TABLE H-20.--IMPACT OF MARKET INCOME AND SAFETY NET PROGRAMS ON POVERTY; CHILDREN, SELECTED YEARS 1979-98
----------------------------------------------------------------------------------------------------------------
                                                                       Year
 Number of children and poverty --------------------------------------------------------------------------------
            measure                1979     1983     1989     1993     1994     1995     1996     1997     1998
----------------------------------------------------------------------------------------------------------------
Total population (in thousands)   63,375   62,333   65,602   69,292   70,020   70,566   70,650   71,069   71,338
Number of poor children (in
 thousands):
    Cash income before            12,761   16,146   14,954   18,198   17,828   17,098   16,642   16,294   15,365
     transfers.................
    Plus social insurance......   11,364   14,405   13,846   16,685   16,324   15,717   15,426   14,890   14,131
    Plus means-tested cash        10,377   13,911   13,154   15,727   15,289   14,665   14,463   14,113   13,467
     benefits..................
    Plus means-tested noncash      8,421   12,464   11,409   13,874   13,212   12,476   12,576   12,511   11,749
     benefits..................
    Less Federal taxes             8,620   13,293   11,811   13,853   12,613   11,443   11,341   11,080   10,230
     (including EIC)...........
Poverty rate (in percent):
    Cash income before              20.1     25.9     22.8     26.3     25.5     24.2     23.6     22.9     21.5
     transfers.................
    Plus social insurance......     17.9     23.1     21.1     24.1     23.3     22.3     21.8     21.0     19.8
    Plus means-tested cash          16.4     22.3     20.1     22.7     21.8     20.8     20.5     19.9     18.9
     benefits..................
    Plus means-tested noncash       13.3     20.0     17.0     20.0     18.9     17.7     17.8     17.6     16.5
     benefits..................
    Less Federal taxes              13.6     21.3     18.0     20.0     18.0     16.2     16.1     15.6     14.3
     (including EIC)...........
Number (in thousands) removed
 from poverty due to:
    Social insurance...........    1,397    1,741    1,108    1,513    1,504    1,381    1,216    1,404    1,234
    Means-tested cash benefits.      987      494      692      958    1,035    1,052      963      777      664
    Means-tested noncash           1,956    1,447    1,745    1,853    2,077    2,189    1,887    1,602    1,718
     benefits..................
    Federal taxes (including        -199     -829     -402       21      599    1,033    1,235    1,431    1,519
     EIC)......................
                                --------------------------------------------------------------------------------
        Total..................    4,141    2,853    3,143    4,345    5,215    5,655    5,301    5,214    5,135
                                ================================================================================
Percent removed from poverty
 due to:
    Social insurance...........     10.9     10.8      7.4      8.3      8.4      8.1      7.3      8.6      8.0
    Means-tested cash benefits.      7.7      3.1      4.6      5.3      5.8      6.2      5.8      4.8      4.3
    Means-tested noncash            15.3      9.0     11.7     10.2     11.7     12.8     11.3      9.8     11.2
     benefits..................
    Federal taxes (including        -1.6     -5.1     -2.7      0.1      3.4      6.0      7.4      8.8      9.9
     EIC)......................
                                --------------------------------------------------------------------------------
        Total..................     32.5     17.7     21.0     23.9     29.3     33.1     31.9     32.0     33.4
                                ================================================================================
Poverty gap (in billions of
 1998 dollars):
    Cash income before              33.2     44.0     40.3     50.6     48.1     45.1     43.8     42.6     38.2
     transfers.................
    Plus social insurance......    27.81     37.0     35.1     43.7     41.7     39.0     37.9     35.9     32.7
    Plus means-tested cash          18.3     26.5     25.1     31.4     30.2     28.2     28.4     28.2     26.5
     benefits..................
    Plus means-tested noncash       12.5     18.4     16.8     20.9     19.9     18.7     19.1     19.7     18.9
     benefits..................
    Less Federal taxes              12.5     18.9     16.8     20.3     18.3     16.8     16.7     17.4     16.4
     (including EIC)...........
Poverty gap per poor child (in
 1998 dollars) due to:
    Cash income before             2,602    2,725    2,698    2,779    2,696    2,638    2,630    2,613    2,489
     transfers.................
    Plus social insurance......    2,450    2,572    2,532    2,620    2,554    2,482    2,456    2,412    2,312
    Plus means-tested cash         1,763    1,904    1,905    1,999    1,977    1,921    1,965    1,997    1,965
     benefits..................
    Plus means-tested noncash      1,481    1,477    1,472    1,505    1,503    1,497    1,516    1,576    1,605
     benefits..................
    Less Federal taxes             1,447    1,425    1,422    1,468    1,455    1,471    1,476    1,569    1,604
     (including EIC)...........
Percent reduction in the
 poverty gap due to:
    Social insurance...........     16.1     15.8     13.1     13.6     13.3     13.5     13.4     15.7     14.5
    Plus means-tested cash          28.8     24.0     24.8     24.3     23.9     24.0     21.6     18.1     16.2
     benefits..................
    Plus means-tested noncash       17.5     18.4     20.5     20.9     21.6     21.0     21.4     19.9     19.9
     benefits..................
    Federal taxes (including        -0.0     -1.2     -0.0      1.1      3.1      4.1      5.3      5.5      6.4
     EIC)......................
                                --------------------------------------------------------------------------------
        Total..................     62.4     56.9     58.4     59.8     61.8     62.7     61.8     59.2    57.1
----------------------------------------------------------------------------------------------------------------
Source: Table prepared by the U.S. Department of Health and Human Services and the Congressional Budget Office
  based on Current Population Survey data. Poverty gaps are based on calculations by the U.S. Census Bureau.


  TABLE H-21.--IMPACT OF MARKET INCOME AND SAFETY NET PROGRAMS ON POVERTY; PERSONS IN UNITS WITH UNMARRIED HEAD
                                  AND RELATED CHILDREN, SELECTED YEARS 1979-98
----------------------------------------------------------------------------------------------------------------
                                                                       Year
 Number of persons and poverty  --------------------------------------------------------------------------------
            measure                1979     1983     1989     1993     1994     1995     1996     1997     1998
----------------------------------------------------------------------------------------------------------------
Total population (in thousands)   23,547   25,559   29,255   34,611   35,091   36,428   36,515   36,702   36,826
Number of poor persons (in
 thousands):
    Cash income before            11,786   13,751   14,074   17,965   17,971   17,199   16,851   16,757   15,724
     transfers.................
    Plus social insurance         11,568   13,501   13,820   17,509   17,628   16,882   16,589   16,459   15,411
     (other than Social
     Security).................
    Plus Social Security.......   10,645   12,611   13,040   16,570   16,619   16,058   15,706   15,377   14,511
    Plus means-tested cash         9,491   12,063   12,388   15,550   15,401   14,930   14,692   14,463   13,698
     benefits..................
    Plus means-tested noncash      7,115   10,531   10,636   13,705   13,014   12,381   12,682   12,655   11,813
     benefits..................
    Plus EIC and less Federal      7,141   10,800   10,648   13,378   12,257   11,338   11,540   11,103   10,268
     payroll and income taxes..
Poverty rate (in percent):
    Cash income before              50.1     53.8     48.1     51.9     51.2     47.2     46.1     45.7     42.7
     transfers.................
    Plus social insurance           49.1     52.8     47.2     50.6     50.2     46.3     45.4     44.8     41.8
     (other than Social
     Security).................
    Plus Social Security.......     45.2     49.3     44.6     47.9     47.4     44.1     43.0     41.9     39.4
    Plus means-tested cash          40.3     47.2     42.3     44.9     43.9     41.0     40.2     39.4     37.2
     benefits..................
    Plus means-tested noncash       30.2     41.2     36.4     39.6     37.1     34.0     34.7     34.5     32.1
     benefits..................
    Plus EIC and less Federal       30.3     42.3     36.4     38.7     34.9     31.1     31.6     30.3     27.9
     payroll and income taxes..
                                --------------------------------------------------------------------------------
        Total reduction in          19.7     11.5     11.7     13.3     16.3     16.1     14.5     15.4     14.8
         poverty rate..........
                                ================================================================================
Number (in thousands) removed
 from poverty due to:
    Social insurance (other          218      250      254      456      343      317      262      298      313
     than Social Security).....
    Social Security............      923      890      780      939    1,009      824      883    1,082      900
    Means-tested cash benefits.    1,154      548      652    1,020    1,218    1,128    1,014      914      813
    Means-tested noncash           2,376    1,532    1,752    1,845    2,387    2,549    2,010    1,808    1,885
     benefits..................
    EIC and Federal payroll and      -26     -269      -12      327      757    1,043    1,142    1,552    1,545
     income taxes..............
                                --------------------------------------------------------------------------------
        Total..................    4,645    2,951    3,426    4,587    5,714    5,861    5,311    5,654    5,456
                                ================================================================================
Percent removed from poverty
 due to:
    Social insurance (other          1.8      1.8      1.8      2.5      1.9      1.8      1.6      1.8      2.0
     than Social Security).....
    Social Security............      7.8      6.5      5.5      5.2      5.6      4.8      5.2      6.5      5.7
    Means-tested cash benefits.      9.8      4.0      4.6      5.7      6.8      6.6      6.0      5.5      5.2
    Means-tested noncash            20.2     11.1     12.4     10.3     13.3     14.8     11.9     10.8     12.0
     benefits..................
    EIC and Federal payroll and     -0.2     -2.0     -0.1      1.8      4.2      6.1      6.8      9.3      9.8
     income taxes..............
                                --------------------------------------------------------------------------------
        Total..................     39.4     21.5     24.3     25.5     31.8     34.1     31.5     33.7     34.7
                                ================================================================================
Poverty gap (in millions of
 1998 dollars):
    Cash income before            35,907   45,244   44,507   57,506   54,744   49,498   49,760   47,900   42,896
     transfers.................
    Plus social insurance         34,890   43,578   43,546   55,860   53,257   48,317   48,545   46,746   41,715
     (other than Social
     Security).................
    Plus Social Security.......   30,813   39,275   39,506   51,194   48,032   43,683   43,597   41,188   37,195
    Plus means-tested cash        17,780   25,803   27,038   35,132   32,642   30,076   31,179   31,101   28,836
     benefits..................
    Plus means-tested noncash     11,033   16,770   17,223   21,567   19,754   18,404   19,437   20,366   19,314
     benefits..................
    Plus EIC and less Federal     10,954   16,876   17,019   20,929   18,350   16,771   17,333   18,216   17,094
     payroll and income taxes..
Reduction in poverty gap (in
 millions) due to:
    Social insurance (other        1,017    1,666      961    1,646    1,487    1,181    1,215    1,154    1,181
     than Social Security).....
    Social Security............    4,077    4,302    4,040    4,666    5,224    4,634    4,948    5,558    4,520
    Means-tested cash benefits.   13,033   13,472   12,468   16,062   15,390   13,607   12,418   10,087    8,359
    Plus means-tested noncash      6,747    9,034    9,815   13,566   12,888   11,672   11,741   10,735    9,522
     benefits..................
    EIC and Federal payroll and       79     -106      204      637    1,403    1,633    2,105    2,150    2,220
     income taxes..............
                                --------------------------------------------------------------------------------
        Total..................   24,953   28,368   27,488   36,576   36,393   32,727   32,428   29,683   25,802
                                ================================================================================
Percent reduction in the
 poverty gap due to:
    Social insurance (other          2.8      3.7      2.2      2.9      2.7      2.4      2.4      2.4      2.8
     than Social Security).....
    Social Security............     11.4      9.5      9.1      8.1      9.5      9.4      9.9     11.6     10.5
    Means-tested cash benefits.     36.3     29.8     28.0     27.9     28.1     27.5     25.0     21.1     19.5
    Plus means-tested noncash       18.8     20.0     22.1     23.6     23.5     23.6     23.6     22.4     22.2
     benefits..................
    EIC and Federal payroll and      0.2     -0.2      0.5      1.1      2.6      3.3      4.2      4.5      5.2
     income taxes..............
                                --------------------------------------------------------------------------------
        Total..................     69.5     62.7     61.8     63.6     66.5     66.1     65.2     62.0    60.2
----------------------------------------------------------------------------------------------------------------
Note.--Poverty gap dollars for each year adjusted to 1998 dollars.

 Source: Table prepared by the U.S. Department of Health and Human Services and the Congressional Budget Office
  based on Current Population Survey data.

table H-15, is that there has been a very large increase in the 
number of persons in families with unmarried heads. The number 
jumped from 23.5 million in 1979 to 36.8 million in 1998, an 
increase of nearly 60 percent. By contrast, the number of 
persons in married couple families increased from 102.2 million 
to only 102.7 million, an increase of less than 1 percent. 
Thus, the family type with the highest poverty rate has been 
increasing more than 40 times as fast as the family type with 
the lowest poverty rate. These demographic developments make 
progress against poverty somewhat difficult.
    Even so, the pretransfer poverty rate among persons in 
families with an unmarried head reached its lowest level ever 
in 1998 at 42.7 percent. Compared with the 53.8 percent 
pretransfer rate in 1983, that's a drop of over 20 percent. 
Progress against pretransfer poverty among these families has 
also been continuous and rapid during the current economic 
expansion, with a drop of 18 percent from 51.9 percent to 42.7 
percent since 1993. Again, as we saw in the case of children, 
progress against pretransfer poverty has been substantial in 
recent years, in all likelihood due to the increase in work by 
single mothers.
    On the other hand, again as was the case with children, 
progress against poverty as measured by the poverty gap has 
been uneven. Although the pretransfer poverty gap at $42.9 
billion for these families is smaller than at any time since 
1979, and although the gap has fallen 25 percent just since 
1993, means-tested cash and noncash programs have been 
increasingly less effective in reducing the poverty gap. By 
contrast, as with children, Federal tax policy has been 
increasingly more effective at reducing the poverty gap. Even 
so, the combination of the reduced pretransfer poverty gap and 
the increased effectiveness of the EIC in reducing the poverty 
gap failed to outweigh the declining effectiveness of means-
tested cash and noncash transfers in reducing the poverty gap. 
As a result, the reduction in the posttax, posttransfer poverty 
gap for these families was lower than in the past as measured 
either by dollars or percentage reduction.

                               REFERENCES

U.S. Census Bureau. (1986). Money income and poverty status of 
        families and persons in the United States: 1985. 
        Current Population Reports (Series P-60, No. 154). 
        Washington, DC: U.S. Government Printing Office.
U.S. Census Bureau. (1993). Money income of households, 
        families, and persons in the United States: 1991. 
        Current Population Reports (Series P-60, No. 180). 
        Washington, DC: U.S. Government Printing Office.
U.S. Census Bureau. (1996 and various years). Income, poverty, 
        and valuation of noncash benefits, 1994. Current 
        Population Reports (Series P-60, No. 189). Washington, 
        DC: U.S. Government Printing Office. [Several 
        publications from the P-60 Series were used in 
        preparing the tables for this chapter. These include 
        numbers 124, 140, 145, 149, 154, 157, 161, 166, 168, 
        174, and 180.]
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