America has a social safety net for all those who live here. Its purpose is to try to ensure that essential needs are met; so much of it is targeted at basic living conditions, including poverty and health care. The federal government has played a major role in developing the American welfare state since the Great Depression.
Americans Living Below Poverty Line
In 2018, about 12% of American families lived below the poverty line. While the proportion of American families living in poverty consistently declined between 2015 and 2018, in 2019, it reached a level lower than it was in 2007, just before the Great Recession. Still, this amounts to 38 million people living in poverty, with children accounting for about 20% of that number.
Families are considered poor based on their total household income, so thresholds for poverty vary depending on how many people live in a household.
Most poverty in the United States is circumstantial and temporary. When someone in a family loses a job, or gets injured, or experiences a catastrophic illness or some other critical event, it can trigger an economic and food security crisis for a family. Events such as these can have cascading effects that compound on one another.
Distribution among Demographics
Poverty is not equally distributed across demographic categories.
Women are more likely to live in poverty than men. Among men, the poverty rate is 10.6%, and among women, it’s about 13%. The poverty rate for single people is much higher than it is for married people. And for someone who is single and a parent, the rate of poverty is higher than for married people or for people without children. There are big gender differences, too. Single mothers are twice as likely to live in poverty as single fathers. Among single dads, the poverty rate is 12.7%, but for single moms, it’s 25%.
The biggest disparities, however, are among racial categories. Whites and Asians tend to have the lowest rates of poverty in America—around 10% each. Among Hispanics, the poverty rate in 2018 was 17.6%. For African Americans, it was almost 21%. But the category most impoverished is Native Americans, where in 2018, one in four Native people lived in poverty.
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There are a number of government programs aimed at helping families to escape poverty.
The primary program to do this is called Temporary Assistance for Needy Families, or TANF. It’s more commonly referred to as welfare.
Welfare is funded by the federal government, administered by state governments, and the only way to qualify for it is for families to demonstrate financial need.
Since TANF is administered at the state level, there is great variance from state to state in the ways that the program is set up. The federal government uses basic formulas to determine how much TANF money states get and then states have some discretion over how to use the money to provide the most benefit to the neediest people.
The other major federal government program designed to address poverty is Social Security. In 2019, there were about 64 million recipients of Social Security.
Created in 1935 by President Franklin Delano Roosevelt, it was designed to alleviate poverty among the elderly and those who are unable to work and remains to this day.
Most Social Security recipients are over the age of 65 and receive benefits based on eligibility from years of work and contributions to the program. However, about 15% of recipients collect benefits under the Social Security Disability Insurance program because they cannot work due to disabilities and some receive benefits because they are a surviving spouse of someone who was a beneficiary. So, Social Security is an income security program, a life insurance program, and a financial assistance program for seniors.
Social Security remains the federal government’s largest program by far. It’s also fair to say that it’s been a pretty successful government program. The rate of poverty among the elderly dropped significantly after Social Security was implemented.
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Social Security: A Pay-as-you-go Program
Social Security is not a savings program. It’s a pay-as-you-go program. Today’s workers who contribute to Social Security are paying for the benefits received by current retirees.
Social Security is financed entirely by payroll taxes. Because Social Security benefits are tied to the amount of money one contributes to the program over the course of their working life, it’s true that a wealthy person will also receive more in benefits from Social Security upon their retirement, compared to a non-wealthy person. But it’s also the case that the Social Security benefits that a non-wealthy person receives is a significantly higher proportion of their working-life earnings, compared to a wealthy person.
For example, someone who earned a $30,000 per year salary during their life might receive around $15,000 a year in Social Security benefits, representing half their previous income. But someone who earned $120,000 in salary might receive around $30,000 a year in Social Security benefits, which represents a quarter of their previous income.
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How Is the Social Security Program Designed?
The Social Security program is designed to provide the most benefit to lower income workers, those who typically receive much more in benefits during their retirement years than they contributed during their working years.
Moreover, Social Security benefits are adjusted for inflation, so as prices naturally rise during the retirement years, the government benefits are also designed to increase so one can maintain the same standard of living.
Social Security is a huge program and it’s only projected to grow. It’s not means-tested program, like TANF, meaning people don’t qualify for Social Security benefits based on their income level. Rather, Social Security is a contributory program, meaning that if one contributed to Social Security through payroll taxes during their working years, they are eligible to receive benefits upon their retirement.
Common Questions about Welfare and Social Security Programs
TANF is Temporary Assistance for Needy Families. It is more commonly referred to as Welfare.
Social Security is an income security program, a life insurance program, and a financial assistance program for seniors.
Social Security is financed entirely by payroll taxes. Social Security benefits are tied to the amount of money one contributes to the program over the course of their working life.