Poverty rises in Wisconsin - and Walker policies will keep it rising

While Governor Walker does his taxpayer-funded campaign stops around the state to try to convince Wisconsinites things are great in the state, we keep seeing reality tell us otherwise. Even with minor job growth in 2016, UW-Madison released a report showing that poverty increased in Wisconsin at the same time.

The 10th annual Wisconsin Poverty Report was released Friday by the university’s Institute for Research on Poverty.

It found that, by three measures, poverty rates in Wisconsin went up in 2016.

According to “Wisconsin Poverty Measure” developed by the institute, the state’s poverty rate rose to 10.8 percent in 2016 from 9.7 percent in 2015. That measure also found child poverty up in the state to 12 percent in 2016, from 10 percent in 2015. UW-Madison released a report last week saying tht poverty increased in Wisconsin at the same time.

The UW-Madison report constantly compares the numbers of the Official Poverty Measure (OPM), which is put out by the US Census Bureau and widely reported, to go along with their Wisconsin Poverty Measure (WPM). The WPM ends up lowering the poverty rate from the Official rate, but both measures rose by around 1% in 2016. Poverty also rose by the "market-based" measure, which only looks at limited types of income.



The UW-Madison researchers explain the difference between OPM and WPM accordingly.

While the OPM considers only pre-tax cash income as resources, the WPM incorporates a more comprehensive range of resources. These include federal refundable tax credits (the Earned Income Tax Credit or EITC, and the Additional Child Tax Credit or ACTC), and noncash benefits such as SNAP and housing subsidies. The WPM also adjusts for household needs, such as out-of-pocket medical costs and work-related expenses that include child care and transportation costs. Consistent with our goal of measuring poverty in Wisconsin, we include Wisconsin-specific public resources, such as the Wisconsin Homestead Tax Credit and the Wisconsin state EITC, in addition to the federal EITC.

To consider need, our poverty thresholds are based on food, clothing, shelter, and other expenses, which are set at roughly the 33rd percentile of national expenses for a two-child, two-adult family, with adjustments for prices in Wisconsin. This approach differs from the OPM, which is based on three times the cost of a minimally adequate diet in the 1960s, with adjustments for inflation, but with no adjustments for price differences across states. To estimate the poverty threshold specific to Wisconsin, we begin with the current experimental federal poverty threshold published by the Census Bureau (which includes tax credits, food stamps, and other federal assistance. In 2016, the national threshold was $29,380. Our baseline poverty threshold (i.e., the threshold for a two-child, two-adult family) for Wisconsin in 2016 was $26,511, $968 more than the 2015 level of $25,543. The Wisconsin line is lower than the rest of the nation because the cost of living in Wisconsin is about 8 percent lower than for the nation as a whole. For comparison, the official U.S. poverty line for a two-child, two-adult family in 2016 in the United States (including Wisconsin) was $24,339. Hence, the WPM poverty line, which reflects national purchases and consumption of necessities among low-income families as well as Wisconsin’s overall lower living costs, exceeds the OPM by almost $2,200. If Wisconsin families at these lower income levels are not doing as well as other similar families in the United States, the higher poverty line ought to help explain some of the increase in poverty that we see in this report…

Much like with the overall poverty rate, child poverty is also lower under the Wisconsin Poverty Measure compared to the official rate. But it rose by significant levels in 2016 under both measures.



So why did we see an increase in Wisconsin poverty in 2016, according to UW-Madison?

...Changes in market income, which essentially captures changes in employment and earnings, no longer drove down child poverty in 2016. Families with children appear to have gotten some boost from the recovering economy in 2015, but for 2016, earnings gains slowed and market-income poverty was flat for families with kids. While families with children continued to benefit from some of the public program increases under the American Recovery and Reinvestment Act of 2009 (ARRA), the effect of benefits on child poverty was less in 2016 than in 2015.

At the start of the recession, the WPM showed different trends than the two cash-based measures overall (Figure1) and for families with children (Figure 5). Between 2009 and 2010, earnings fell sharply, but SNAP benefits rose as more families qualified for assistance, and as SNAP, the federal EITC, and other refundable tax benefits were expanded under the ARRA. Because the state EITC is tied to a percentage of the federal EITC, the state EITC also increased. However, the growth in the state EITC was offset by state action (by Walker and WisGOP) to reduce the state EITC, effective in tax year 2011 and continuing. As these programs expanded, child poverty as measured by the WPM declined, despite the worsening economy and the accompanying increase in market-income poverty in the aftermath of the recession (see Figure 5). As the economy expanded, the improving labor market translated into lower WPM child poverty as earnings replaced income support programs in 2015. But these effects from earnings gains decreased in 2016, while the effects of SNAP on child poverty fell, as seen below in Figure 8.

The UW researchers said that a main reason why Wisconsin’s poverty rate rose is because of reductions in benefits and tax credits that give their largest benefits to low-income working families.

Among benefit programs examined in this analysis, SNAP benefits had the greatest impact on reducing overall poverty in 2016, reducing the percentage of people in poverty by approximately 1.4 percentage points (Figure 7). The program’s anti-poverty impact has fallen over the past few years, especially from 2015 to 2016 as SNAP benefits rapidly contracted in Wisconsin (Figure 3 above). Tax provisions such as the EITC had the second largest antipoverty effect, and here the effects were lower in 2016 than in 2014 or 2015. The Making Work Pay tax credit (which was in effect in 2009 and 2010) and the 2 percentage point reduction in payroll taxes (which was in effect in 2011 and 2012) increased the antipoverty effect of tax provisions in earlier years. Neither the Making Work Pay tax credit nor the cut in payroll taxes have been in effect since 2013, and as a result, the net effect of taxes and tax credits was less likely to lift the working poor out of poverty in 2016 than in earlier years.

Both taxes and SNAP had a larger impact on reducing child poverty than overall poverty. The larger impact of these programs on children than on overall poverty can be seen in 2016, where tax-related provisions reduced child poverty by 4.4 percentage points and SNAP benefits reduced child poverty by 3.2 percentage points as compared to 1.3 and 1.4 points for overall poverty (see Figure 8 and compare to Figure 7). As noted above, various tax and SNAP provisions have changed since the end of the recession especially following the end of ARRA expansions, and in 2016 SNAP’s impact on child poverty was at the lowest level since 2009.

By comparison, the UW researchers say that food stamps and tax provisions do little to change elderly poverty rates, but what does help the elderly is housing programs to offset those expenses.

On the down side, the UW researchers say the elderly are more susceptible to be driven into poverty by out-of-pocket expenses for medical care, while children are more susceptible these days to an offshoot of more people (and especially parents) working – more of a need for child care, whose costs keep going up above pay increases for parents and other guardians. Combine that with increased medical expenses taking a bigger bite out of people’s take-home pay, and that helps explain how you can get more poverty despite more employment.

And the recent direction of Scott Walker and other Republicans isn't helping. Walker wants to impose barriers to receiving SNAP benefits and make recipients pee in a cup in order to get help from the program that does the most to reduce child poverty in Wisconsin. The GOPs in Congress also want to cut SNAP benefits in the latest Farm Bill, with a "cliff" that has little to no phasing out of those benefits, basically causing a back-door disincentive to work in a low-wage job.

On the flip side, Walker is doing nothing to defray the increasing cost of child care, which is a large reason behind the 2016 increase in Wisconsin poverty. Nor has Walker done much to defray rising out-of-pocket costs for medical care. The Kochs' errand boy has sabotaged the ACA for several years and refused to expand Medicaid for low-income individuals, and even tried to cut the popular Senior Care program that helps to pay for prescription drugs in 2015, before pulling it back after public outcry.

Lastly, neither Walker nor WisGOP have done lifted a finger to raise the minimum wage above its paltry $7.25 an hour level in Wisconsin, and have actively repressed wages through measures like Act 10, right-to-work, and repealing prevailing wage. You want to know why "earning gains slowed" in the state? Because Walker and WisGOP have gone out of their way to try to keep wages as low as possible to please their WMC puppetmasters.

And given that Wisconsin dropped from 7th to 15th last year when it came to its residents having health insurance, I'm not counting on this poverty figure being much better when UW releases it this time next year. Hopefully by that point, we'll have a new governor and new legislators who actually care about putting in policies that are effective in reducing poverty, instead of trying to make things tougher for the most vulnerable of Wisconsinites.