The Poverty Reduction of Social Security and Means-Tested Transfers

59 Pages Posted: 7 May 2018 Last revised: 18 Aug 2021

See all articles by Bruce D. Meyer

Bruce D. Meyer

University of Chicago - Harris School of Public Policy; National Bureau of Economic Research (NBER)

Derek Wu

University of Chicago - Harris School of Public Policy

Date Written: May 2018

Abstract

Many studies examine the anti-poverty effects of social insurance and means-tested transfers, relying solely on survey data with substantial errors. We improve on past work by linking administrative data from Social Security and five large means-tested transfers (SSI, SNAP, Public Assistance, the EITC, and housing assistance) to 2008-2013 Survey of Income and Program Participation data. Using the linked data, we find that Social Security cuts the poverty rate by a third – more than twice the combined effect of the five means-tested transfers. Among means-tested transfers, the EITC and SNAP are most effective. All programs except for the EITC sharply reduce deep poverty (below 50% of the poverty line), while the impact of the EITC is more pronounced at 150% of the poverty line. For the elderly, Social Security single-handedly slashes poverty by 75%, more than 20 times the combined effect of the means-tested transfers. While single parent families benefit more from the EITC, SNAP, and housing assistance, they are still relatively underserved by the safety net, with the six programs together reducing their poverty rate by only 38%. SSI, Public Assistance, and housing assistance have the highest share of benefits going to the pre-transfer poor, while the EITC has the lowest. Finally, the survey data alone provide fairly accurate estimates for the overall population at the poverty line, although they understate the effects of Social Security, SNAP, and Public Assistance. However, there are more striking differences at other income cutoffs and for specific family types. For example, the survey data yield 1) effects of SNAP and Public Assistance on near poverty that are two-thirds and one-half what the administrative data generate and 2) poverty reduction effects of SSI, Social Security, and Public Assistance that are 34-44% of what the administrative data produce for single parent families.

Suggested Citation

Meyer, Bruce D. and Wu, Derek, The Poverty Reduction of Social Security and Means-Tested Transfers (May 2018). NBER Working Paper No. w24567, Available at SSRN: https://ssrn.com/abstract=3174499

Bruce D. Meyer (Contact Author)

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States
(773) 702-2712 (Phone)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Derek Wu

University of Chicago - Harris School of Public Policy ( email )

1155 East 60th Street
Chicago, IL 60637
United States

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