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Treasury Notes

 The Economic Security of American Households

By: Karen Dynan
1/18/2017

Issue Brief Four: The Distribution and Evolution of the Social Safety Net and Social Insurance Benefits from 1990 to 2014​

Today, the Office of Economic Policy at the Treasury Department released the fourth in a series of briefs exploring the economic security of American households. This brief  focuses on the distribution of benefits from the social safety net and social insurance programs and how that distribution has changed since 1990.

The social safety net is largely defined as those programs that help protect individuals and households from negative economic shocks. As a result, eligibility for the social safety net programs is generally restricted to those whose incomes fall below certain threshold amounts and whose assets do not exceed certain amounts. While there are many programs that aim to protect individuals against negative economic shocks, in this brief, we focus on the following programs: Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), Medicaid, Supplemental Security Income (SSI), and the Earned Income Tax Credit (EITC).   

Social insurance provides individuals with protection against economic risks, with benefits linked to certain triggers. Social insurance is provided to all individuals regardless of their income or wealth, although the benefit amounts may be tied to past work experience, income, or wealth. Social Security (retirement, survivor, and disability), Medicare, and Unemployment Insurance are the most well-known social insurance programs.

Over the past 25 years, there have been significant changes in the provision and distribution of benefits from safety net and social insurance programs. Some of these changes have been designed to reduce the work disincentives inherent in many programs, while other changes have expanded eligibility for benefits to individuals above the very bottom end of the income distribution. The past 25 years have also seen important changes in demographics and labor force participation patterns. Together, these changes have important implications for which individuals and households are eligible to receive benefits, the distribution of benefits by income, how much in benefits households receive, and the labor force participation of eligible individuals.

During the period from 1990 to 2014, among non-elderly households, the poorest households, households with children under the age of 18, and households with a disabled individual received the largest average benefits from the social safety net and social insurance programs.  

Elderly households and households with a disabled individual have experienced relatively little change in the distribution of benefits since 1990, but non-elderly non-disabled households with children under the age of 18 have experienced large changes in the distribution of benefits. These changes reflect the fact that the receipt of benefits for these households has become increasingly tied to their ability to find employment. As a result, non-disabled households with children just above the very bottom of the income distribution – in the second, third, and fourth deciles – have seen the largest growth in the average total benefits (see the figure below). While tying the receipt of benefits to employment reduces the disincentive effects of these programs on willingness to work, it may also reduce the ability of the safety net to respond to adverse macroeconomic conditions.  In particular, during periods of elevated unemployment, the safety net may be less effective in preventing individuals and households from falling into poverty. This limitation should be considered when designing the discretionary policy response to future macroeconomic shocks.


While the social safety net and social insurance programs have historically provided benefits to households with children and disabled households, non-elderly non-disabled households without children under age 18 have traditionally received few benefits. This continues to be true such that, across the income distribution, non-disabled households without children receive far less from the social safety net and social insurance programs than any other group (see the figure below). As a result, in the event of a negative income shock, there exists only a limited social safety net to prevent these households from falling into poverty. One reason that non-disabled households without children are less likely to receive benefits as income increases is that fewer of the social safety net and social insurance programs are available to households in this group. For example, the EITC provides material benefits to households with children in the bottom third of the income distribution, while the EITC provides very little benefit to non-disabled households without children. Moreover, non-disabled households without children have less access to cash welfare and SNAP.


Overall, though, the social safety and social insurance programs provide critical support to vulnerable American households. Moreover, according to the most comprehensive measures of poverty currently available, poverty in the United States would be significantly higher in the absence of these programs. In addition, these programs have contributed to a material reduction in the incidence of poverty since the late 1960s, when many of the social safety net programs were created. 

Karen Dynan is the Assistant Secretary of Economic Policy at the Department of the Treasury.

Posted in:  Economic Policy
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