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Social Security Keeps 20 Million Americans Out of Poverty:
A State-By-State Analysis

Social Security benefits play a vital role in reducing poverty. Without Social Security, according to the latest available Census data (for 2008), 19.8 million more Americans would be poor. Although most of those kept out of poverty by Social Security are elderly, nearly a third are under age 65, including 1.1 million children. (See Table 1.) Depending on their design, reductions in Social Security benefits could significantly increase poverty, particularly among the elderly.

Social Security Lifts 13 Million Elderly Americans Out of Poverty

Almost 90 percent of people aged 65 and older receive some of their family income from Social Security. [1] Without Social Security benefits, 45.2 percent of elderly Americans would have incomes below the poverty line, all else being equal. With Social Security benefits, only 9.7 percent are poor. Some 13.2 million elderly Americans are lifted out of poverty by Social Security.

Social Security reduces elderly poverty dramatically in every state in the nation, as shown in Figure 1 and Table 2. Without Social Security, the poverty rate for those aged 65 and over would exceed 40 percent in 42 states. With Social Security, the elderly poverty rate in the large majority of states is less than 10 percent. Social Security lifts 1.1 million elderly people out of poverty in California and Florida, almost 900,000 in Texas, and 800,000 in New York.

Social Security Lifts More Than 1 Million Children Out of Poverty

Social Security is important for children and their families as well as for the elderly. About 6 million children under age 18 (8 percent of all U.S. children) lived in families that received income from Social Security in 2008, according to Census data. Over 3 million children received their own benefits as dependents of retired, disabled, or deceased workers. Others lived with parents or relatives who received Social Security benefits. In all, 1.1 million children are lifted out of poverty by Social Security.

Social Security records show that 3.2 million children under age 18 qualified for Social Security payments themselves in December 2009. (See Table 3.) Of these, 1.3 million were the survivor of a deceased worker. Another 1.6 million received payments because their parent had a severe disability. And 301,000 children under 18 received payments because their parent or, in some cases, grandparent was retired. [2]

Technical Note

This analysis uses the official definition of poverty used by the Census Bureau. In determining poverty status, the Census Bureau compares a family’s cash income before taxes with poverty thresholds that vary by the size and age of the family. The poverty thresholds in 2008 were $10,326 for an elderly individual, $13,014 for an elderly couple, and $22,025 for an average family of four. To calculate the anti-poverty effects of Social Security, we determined each family’s poverty status twice — first excluding and then including the family’s Social Security benefits.

Our analysis uses data from the Census Bureau’s Current Population Survey (CPS), the survey that is used to produce official poverty estimates. [3] Each March the CPS collects information on personal income, health coverage, and other social and economic characteristics for the previous year. The national estimates reported here are for 2008. The state-by-state estimates are based on a three-year average (for 2006, 2007, and 2008) to improve the reliability of the results.

One critic of estimates such as these argues that they “do nothing to answer the question of what would have happened if Social Security had not existed.”[4] Indeed, this analysis does not take into account other changes that would occur in the absence of Social Security. If Social Security did not exist, most elderly individuals likely would have saved somewhat more and worked somewhat longer.

Other studies confirm, however, that Social Security has made a very large contribution to reducing poverty, and that cutting Social Security benefits could substantially increase poverty among the elderly.[5]

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