The Poverty Gap is the annual income necessary to move an individual or family out of poverty. In the United States, the Poverty Gap is equal to the shortfall between the Poverty Threshold and the income of the individual or family. For example, a family of four with an annual household income of $20,000 is $9,950 below the Poverty Threshold of $29,950. Therefore the family is considered to be “in poverty” and $9,950 is the Poverty Gap.
The Total U.S. Poverty Gap Compared to Welfare Spending
The U.S. Poverty gap for all people in poverty in the United States totaled $279 billion for the year 2022. It is calculated using Census Bureau poverty statistics as described below. Therefore, we could have ended poverty in America for $279 billion. Yet in the same year, the federal government spent $623 billion on 13 welfare programs, not including Medicaid (health care for low-income Americans). Therefore, we spent $344 billion more than was necessary to end poverty in America.
Was poverty eliminated from the high welfare spending? No. Poverty in America has hovered between 11% – 15% of the population since it was first measured in the 1960s. Here are the numbers on spending and the poverty rate over the last 50 years and the reasons the high spending does not eliminate poverty.
Why Does Welfare Spending Twice Above the Poverty Gap Not Eliminate Poverty?
First of all, is the goal of welfare to eliminate poverty? Or is the purpose of welfare merely to make lives more comfortable without helping to lift individuals and families out of poverty? Here is a full analysis of the purpose of welfare.
There is a second reason that welfare does not eliminate poverty, even though spending is twice as high as the Poverty Gap. It is because the system is not designed to help promote people to achieve their financial independence. The welfare system comprises 13 uncoordinated programs, poorly targeted and ineffective. Here are the issues surrounding the complex welfare system of the federal government.
The welfare system misses the promotion of personal responsibility. Here is a good site addressing the difficult means of helping the poor grow in personal skills to transcend poverty – HowToHelpThePoor.com
Calculation of the Poverty Gap
The Census Bureau reports that in 2022 there were 7,400,000 families and 12,790,000 single individuals in poverty in America. This means their income was below the Poverty Threshold. The Bureau reports how many of these families were 50% below the Poverty Threshold, how many were between 50% to 75% of the threshold, and how many were above 75% of the Threshold. Assuming the families below 50% of the threshold had no income at all results in the application of 100% of the Poverty Threshold to these families to calculate the Poverty Gap for these families. This calculation yields a high calculation because some families will have some income. The Census Bureau does not report actual income from these families, so the figure is the maximum Poverty Gap for these families.
One-half of the Poverty Threshold was applied to families with income between 50% to 75% of the Poverty Threshold. 25% of the Poverty Threshold was applied to families with inocme greater than 75% of the Poverty Threshold. In each case this calculation represents the maximum Poverty Gap for these families. Adding up these figures gives a total Poverty Gap for all families in poverty in America. This same methodology was followed for single individuals in poverty. A spreadsheet of all calculations and references to Census Bureau reports is included below.
Total Welfare Spending Compared to Poverty Gap
State and local governments also spend welfare dollars to help Americans in poverty. Over the past seven years, this spending has averaged greater than $50 billion per year. Private charities, such as food banks, also target aid to low-income Americans. This state, local and private aid widens the comparison of spending to the Poverty Gap.