The official poverty rate fell by 1.3 percentage points from 2014 to 2015, as annual earnings and household incomes rose significantly for the first time since 2007. Since 2010, the U.S. Census Bureau has also released an alternative to its official poverty measure known as the Supplemental Poverty Measure (SPM). As shown in Figure A, the SPM has consistently indicated that poverty in America is more extensive than the official poverty measure reports. The good news is that the SPM data do show a similar decline in poverty last year to that reported in the official poverty measure. This year’s SPM release reported that in 2015, 45.7 million people were in poverty—roughly 14.3 percent of Americans. Under the “official” poverty measure, 43.1 million people were in poverty, or 13.5 percent of all Americans.

The SPM data also show a lower rate of child poverty than the official statistics, primarily as a result of the SPM’s inclusion of noncash income from government assistance in its calculations. In 2015, the official child poverty rate was 19.7 percent—a decline of 1.4 percentage points from 2014. Under the SPM, the child poverty rate was 16.1 percent, 0.6 percentage points lower than in 2014 although the Census Bureau reports that this reduction in the SPM child poverty rate was not statistically significant.

Because the SPM data incorporates noncash sources of income, it allows us to see the tremendous impact that government programs have in reducing poverty—shown in Figure B. Social Security is, by far, the most effective anti-poverty program in the United States. Without Social Security, an additional 26.6 million, or 8.4 percent of Americans, would fall below the SPM poverty threshold. Refundable tax credits, such as the Earned Income Tax Credit, kept 9.2 million, or 2.9 percent of Americans, above the SPM poverty threshold. Other programs, such as SNAP (commonly known as “food stamps”), Supplemental Security Income, housing subsidies, and unemployment insurance, also have a significant impact on the ability of families to stay afloat.

Government assistance programs were particularly important in keeping children out of poverty. As shown in Figure B, of the 9.2 million that refundable tax credit lifted out of poverty, 4.8 million were children. Similarly, of the 4.6 million people that SNAP kept out of poverty, 2 million were children. Even Social Security has an impact on the welfare of children, keeping 1.6 million kids out of poverty.

The SPM data provide a much more sophisticated measure of poverty in America and show the enormous impact that government programs make in the fight against poverty. In the absence of stronger wage growth for low and middle-income workers, safety-net programs play an increasingly important role in helping struggling families afford their basic needs.