In addition to showing sharp growth in income and earnings in 2015, new data from the U.S. Census Bureau released last month also showed a significant reduction in poverty, both in Minnesota and the nation as a whole. With the improvements shown in the new data, Minnesota now ranks among the bottom three states in the nation in terms of its poverty rate. The “poverty rate” refers to the number of people living below the poverty level as a percentage of the total population.
Based on three year averages (2013 to 2015) from the Current Population Survey (CPS), the national poverty rate is 14.5 percent, while Minnesota’s poverty rate is 9.1 percent. During this period, Minnesota and Vermont are tied with second lowest poverty rate in the nation. Only New Hampshire has a lower rate of poverty.
The balance of this article will focus on poverty rates from the American Community Survey (ACS). Unlike the CPS, single year ACS poverty rate estimates for 2015 are currently available for every U.S. state. These single year estimates will allow for an analysis of year to year changes in the poverty rate in Minnesota relative to the rest of the nation.
Based on ACS data, the national poverty rate fell by 0.8 percent from 2014 to 2015, from 15.5 percent to 14.7 percent. Meanwhile, Minnesota’s poverty rate fell by 1.3 percent, from 11.5 percent to 10.2 percent. Minnesota has the third lowest poverty rate among the fifty states based on ACS data. The greater decline in the poverty rate in Minnesota relative to the rest of the nation from 2014 to 2015 is real (i.e., not a statistical anomaly), insofar as the difference in the rate of decline exceeds the margin of error in these estimates.
The following chart shows the change in the U.S. and Minnesota poverty rates since the beginning of the Great Recession in 2007 through 2015. From 2007 to the Great Recession peak in 2011, the U.S. poverty rate increased by 2.9 percent, while Minnesota rate increased by 2.4 percent. From the 2011 peak to 2015, the U.S. poverty rate has declined by 1.2 percent, while Minnesota’s rate has fallen by 1.7 percent. Minnesota’s poverty rate is now within 0.7 percent of the pre-Great Recession level set in 2007, while U.S. poverty rate is still 1.7 percent above the 2007 level. Based on these numbers, Minnesota has clearly outperformed the rest of the nation in terms of restricting the rate of growth in poverty during the recession and lowering poverty during the subsequent recovery.
Minnesota’s success in controlling poverty relative to the rest of the nation from 2007 to 2015 is noteworthy, given that Minnesota’s poverty rate was already significantly below the national average in 2007. States with low poverty rates generally experience smaller reductions in poverty over time, since it is more difficult to reduce poverty if the poverty rate is already low. Among the fifty states, Minnesota’s poverty rate improved from the seventh lowest in 2007 to the third lowest in 2015.
Poverty among most of the twelve Midwestern states (Iowa, Illinois, Indiana, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin) was below the national average in 2015. However, Minnesota’s poverty rate was low even in comparison to its relatively low poverty neighbors. Among Midwestern states, only North Dakota had a poverty rate (11.0 percent) that was within one percent of Minnesota’s 10.2 percent level.
While the 2015 decline in poverty was welcome news, more work still needs to be done, as the rate of poverty still exceeds pre-Great Recession levels, both nationally and in Minnesota. The next article in this series will explore the significant role that government programs have played in reducing the rate of poverty.