How Weak Safety Net Policies Exacerbate Regional and Racial Inequality

The economic crisis brought on by the COVID-19 pandemic made painfully clear the depth and pervasiveness of economic insecurity and inequality in the United States. Importantly, it demonstrated that strong and responsive anti-poverty policies are crucial to preventing and alleviating hardships and maintaining a functioning economy, especially for people with low incomes.

America’s complex system of public benefits and supports—also known as the social safety net—has proven to be effective in reducing poverty and preventing the intergenerational transmission of poverty, but it has weakened substantially over the past several decades.¹ While most safety net programs are federally funded, states have considerable autonomy over program design, rules, and benefit levels, which has resulted in uneven and inconsistent levels of protection based solely on where people live. Moreover, there is considerable evidence that racial animus in the form of both community violence and discriminatory government policies has led to lower investment in public services, contributing to persistent racial inequity and a weakened support system for low-income individuals and families.²

A new analysis from the Center for American Progress compares state-level differences in government policy choices, demonstrating that U.S. regions with larger populations of color have weaker safety nets and anti-poverty policies, and that regions with weaker safety nets have higher rates of hardship and worse economic outcomes overall. In examining the largest and most notable state-run programs and policies—including the earned income tax credit (EITC), minimum wage, unionization and other worker protections, unemployment insurance (UI), and Temporary Assistance for Needy Families (TANF)—the authors found that the South, West, and Midwest have consistently weaker safety nets than the Northeast, while the South and West both had significantly weaker economies than the Northeast in terms of poverty, food security, employment, and median income.

Regional boundaries are imperfect and can mask important differences within regions and states; for example, there are thriving economies at the local level in the South and pockets of economic stagnation and inequality within relatively more prosperous regions. Nevertheless, the data show that many state and local governments are underserving and failing to protect their lowest-income residents, which not only increases hardship for families but also harms states’ overall economic growth.

These regional trends, unsurprisingly, exacerbate economic and racial inequities at the national level. Workers of color generally have higher unemployment rates while tending to reside in states with relatively weaker UI systems and other safety net programs. The U.S. Black unemployment rate has historically held at roughly double the rate for white Americans,³ and Hispanic or Latino Americans have experienced unemployment rates that are typically about 40 to 80 percent higher than the white unemployment rate.⁴ Economic downturns tend to hit communities of color especially hard—a problem made worse when governments largely base their policy decisions on the overall unemployment rate, which tends to be substantially lower and quicker to recover than unemployment rates for people of color.⁵

Evidence shows that safety net programs that boost earnings for low-income families improve immediate and long-term health, educational, and career outcomes for adults and children.⁶ Because some state and local governments will, unfortunately, continue to deprive their residents of critical protections and supports, the federal government should establish positive minimum standards that elevate benefits and coverage nationwide to truly meet the needs of underserved Americans everywhere.

While not a comprehensive list of steps to bolster the safety net and reduce regional inequity, this report presents the following state and federal policy recommendations:

• Increase benefit levels, particularly in the form of direct cash assistance.
• Expand eligibility and outreach for safety net programs and ease onerous administrative burdens so that all individuals and families who need the aid receive it.
• Raise asset limits and earned income disregards to offset potential benefit cliffs.
• Properly invest in administrative improvements to expand capacity and avoid huge backlogs such as those seen at UI agencies during the pandemic.
• Streamline application and navigation processes so recipients applying for or enrolling in one safety net program are automatically enrolled in other programs they would be eligible for.
• Raise the minimum wage and eliminate subminimum wages.
• Support unionization efforts and worker bargaining power by passing laws such as the Protecting the Right to Organize (PRO) Act.
• Expand worker protections with laws such as paid family and medical leave, paid time off, fair scheduling practices, just cause employment, and the banning of forced arbitration and noncompete clauses.
• Implement or expand refundable state-level supplements to the EITC, CTC, and child and dependent care tax credit (CDCTC), and make the federal expansions to these programs under the American Rescue Plan permanent.

The massive economic disruption associated with the pandemic laid bare that the U.S. safety net has provided inadequate protection for far too many low-income individuals and families.⁷ As the country faces a long recovery from the economic and public health crisis, policymakers must take the opportunity to strengthen assistance programs across every state and region to ensure that no one is consigned to poverty simply because of where they live.

To assess how policies and economic outcomes vary across states, this analysis draws on a range of publicly available data sources for the years 2000, 2010, and 2019. Here, state-level analysis uncovers a strong association between relatively weaker safety net and worker protections and diminished economic outcomes. Regions with a higher proportion of Black residents generally maintain weaker supports, meaning that safety net programs and worker protections could function as important mechanisms for promoting racial economic equity if properly administered and supported. A map showing the regions and divisions of the United States as defined by the U.S. Census Bureau is below.

Figure 1

The state-level analysis revealed several key regional takeaways and trends:

• States in the South have, on average, the lowest TANF and UI benefits of any region, and those benefits are received by fewer would-be eligible adults and families than in other regions.
• Southern states are also the least likely to provide a refundable EITC supplement or a minimum wage above the federal level of $7.25.
• States in the Midwest and West have significantly weaker safety nets than the Northeast, on average, across several dimensions.
• States in the South, Midwest, and West are much more likely to enact policies that discourage or prohibit labor union activity.
• The South has a relatively higher Black population than the Northeast, while the West has a relatively higher Hispanic population. These demographic trends leave many families of color with relatively weaker safety net protections.
• States in the South have higher poverty rates, more food insecurity, smaller employment-to-population ratios, and lower median household incomes, even after adjusting for regional differences in prices and purchasing power.
• Regional boundaries and trends can mask important differences within regions and states. For example, many Southern cities and metropolitan areas boast thriving economies, while there are well-documented pockets of economic stagnation and inequality within U.S. regions and states outside the South.

The interactive below illustrates the relationships among demographics, policy, and economic outcomes. Users can select from several of the safety net programs, anti-poverty policies, or economic indicators analyzed in this report to view a scatterplot for the year 2019 of where each state stands on a given metric relative to other states. States are also color-coded based on their region—Northeast, Midwest, South, and West—and users can hover over each dot to see the specific state and the level of support it offers. For a complete list of results from the regressions run for this analysis, please see the summary tables in the Appendix.

All the data collected, including several additional variables, are available for download here.

Regional and state comparisons

Compared with states in the Northeast, where supplements to federal policies and programs tend to be stronger and more common, state governments in the South were 42 percentage points less likely to set a minimum wage above the federal level across the three years evaluated. The federal minimum wage of $7.25 yields substantially lower purchasing power today relative to prior iterations of the policy;⁸ indeed, many prominent economists have called for a higher federal minimum wage.⁹ States in the Midwest were 31 percentage points less likely to offer minimum wages above the federal level as well. State governments in the South and West were approximately 40 and 39 percentage points, respectively, less likely to offer refundable EITCs for the years evaluated compared with states in the Northeast.

Similar regional patterns emerge for unemployment insurance. Average weekly UI benefits were $72 lower in the South, $30 lower in the Midwest, and $25 lower in the West than those provided in the Northeast across the years evaluated. Those benefits replaced 3.5 percentage points less of a person’s previous wages in the South than in the Northeast, while there was not a significant difference in the Midwest and West. Meanwhile, the UI recipiency rate—the measure of how many people actually receive UI among the eligible population—was 17, 11, and 10 percentage points lower in the South, Midwest, and West, respectively, than in the Northeast for the years evaluated.

In assessing TANF, the maximum benefit amount available to an eligible three-person household was, on average, $297 less in the South, $144 less in the Midwest, and $82 less in the West compared with the Northeast across the years evaluated. A similar trend emerged upon examining the TANF-to-poverty ratio—a relative measure of safety net effectiveness, similar to the UI recipiency rate, tracking how many families receive TANF cash assistance relative to the number of poor families residing in the state who should be eligible given the program’s stated goals and aims. According to this analysis, for every 100 families in poverty, state governments provided cash assistance to 27, 18, and 16 fewer residents in the South, Midwest, and West, respectively, for the years evaluated relative to the Northeast.

These same patterns arose when analyzing a key indicator of governmental support for worker power: “right-to-work” laws. State governments in the South were 73 percent more likely to have enacted right-to-work laws across the years evaluated; relative to states in the Northeast, they promote policy conditions less amenable to workers that seek to gain bargaining power through unionization. State governments in the Midwest were 50 percent more likely than states in the Northeast to have implemented right-to-work laws, and those in the West were 38 percent more likely to have done so. This came through quite clearly in unionization rates across the four regions. For all workers, states in the South had unionization rates 8 percentage points lower than states in the Northeast, while states in the Midwest and West had fewer workers represented by a union, by 4 and 2 percentage points, respectively.

As stated earlier in this report, regions with more people of color, particularly Black residents, report weaker safety nets and fewer protections for low-income workers; these workers are, in turn, disproportionately Black and brown, although weaker protections harm workers regardless of race or ethnicity. Across the three years evaluated, the Black population in the South was 15 percentage points higher than in the Northeast. While the West had a Black population rate that was 4 percentage points lower than in the Northeast, the West’s Hispanic population rate was 8 percentage points higher. Meanwhile, the white population rate was 14 and 13 percentage points lower in the South and West, respectively, compared with the Northeast.

Across a range of metrics, states in the South—the region with the weakest safety net across all categories described—reported higher levels of economic hardship and weaker economic output relative to states elsewhere across the years evaluated. Southern states, on average, reported higher poverty rates by a margin of 4.5 percentage points relative to the Northeast. Food insecurity was 3 percentage points higher in the South; median household income was more than $4,500 lower, even after adjusting for differences in prices and purchasing power across states; and the prime age employment-to-population (EPOP) ratio was relatively lower by 3.5 percentage points. Relative to the Northeast, the West similarly had a higher poverty rate, by 1.9 percentage points; greater food insecurity, by 2.4 percentage points; and a lower prime-age EPOP, by 2.3 percentage points.

As noted above, average regional differences in public policies and economic outcomes, while informative, should be interpreted cautiously. Some states throughout the South, West, and Midwest have strong safety nets and economic performance relative to the rest of their region and the country at large. This is also true of several Southern and Midwestern metropolitan areas—well-known hubs of innovation and economic dynamism that are growing, in part, as a result of in-migration from the Northeast and Western regions of the country.

There are a range of factors that contribute to individual and state-level economic growth. This analysis demonstrates a strong association between safety net support for low-income individuals and families and stronger economic security indicators overall. And, given that a disproportionate number of people of color live at or near poverty while residing in states with weaker safety nets, inequities in safety net policy potentially exacerbate racial economic inequities in the nation as a whole.

Efforts to reduce and eliminate poverty will benefit from a combination of federally and state-funded financial assistance, worker protections, and insurance against significant adverse events such as health scares and job loss. The American Families Plan recently introduced by President Joe Biden as part of his “Build Back Better” agenda takes a significant step in this direction, potentially cutting child poverty in half through expanded tax credits, child care subsidies, and food assistance,¹⁰ and the American Jobs Plan would boost unionization efforts, invest in caregiving jobs, and improve worker protections and enforcement.¹¹ In addition, the Biden administration recently instituted the largest increase in benefits for the Supplemental Nutrition Assistance Program (SNAP)—also known as food stamps—in the program’s history, updating the model used to set benefit levels to, in President Biden’s words, “reflect the true cost of a basic healthy diet.”¹²

Evidence shows that safety net programs that boost earnings for low-income families improve both immediate and long-term health, educational, and career outcomes for adults and children in those families.¹³ Food security, nutrition, and stress levels are all improved by safety net supports.¹⁴ Adults who received SNAP as children exhibited better health outcomes in adulthood across a range of measures including obesity, diabetes, and high blood pressure.¹⁵ Early childhood Medicaid recipients also see lower mortality and disability rates and better economic outcomes as adults.¹⁶ The EITC has been linked to a range of improved health and socioeconomic outcomes, including higher birth weight and fewer low birth weight infants; higher test scores, educational attainment, and future earnings;¹⁷ and lower rates of suicide and recidivism, at least among women.¹⁸

Meanwhile, the decline of cash assistance since the late 1990s was linked to increased food insecurity and child homelessness.¹⁹ Longer poverty spells reduce the likelihood of a person escaping poverty,²⁰ and a child experiencing at least one year of poverty leaves them significantly more likely to live in poverty as an adult.²¹ Additionally, safety net programs that increased employment among participants but without any net increase in total income, inclusive of safety net benefits, have been shown to have little impact on educational outcomes for children residing in these households; in contrast, programs that increased income overall resulted in better school performance. Thus, the safety net’s effectiveness could be improved by focusing on income support and liquidity alongside direct connection to high-quality, well-paying job opportunities.²²

The evidence presented above clearly demonstrates that liquidity and economic security are associated with improved individual socioeconomic outcomes and that financial stability is associated with lower poverty and broader economic strength. That being the case, there are a range of actions that states and the federal government can take to support the economic well-being of their residents, many of whom will experience spells of poverty or near-poverty over the course of their working lives:²³

• Increase benefit levels, particularly in the form of direct cash assistance.
• Expand eligibility and outreach for safety net programs and ease onerous administrative burdens so that all individuals and families who need the aid receive it.
• Raise asset limits and earned income disregards to offset potential benefit cliffs.
• Properly invest in administrative improvements to expand capacity and avoid huge backlogs such as those seen at UI agencies during the pandemic.
• Streamline application and navigation processes so recipients applying for or enrolling in one safety net program are automatically enrolled in other programs they would be eligible for.
• Raise the minimum wage and eliminate subminimum wages.
• Support unionization efforts and worker bargaining power by passing laws such as the Protecting the Right to Organize (PRO) Act.
• Expand worker protections with laws such as paid family and medical leave, paid time off, fair scheduling practices, just cause employment, and the banning of forced arbitration and noncompete clauses.
• Implement or expand refundable state-level supplements to the EITC, CTC, and child and dependent care tax credit (CDCTC), and make the federal expansions to these programs under the American Rescue Plan permanent.

Actions at the state level

The regional disparities in the strength of safety nets and worker protections should be corrected by the states currently providing far less assistance to low-income residents. Higher benefit levels in programs such as TANF and UI could provide better support for an individual’s or family’s basic needs. States should prioritize aid in the form of direct cash assistance, while broadening who can receive benefits and ensuring that those who are eligible actually receive aid and can navigate administrative burdens. Additionally, asset limits and earned income disregards in programs such as TANF should be raised to allow beneficiaries to build their savings and begin earning employment income without facing steep cutoffs in benefits that can trap them in poverty.

Aside from increasing direct cash assistance, there are several other actions states could take to improve their safety nets. Properly investing in administrative improvements in programs such as UI that have struggled to meet increased need during the pandemic would greatly help ensure that individuals in need can successfully navigate the social welfare system to receive benefits. Administrative burdens—including onerous paperwork and documentation requirements that individuals and families with lower incomes navigate in many states to receive safety net benefits—can exclude eligible individuals and families. These burdens should be scrutinized and removed or significantly reduced wherever possible.²⁴ States should also invest in streamlining application and navigation processes across safety net programs so that applicants for one program are quickly made aware of and can more easily apply to other benefit programs they qualify for. And more generally, states should invest more in spreading awareness of safety net benefits so that all individuals who would be eligible for help do apply.

Raising the minimum wage to a livable level and eliminating subminimum wages for tipped, disabled, and temporary teenage workers is crucial for guaranteeing incomes for all workers that better reflect everyday costs, including housing, transportation, and food expenses.²⁵ Recent studies suggest that increases to the minimum wage may have little if any negative effects on employment while significantly improving the economic well-being of individuals working at or near minimum wages.²⁶ Despite this evidence, in 20 states, the minimum wage is still equal to the federal level of $7.25, while at least 12 cities and counties across Alabama, Iowa, Florida, Kentucky, Missouri, and Wisconsin have passed higher local minimum wages only for them to be struck down by state legislators. In total, 44 states have a preemption law stopping localities from implementing stronger worker protections such as fair scheduling, paid leave, and gig economy regulations.²⁷

States can also support worker bargaining power, which has been linked to increased earnings and economic well-being and reduced inequality across race, ethnicity, and education for both workers in the union and workers elsewhere in the sector.²⁸ This means not just repealing right-to-work laws but also supporting unionization efforts more broadly, including for workers not covered under the National Labor Relations Act; implementing new and stronger worker protections; and better resourcing state labor departments to increase enforcement of penalties for labor violations. Examples of important worker protections that have been successfully adopted in several states and cities²⁹ include paid family and medical leave, paid time off, fair scheduling practices, just cause employment, and the banning of forced arbitration and noncompete clauses.

Actions at the federal level

Unfortunately, regional inequities and inadequate low-income supports are likely to persist in the absence of federally established acceptable minimum standards and baselines to improve the efficacy of anti-poverty assistance. Perhaps the most glaring example from recent years is the Medicaid expansion included in the Affordable Care Act (ACA). To date, 12 state governments still refuse to expand Medicaid, despite massive incentives to do so in the ACA and the recently passed American Rescue Plan, and despite the fact that the program is very popular among residents in these states.³⁰ Many of the major poverty-reducing programs are administered at the state level but funded federally, and they are already subject to some federal standards in terms of rules and filing and certain spending requirements.³¹ The federal government can set minimum standards for programs such as TANF and UI for benefit levels as well as the share of low-income households served by these programs. The Unemployment Insurance Modernization Act introduced in April 2021 by Sens. Ron Wyden (D-OR) and Michael Bennet (D-CO) would set these kinds of strong universal standards for UI; a comprehensive report on reforming UI recently released by several progressive organizations, including the Center for American Progress, also details a similar approach to strengthening and improving the program.³²

Meanwhile, the Raise the Wage Act would lift the minimum wage to $15 per hour by 2025 and eliminate all subminimum wages by 2027.³³ The PRO Act would, among other things, create new federal rules that support collective bargaining and break down significant barriers to unionization efforts, repeal right-to-work laws, and prevent companies from misclassifying workers as independent contractors.³⁴ The American Rescue Plan’s expansion of the federal EITC—specifically the broadening of the eligible age range and increase of the maximum benefit by almost $1,000 for low-income childless workers—as well as of the CTC and CDCTC should be made permanent as well.³⁵ The federal government should also strongly consider adopting some of the other worker protections listed above, including ending forced arbitration; banning noncompete clauses; and implementing fair scheduling practices, just cause employment, paid family and medical leave, and paid time off.

Given the dynamic nature of the economy—wherein inequality translates to uneven individual gains, with some individuals and families struggling to connect with higher-paying job opportunities even amid economic expansions—a robust safety net system assists vulnerable populations as they weather financial and health emergencies. Future downturns do not have to be inevitable or have such dire consequences if strong protections automatically stabilize families in the event of individual or macro-level insecurity. To contrast this point, 25 states planned to cut expanded UI benefits for roughly 4 million still-unemployed workers, including ending benefits for 2.3 million people a couple of months before they were set to expire federally. These shortsighted actions would potentially trap millions of individuals, more than 46 percent of whom are people of color, in longer spells of poverty. By extension, these policies dampen the economic recovery at the state and national level, depriving residents and businesses alike of substantial federal resources.³⁶

While the pandemic created a temporary shock for many households, it pushed other individuals and families teetering on the edge of financial stability into poverty. Many Americans cycle in and out of poverty throughout their lives and would benefit from safety net assistance to smooth out spells of economic insecurity.³⁷ Strong federal minimum standards will ensure that people do not receive less help than they need simply because of where they live and will focus assistance during both economic contractions and expansions.

Advocates and economists have put forth forceful moral arguments surrounding poverty alleviation, but there are also strong economic and efficiency arguments for government investments that boost earnings and strengthen the economic security of individuals and families with low, volatile incomes.

U.S. residents in every town, city, and state should benefit from a stronger, more uniform set of government policies and assistance programs. These benefits should be responsive to their needs, with strong protections for workers and all low-income people.

Alexandra Cawthorne Gaines is the former vice president of the Poverty to Prosperity Program at the Center for American Progress and is currently the executive director for global public policy at the JP Morgan Chase PolicyCenter.

Bradley Hardy is an associate professor of public policy at Georgetown University.

Justin Schweitzer is a policy analyst for the Poverty to Prosperity Program at the Center.

The authors would like to thank Arohi Pathak, Lily Roberts, Karla Walter, Caius Z. Willingham, Marina Zhavoronkova, Lorena Roque, and Mia Ives-Rublee for their review and notes helping to shape this report. Special thanks to Areeba Haider and Kyle Ross for fact-checking the sources and data, respectively.

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