New tool reveals impact of gov’t programs, taxes on island’s poverty
The Instituto del Desarrollo de la Juventud developed the Puerto Rico Poverty Measure to help inform public policy.
The Instituto del Desarrollo de la Juventud (IDJ) unveiled the Puerto Rico Poverty Measure (PRPM), a tool that highlights the impact of government programs and taxes on poverty. It also provides insights into how changes in public policies could improve living conditions.
Until now, Puerto Rico only had the federal government’s Official Poverty Measure (OPM) available, which did not reflect the local context or include non-monetary benefits. For this reason, the IDJ created a new measure that integrates both these benefits and necessary expenses.
“We’re at a unique moment developing solutions that really respond to the needs of families and the island,” said IDJ Executive Director Brayan Rosa.
“This new measure not only allows us to understand in depth the challenges faced by families with children and young people but also paves the way to design and implement more effective public policies aligned with the needs of the population,” he said.
The PRPM considers non-cash benefits such as the Nutrition Assistance Program (NAP) and housing subsidies, as well as tax incentives such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC). This approach is relevant in Puerto Rico, where a large part of the population resorts to government programs to supplement their income.
“This tool is useful for assessing the effectiveness of government programs and their impact on poverty. It also allows us to analyze how possible changes in these programs would affect the economic well-being of families,” said María E. Enchautegui-Román, director of Research and Knowledge at the IDJ.
“For example, it could be analyzed how the poverty rate would change if the PAN were transformed into SNAP or how a local tax credit for dependent children would reduce poverty,” she said.
The PRPM also shows how tax, childcare and employment costs, along with low wages, impact the resources available of families in Puerto Rico.
The PRPM reveals that:
- Non-cash benefits represent 24% of the total resources of households in Puerto Rico. That is, for every $100, $24 comes from non-cash benefits. Among families living in poverty, these benefits represent 53% of their resources.
- The program with the greatest impact on poverty is NAP. This benefit reduces poverty in Puerto Rico by 10 percentage points, according to the PRPM.
- The Earned Income Tax Credit follows as the policy with the greatest impact. When this program is added to the core resources, the poverty rate decreases by 3 percentage points. Among children, the EITC reduces poverty by 5 percentage points.
- The child poverty rate is 32%, 26 percentage points lower than the OPM.
- Overall, according to the PRPM, 25% of the total population in Puerto Rico lives in poverty, compared to 42%, according to the OPM.
