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Image: Rural Economy & Population

Transfer Payments

Government transfer payments comprise a sizeable share of personal income for both nonmetro and metro communities. Transfer payments to individuals accounted for 23.9 percent of total nonmetro personal income and 15.7 percent of metro personal income in 2012. Of the $2.3 trillion in Federal, State, and local government personal transfer payments to individuals in 2012, $391 billion went to nonmetro residents and $1.9 trillion went to metro residents. Per capita, in 2012 nonmetro residents received more government transfers ($8,460) than metro residents ($7,110).

Unemployment insurance compensation and Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) payments increased sharply with the beginning of the 2007/09 recession. Transfer payments in these categories had the largest increases during the recession and recovery period. Nonmetro unemployment insurance compensation payments increased by 157.8 percent and SNAP rose by 93.2 percent between 2007 and 2011. Between 2011 and 2012, however, nonmetro unemployment compensation fell by 25.5 percent, while SNAP benefit payments continued to increase by 3.5 percent. Unemployment insurance compensation declined because of lower unemployment rates and the elimination of long term unemployment benefits. SNAP expenditures continued to increase during this period, but may begin to fall in future years as cuts specified in the Agricultural Act of 2014 take effect.

Since 1979, nonmetro per capita transfer payments have risen faster than payments in metro areas. Most of this increase comes from the rising cost of government programs that provide medical benefits, such as Medicare and Medicaid. Because nonmetro areas have an older population and a higher proportion of persons with disabilities than metro areas, nonmetro areas receive more transfer payments for retirement and medical costs.

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Medical benefits are the single largest transfer payment category in both nonmetro and metro areas. In 1979, medical benefits accounted for 20.6 percent of all nonmetro transfer payments (the second largest category) and by 2012 these had risen to 44.0 percent (the largest category) of all nonmetro transfer payments. Similarly, in metro areas, medical benefits increased from 24.6 percent of all transfer payments in 1979 to 43.9 percent of payments in 2012. Overall, between 1979 and 2012, nonmetro transfer payments for medical benefits increased 547.8 percent, compared with 489.4 percent in metro areas. Some of the increase in transfer payments for medical benefits can be attributed to legislation expanding health insurance to children in working families through Medicaid and the Children's Health Insurance Program (CHIP). However, the rising cost of health care, which has far outpaced the overall rate of inflation, is a major source of this increase. See the ERS report Health Status and Health Care Access for the Rural and Farm Population (EIB-57, August 2009) for more information.

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Transfer payments for retirement and disability insurance are also increasing, but in contrast to medical benefits, have been declining as a proportion of total transfer payments. In 1979, nonmetro retirement and disability payments accounted for 54.5 percent of total transfers; by 2012, this percentage had fallen to 36.7 percent. Nonmetro retirement and disability transfer payments increased by 103.8 percent over this period. Metro retirement and disability payments fell from 54.5 percent of transfers to individuals in 1979 to 36.7 percent in 2012, but increased by 139.4 percent over this period. Barring changes in program eligibility and support, per capita transfer payments in rural America are likely to increase as a result of the gradual aging in place of the rural population. For more information see the Population and Migration Topic Page.

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The counties with the highest percentage of total income from government transfer payments in 2012 were concentrated in Appalachia and the Mississippi Delta. The top three nonmetro counties with the highest percentage of total income from government transfer payments were located in eastern coal fields of Kentucky (Owsley County with 52.1 percent, Wolfe County with 51.6 percent, and McCreary County with 49.9 percent). These counties have high levels of disability payments, along with very high unemployment and poverty rates. Between 2006 and 2012, the largest percentage point increases in transfer payments as a percent of total personal income were in Ontonagon County Michigan (10.7 points to 41.9 percent), Madison County Arkansas (9.9 points to 31.7 percent), and Storey County Nevada (9.9 points to 19.7 percent). In contrast, the counties with the largest percentage point declines were in North Dakota—Mountrail County (-15.1 points to 8.0 percent), Wells County (-14.4 points to 12.9 percent), and Emmons County (-13.6 points to 15.3 percent).

What is included in government transfer payments to individuals?

The data used in the transfer payment map is from the Bureau of Economic Analysis "Personal Current Transfer Receipts" data file. The following is a list of the major transfer payment categories and their components.

  • Retirement and disability insurance benefits: Consist of old-age, survivors, and disability (OASDI) benefits; railroad retirement and disability benefits; Federal and State workers' compensation; temporary disability benefits; black lung benefits; and Pension Benefit Guaranty benefits.
  • Medical benefits (includes Medicare benefits): These benefits are Federal Government payments made through intermediaries to beneficiaries for the care provided to individuals under the Medicare program.
    • Public assistance medical care: These medical benefits are received by low-income individuals. These payments consist mainly of the payments made through intermediaries to the vendors for care provided to individuals under the federally assisted, State-administered Medicaid program and Children's Health Insurance Program (CHIP) and under the general assistance medical programs of State and local governments.
    • Military medical insurance benefits: These benefits are vendor payments made under the TriCare Management Program, formerly called the Civilian Health and Medical Plan of the Uniformed Services program, for the medical care of dependents of active duty military personnel and of retired military personnel and their dependents at nonmilitary medical facilities.
  • Income maintenance benefits: Includes supplemental security income payments, family assistance, food stamp payments, and other assistance payments. 
  • Unemployment insurance compensation: Includes State unemployment compensation, unemployment compensation of Federal civilians, unemployment compensation of railroad employees, and other unemployment compensation.
  • Veterans' benefits: Includes veterans' pension and disability benefits, veterans' readjustment benefits, veterans' life insurance benefits, and other assistance to veterans.
  • Education and training assistance: Consists of the following Federal fellowships: payments to outstanding science students who receive National Science Foundation (NSF) grants, the subsistence payments to the cadets at the six State maritime academies, and the payments for all other Federal fellowships.
    • Higher education student assistance: These benefits consist of the Federal payments, called Pell Grants, for an undergraduate education for students with low incomes. Job Corps payments- these benefits are primarily the allowances for living expenses received by economically disadvantaged individuals who are between the ages of 16 and 21 and who are enrolled in the designated vocational and educational training programs. These benefits also include the adjustment allowances received by trainees upon the successful completion of their training.
    • Interest payments on guaranteed student loans: These payments are made by the Department of Education to commercial lending institutions on behalf of the individuals who receive low-interest, deferred-payment loans from these institutions in order to pay the expenses of higher education.
    • State educational assistance: These benefits consist of educational assistance provided by States to individuals for tuition and other educational expenses not including loans. The national and State estimates are based on data for State government expenditures for "other education assistance and subsidies" from the Census Bureau's annual State Government Finances. 
  • Other transfer receipts of individuals from governments: Other transfer receipts of individuals from governments consist largely of Bureau of Indian Affairs payments, education exchange payments, Alaska Permanent Fund dividend payments, compensation of survivors of public safety officers, compensation of victims of crime, disaster relief payments, compensation for Japanese internment, and other special payments to individuals.

Note that government pensions and farm payment are not included in transfer payments to individuals.
Source: Bureau of Economic Analysis.

Last updated: Wednesday, October 15, 2014

For more information contact: Timothy Parker