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Transfer Payments

Government transfer payments comprise a large share of personal income for both nonmetro and metro residents.  Transfer payments to individuals accounted for 24.8 percent of total nonmetro personal income and 16.3 percent of metro personal income, in 2011. Of the $2.2 trillion in Federal, State, and local government personal transfer payments to individuals in 2011, $421 billion went to nonmetro residents and $1.8 trillion went to metro residents. Per capita, nonmetro residents received more government transfers than metro residents, $8,236 vs. $7,022, in 2011. 

Unemployment insurance compensation and Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program) payments have increased sharply since the beginning of the recession in 2007 (see the ERS topic on SNAP). Between 2007 and 2011, nonmetro unemployment compensation payments increased by 162.8 percent (in 2011 dollars), compared with 207.0 percent in metro areas. Nonmetro SNAP payments jumped by 100.4 percent in the same period, while metro payments increased by 121.1 percent. Since 2010 however, transfer payments have fallen. This is primarily due to a decline in unemployment insurance compensation, which has fallen 25 percent in both metro and nonmetro areas, as the economy has recovered and benefits have expired.

Since 1978, 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. 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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Medical benefits are the single largest transfer payment category in both nonmetro and metro areas.  In 1978, medical benefits accounted for 18.9 percent of all nonmetro transfer payments (the second largest category) and by 2011 these had risen to 41.7 percent (the largest category) of all nonmetro transfer payments. Similarly, in metro areas, medical benefits increased from 22.7 percent of all transfer payments in 1978 to 42.1 percent of payments in 2011.  Overall, between 1978 and 2011, nonmetro transfer payments for medical benefits increased 581.5 percent, compared with 498.9 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.

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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 1978, nonmetro retirement and disability payments accounted for 51.7 percent of total transfers; by 2011, this percentage had fallen to 34.8 percent. Nonmetro retirement and disability transfer payments increased by 107.9 percent over this period. Metro retirement and disability payments fell from 46.1 percent of total transfers in 1978 to 31.8 percent in 2011, but increased by 122.0 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 aging of the baby boom population, many of whom are expected to move to rural areas as they retire. For more information see Baby Boom Migration Tilts Towards Rural America (Amber Waves, September 2009).

The counties with the highest percentage of total income from government transfer payments in 2011 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 54.5 percent, Wolfe County and McCreary County both with 52.8 percent). These counties have high levels of disability payments, along with very high unemployment and poverty rates.

Last updated: Friday, November 30, 2012

For more information contact: Timothy Parker

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