Chapter 12 Poverty, Welfare, and Women Poverty in the U.S. Welfare programs incentives reform...
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Transcript of Chapter 12 Poverty, Welfare, and Women Poverty in the U.S. Welfare programs incentives reform...
Chapter 12 Chapter 12 Poverty, Welfare, and WomenPoverty, Welfare, and WomenChapter 12 Chapter 12 Poverty, Welfare, and WomenPoverty, Welfare, and Women
• Poverty in the U.S.
• Welfare programs incentives reform
• EITC
• Poverty in the U.S.
• Welfare programs incentives reform
• EITC
Measuring povertyMeasuring povertyMeasuring povertyMeasuring poverty
• Bureau of the Census
• 12.1% population is “poor” 2003 official poverty rate
• where does that come from?
• Bureau of the Census
• 12.1% population is “poor” 2003 official poverty rate
• where does that come from?
Calculating the poverty rateCalculating the poverty rateCalculating the poverty rateCalculating the poverty rate
• compare HH money income to poverty threshold
• poverty threshold cost nutritionally adequate diet for
HH
x 3 $14,824 for adult w/ 2 children (2003)
• compare HH money income to poverty threshold
• poverty threshold cost nutritionally adequate diet for
HH
x 3 $14,824 for adult w/ 2 children (2003)
• money income earned income, interest income + cash benefits before taxes does not include noncash benefits
• food, housing, medical care
• poverty rate is sensitive to the income measure
• money income earned income, interest income + cash benefits before taxes does not include noncash benefits
• food, housing, medical care
• poverty rate is sensitive to the income measure
criticismscriticismscriticismscriticisms
• poverty measure overstates problem money income does not include
non-cash benefits
• poverty measure understates problem HH should only spend 20-25% of
budget on food
• poverty measure overstates problem money income does not include
non-cash benefits
• poverty measure understates problem HH should only spend 20-25% of
budget on food
poverty variespoverty variespoverty variespoverty varies
• household type
• education
• race
• sex
• age
• state
• household type
• education
• race
• sex
• age
• state
26.5%
17.8%
11.1%7.9%
3.5% 3.2%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
< HS HS diploma College degree
Poverty Rates by Education (age 25+), 2001
Women Men
by state, 2002by state, 2002by state, 2002by state, 2002
• New Hampshire 5.8%
• New York 14%
• New Jersey 7.9%
• Pennsylvania 9.5%
• Mississippi 18.4%
• New Hampshire 5.8%
• New York 14%
• New Jersey 7.9%
• Pennsylvania 9.5%
• Mississippi 18.4%
feminization of povertyfeminization of povertyfeminization of povertyfeminization of poverty
• high poverty rate among female-headed HH (28%)
• rising number of female-headed HH over past 30 years
• over 50% of poor families are female-headed HH
• high poverty rate among female-headed HH (28%)
• rising number of female-headed HH over past 30 years
• over 50% of poor families are female-headed HH
child poverty, 2004child poverty, 2004child poverty, 2004child poverty, 2004
• % of people < 18 living in poverty 17.2% (all) 29.4% (Hispanic) 33.2% (Black)
• % of people < 18 living in poverty 17.2% (all) 29.4% (Hispanic) 33.2% (Black)
Why are women more likely to be Why are women more likely to be poor?poor?Why are women more likely to be Why are women more likely to be poor?poor?
• more single women have custody of children
• women, on average, earn less mothers, on average, earn less
• alimony, child support is spotty
• women live longer
• more single women have custody of children
• women, on average, earn less mothers, on average, earn less
• alimony, child support is spotty
• women live longer
Why are people poor?Why are people poor?Why are people poor?Why are people poor?
• lack of education, skills spotty work history low wages
• adverse events—divorce, job loss, disability
• bad attitudes? small % of those in poverty are their for
a long time
• lack of education, skills spotty work history low wages
• adverse events—divorce, job loss, disability
• bad attitudes? small % of those in poverty are their for
a long time
• Do programs to help the poor actually encourage poverty?
• Do programs to help the poor actually encourage poverty?
What is welfare?What is welfare?What is welfare?What is welfare?
• “means-tested” assistance
• several different programs
• federally and state funded administered by states states get wide latitude
• “means-tested” assistance
• several different programs
• federally and state funded administered by states states get wide latitude
• housing assistance (HUD) rent vouchers subsidized housing housing renovation home heating
• food assistance food stamps (dept. of Agriculture) WIC school lunch program
• housing assistance (HUD) rent vouchers subsidized housing housing renovation home heating
• food assistance food stamps (dept. of Agriculture) WIC school lunch program
• medical care Medicaid state subsidized health insurance
• childcare subsidies
• cash assistance AFDC/TANF SSI
• medical care Medicaid state subsidized health insurance
• childcare subsidies
• cash assistance AFDC/TANF SSI
• unemployment compensation is NOT welfare have to qualify
--work history funded through payroll taxes
• unemployment compensation is NOT welfare have to qualify
--work history funded through payroll taxes
Cost of welfareCost of welfareCost of welfareCost of welfare
• 2001 $82 billion total federal budget = $1.85 trillion 4.5% of the federal budget
• 2001 $82 billion total federal budget = $1.85 trillion 4.5% of the federal budget
Welfare and workWelfare and workWelfare and workWelfare and work
• prior to 1996, no time limit on benefits benefits cut (earnings penalty)
when recipients work
• prior to 1996, no time limit on benefits benefits cut (earnings penalty)
when recipients work
Welfare and work incentivesWelfare and work incentivesWelfare and work incentivesWelfare and work incentives
• welfare is nonearned income income effect
• earnings penalty makes working costly substitution effect
• welfare is nonearned income income effect
• earnings penalty makes working costly substitution effect
recall our time allocation modelrecall our time allocation modelrecall our time allocation modelrecall our time allocation model
• decision to work depends on MVT from working
• welfare lowers MVT of work earnings penalty lowers effective
wage welfare acts as nonearned income
• decision to work depends on MVT from working
• welfare lowers MVT of work earnings penalty lowers effective
wage welfare acts as nonearned income
• with a lower MVT for work, cut back on work to boost overall
utility allocate more time to leisure,
housework
• with a lower MVT for work, cut back on work to boost overall
utility allocate more time to leisure,
housework
evidenceevidenceevidenceevidence
• studies show that AFDC reduces labor supply of its recipients
• studies show that AFDC reduces labor supply of its recipients
Welfare ReformWelfare ReformWelfare ReformWelfare Reform
• many states experimented with reforms in late 1980s – early 1990s
• Federal reform 1996
• many states experimented with reforms in late 1980s – early 1990s
• Federal reform 1996
1996 Welfare Reform1996 Welfare Reform1996 Welfare Reform1996 Welfare Reform
• AFDC replaced by TANF block grants to states to use as
they see fit not a legal entitlement time limits
• 5 years total
• after 2 years, work requirements
• AFDC replaced by TANF block grants to states to use as
they see fit not a legal entitlement time limits
• 5 years total
• after 2 years, work requirements
• limits on benefits for noncitizens
• focus on family formation discourage unwed/teenage
motherhood family caps child support enforcement programs that encourage marriage
• limits on benefits for noncitizens
• focus on family formation discourage unwed/teenage
motherhood family caps child support enforcement programs that encourage marriage
EvidenceEvidenceEvidenceEvidence
• huge TANF caseload decline 1996-1999 4.4 million to 2.1 million success of reforms? and/or rapid economic growth
• huge TANF caseload decline 1996-1999 4.4 million to 2.1 million success of reforms? and/or rapid economic growth
• studies 1/3 of decline due to reforms 1/5 of decline due to economy
• studies 1/3 of decline due to reforms 1/5 of decline due to economy
• impact on marriage state evidence suggests that work
requirements reduce marriage• women more self-sufficient,
• women have less time for relationships
• impact on marriage state evidence suggests that work
requirements reduce marriage• women more self-sufficient,
• women have less time for relationships
EITCEITCEITCEITC
• Earned Income Tax Credit started 1975 expanded 1990s
• EITC is like a negative tax refundable tax credit to low-
income families• up to about $4000/yr.
• Earned Income Tax Credit started 1975 expanded 1990s
• EITC is like a negative tax refundable tax credit to low-
income families• up to about $4000/yr.
EITC vs. welfareEITC vs. welfareEITC vs. welfareEITC vs. welfare
• family must have earnings
• married & single parents eligible
• structure rewards works greater political support alternative to minimum wage
• family must have earnings
• married & single parents eligible
• structure rewards works greater political support alternative to minimum wage
Impact of EITCImpact of EITCImpact of EITCImpact of EITC
• increased LFP among single mothers
• but decreases LFP among married mothers in families close to cut-off point loss of EITC makes work too costly
• increased LFP among single mothers
• but decreases LFP among married mothers in families close to cut-off point loss of EITC makes work too costly