1、Chapter 14: Poverty and Income Support Policies,“The federal government declared a war on poverty, and poverty won” Ronald Reagan, Former President of the United States, State of the Union Message, 1988“There was never a war on poverty. Maybe there was a skirmish on poverty.” Andrew Cuomo, Governor
2、of New York, former U.S. Secretary of Housing and Urban Development,Views of Poverty,Schiller (2004, pp. 4-7) offers three alternative views of the causes of poverty. The flawed character view blames poverty on the poors lack of motivation or skills. The restricted opportunity view blames poverty on
3、 societys barriers to opportunity. According to this view the poor are often trapped in poverty by inadequate education and services as well as class and race barriers. Finally, the big brother view blames the disincentive effects of government policy for at least some of the income and employment p
4、roblems of the poor.,What is Poverty?,“Poverty is hunger. Poverty is lack of shelter. Poverty is being sick and not being able to see a doctor. Poverty is not having access to school and not knowing how to read. Poverty is not having a job, is fear for the future, living one day at a timePoverty is
5、powerlessness, lack of representation and freedom.” World Bank,Absolute Poverty in Less Developed Countries,Common standards such as $1.25 or $2 per day have been developed.,The United States Absolute Poverty Measure,The official measure varies by family size and is adjusted for inflation each year.
6、,Who are the U.S. Poor?,Trends vary widely for different groups. The “Great Recession” increased poverty, but not for all groups,Criticisms of the U.S. Poverty Line,See the text for a discussion of this topic, and discuss whether you consider the official poverty line to be too low, too high, or app
7、roximately accurate.,Alternative Poverty Measures,The U.S. Supplementary Poverty Index,This alternative produces a slightly higher overall poverty rate but larger changes in poverty rates for some groups.Table 14-5: Official and Supplementary Poverty Rates by Group,Extreme Poverty and the Poverty Ga
8、p,Two measures of extreme poverty: Households with incomes below of the official poverty line. For example, the official U.S. poverty rate rose from 11.3% in 2000 to 15% in 2011. Over the same time period the percent of persons with incomes below of the official poverty line rose from 4.5% to 6.6%.
9、The poverty gap is the average difference between the poverty line and a persons income. In 2012 the mean poverty gap per person in poor families was $2,806, and for unrelated single persons in poverty the mean gap was $6,542 (U.S. Census Bureau, 2012).,Multidimensional Poverty Measures,Social exclu
10、sion refers to the inability of some households to gain access to adequate income and services based on that nations values. For European nations, this measure involves a combination of relative income deprivation and separate measures of inadequate housing, education, employment, health, and other
11、services. (Marlier, et. al. 2012; European Commission, pp. 7-15). The Multidimensional Poverty Index (MPI), measures the lack of access to 10 different measures of well-being for 104 nations (Alkire, et. al.).,The Multidimensional Poverty Index,Table 14-6: Multidimensional and Income Poverty, Select
12、ed Countries,Relative Poverty,Measures of Inequality,The Lorenz Curve,The Lorenz Curve is a graph that measures the cumulative population on the horizontal axis and the cumulative income on the vertical. The curved line is the Lorenz Curve, which represents the actual cumulative distribution of inco
13、me in a society. The larger the area between the two curves (area A in 14-1), the more inequality exists in that society.,The Gini Coefficient,. In Figure 14-1 the Gini Coefficient is the ratio of Area A over areas A + B. In a nation with perfect equality, the Gini coefficient would equal zero since
14、 area A would not exist.,A Gini Coefficient Example,The 2002 Gini Coefficient can be calculated without calculus by identifying the various rectangles and triangles in area B. One can also use the 5 trapezoid areas for a shorter calculation. The Gini coefficient for 1968 is about .362. The 2002 Gini
15、 is over .4.,Harms of Inequality,Inequality is a significant ethical issue. Unhappiness (Alesina, DeTella and MacCulloch), health (Etienne, Skalli and Theodossiou), crime, and carbon dioxide emissions (Baek and Grousch) are correlated with inequality. Economic mobility across generations may be nega
16、tively affected by inequality.,Intergenerational Earnings Elasticity and the “Great Gatsby” Curve,Inequality now correlates to inequality for future generations. Inter-generational earnings elasticity is the % change in the childs permanent income divided by the % change in parents permanent income.
17、 If higher income parents produce higher income children this elasticity will be high.Figure 14-3: The “Great Gatsby Curve” for Selected Countries,Analyzing U.S. Public Assistance,Goals of Anti-Poverty Programs (Kimenyi),1. Adequacy: the poor should receive an adequate income level. 2. Target effici
18、ency: benefits should go to those most in need. Payments to the non-poor or evidence of cheating or inaccuracy violate this goal. 3. Administrative efficiency: services should be provided with minimum overhead costs. 4. Horizontal equity: people in similar situations should be provided with similar
19、benefits. 5. Vertical equity: Those with greater need should receive greater benefits, and those with more earnings should receive higher total incomes, including benefits. 6. Work incentives: Recipients should have a reasonable incentive to work. 7. Family stability: Family breakup should not be en
20、couraged. 8. Independence: Public assistance should discourage long term dependence on benefits. 9. Coherence and control: Public assistance should be easy to understand and administer.,The Negative Income Tax Model,A simple negative income tax contains two components, a base payment for someone wit
21、h zero earned income, and an implicit tax rate or benefit reduction rate that measures the change in government assistance as earnings rise. the implicit tax rate is t = assistance/earnings. An implicit tax rate of -1/2 means that the recipient will lose one dollar of assistance for each two dollars
22、 of earnings she gains.,Formulas for earnings and income with public assistance,(14-1) Earnings = WageHours (14-2) Public Assistance = Base + tEarnings (14-3) Total Income = Earnings + Public Assistance = Base + (1+t)Earnings Example: Assume the wage equals $6 per hour and the public assistance prog
23、ram has a base payment of $75 per week and an implicit tax rate of -2/3. If the welfare recipient does not work (zero hours per week), she will earn nothing and collect $75 per week in public assistance. If she works 10 hours per week, she will earn $60, collect $75 2/3$60, or $35 per week in public
24、 assistance, and have total income of $60 + $35 = $95. Notice that her added income from 10 hours of work totals $20, the difference between her earnings and her reduction in public assistance.,Graphical Analysis of Work Incentives and Well-Being,Graphical Analysis of Work Incentives and Well-Being,
25、Multiple Programs,The 1996 U.S. Welfare Reform Law,Main Provisions of the 1996 Law,This act imposed a lifetime maximum of 5 years eligibility for federal TANF funds. States were allowed to impose shorter time limits, exempt 20 percent of their caseload from federal time limits, and support families
26、for additional time using state funds. Second, the TANF program imposed additional work requirements on both individuals and states. TANF required recipients to engage in work related activity within 2 years of entering the program. The policy also required the states to place an increasing percenta
27、ge of beneficiaries in work for at least 30 hours per week.,Work Requirements and Lower Implicit Tax Rates,A work requirement lowers utility but eliminates the option of collecting benefits with zero work hours. See Figure 14-7 14-7: Effects of a Work RequirementYour Turn 14-4: Graph the effects of
28、a reduction in the implicit tax rate from -1 to -1/2. Are these effects more like those of a wage increase (Figure 14-4) or a cash assistance program (Figure 14-5)? Discuss the positive and negative aspects of this policy change.,Trends in AFDC/TANF recipients,Figure 14-8: Percent of Poor on TANF, 1
29、979-2010,Trends in TANF Payment Levels,In-Kind versus Cash Benefits: The “Food Stamp” Problem,In Figure 14-9 the red dotted line represents income after cash assistance, and the green line represents income after Food Stamps. Sue is better off with cash, while Hal is equally well-off with either pro
30、gram. Your Turn 14-5: Discuss additional reasons for favoring either cash benefits or food stamps as forms of aid to the poor. Which do you prefer, and why?,Conclusion,The meaning, causes, frequency, and harms of poverty are all controversial. This chapter has attempted to show that critical thinkin
31、g regarding even the most value-laden issues can benefit from the analysis of statistics and research-based evidence.The nature and effects of the 1996 welfare reform known as Temporary Assistance for Needy Families provide a useful case study of cash assistance programs.The comparison of cash an in-kind or specific benefits through the “food stamp problem” displays the difference between public control and the well-being of those receiving benefits.,
