Poverty, Welfare, and Women

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Poverty, Welfare, and Women

• Chapter 12

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Measuring Poverty

• Absolute Measure of Poverty
• People living below a certain threshold
• Relative Income Poverty Measures
• Income is significantly lower than average income
• For instance, 2 or 3 standard deviations lower
  than the average

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Measuring Poverty

• The U.S. threshold was first established by Molly
  Orshansky, SSA, who based it on the minimum
  annual cost of a nutritionally adequate diet as
  computed by the U.S. Department of Agriculture.
  The cost was then multiplied by 3 to obtain the
  poverty threshold for a family of four

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Poverty Thresholds 2004
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Poverty by Family Structure

• Table 12.1 p. 445
• Mother only households are twice as likely to be
  in poverty than father only households
• And about six times as likely to be in poverty
  than married couple
• And father only households are about 2 or 3 times
  as likely to be in poverty than married couples

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Feminization of Poverty

• A term first used by Diana Pearce
• Figure 12.2, page 446.
• Shows that by 2000, half of all households in
  poverty are lead by female-Headed Families
• This even though the number of Female-Headed
  Families as a percent of all families are
  decreasing

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Why Are Women More Likely to be Poor

• Labor Market Earnings
• Transfers from their families
• Transfer payments or tax credits from the
  government

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Why Are Women More Likely to be Poor

• Labor Market Earnings
• In divorce the custody of children is more likely
  to go to the women and so even if earning the
  same income, women with more children are more
  likely to fall under the threshold
• Women have lower earnings than men
• More likely to work part-time

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Why Are Women More Likely to be Poor

• Labor Market Earnings
• More than away from workplace to take care of
  children so human capital more likely to have
  depreciated

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Why Are Women More Likely to be Poor

• Transfers from their families
• Most divorces do not lead to large cash divorce
  settlements
• Most women do not get alimony
• Child support is generally low and many times
  still remains uncollected

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Why Are Women More Likely to be Poor

• Transfer payments or tax credits from the
  government
• As mentioned before, the welfare program in the
  US has had an impact on US family structure

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Welfare Programs in the US

• 1930s, AFDC (Aid to Families with Dependent
  Children)
• 1996 AFDC was suspended and replaced with TANF
  (Temporary Assistance for Needy Families)
• SSI (Supplemental Security Income)
• WIC (Women, Infants, and Children)
• Medicaid

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AFDC

• Income Maintenance Program
• Thus, it required a means-tested program
• Provided an income guarantee
• As income increased the benefits were reduced by
  an implicit tax rate
• Income disregard was a minimum income allowed
  below all benefits expired due to increased
  earned income
• Break even point where family receives no benefits

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AFDC

• AFDC provides a strong benefit not to work
• Income effect
• The benefits reduction play against the incentive
  to work
• Substitution effect

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Choosing Household Production
MVTL
MVTH Before AFDC
MVTH
MVTH After AFDC
0 24
0 24
L H
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Welfare Reform

• AFDC-UP
• Benefits in the case that one parent went
  unemployed
• At first optional but by 1988 all states required
  to participate
• Personal Responsibility and Work Reconciliation
  Act (PRWORA) signed into law in 1996 by Clinton

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Personal Responsibility and Work Reconciliation
Act (PRWORA)

• First difference
• AFDC was funded by Federal Government with state
  matching funds
• PRWORA is a Federal Block Fund.
• Removed AFDC and replaced with TANF (Temporary
  Assistance for Needy Families)

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Temporary Assistance for Needy Families (TANF)

• Not a legal entitlement
• Strict five year limit
• Participants must be involved in some work type
  activity within 2 years of face loss of benefits
  with very few exceptions
• Must public assistance is denied to legal
  immigrants for five years or until they become
  citizens

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Iron Triangle of Welfare

• Three goals of all welfare programs
• Lift poor people out of poverty
• Maintain incentives to work
• Accomplish two previous goals at a reasonable
  cost
• Marriage and Welfare
• Women moving out of welfare less likely to marry
  (opportunity cost is high)
• Cost of finding appropriate husband is higher

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Welfare Programs in the US

• SSI (Supplemental Security Income)
• Benefits disabled, blind, and poor elderly adults
  as well as providing food stamps
• WIC (Women, Infants, and Children)
• Food stamps and school lunches
• Medicaid
• Medical program for the poor

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Earned Income Tax Credit

• DIFFFER from Welfare programs
• In 2000, EITC provided 32.5 billion to more than
  19 million households
• TANF served about 2.6 million households a total
  of 12.5 billion

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Earned Income Tax Credit

• DIFFFER from Welfare programs
• Only families with earned income
• Negative Income Tax
• Marriage status is not an issue
• All can participate
• General support across the political spectrum