Chapter 3 section 4 Providing a Safety Net

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Chapter 3 section 4 Providing a Safety Net

• Income and Poverty
• In a Market economy, income depends primarily on
  earnings, which depend on the value of each
  persons contribution to production.
• Some people are not able to contribute much value
  to production.
• Mental or physical disabilities

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Limited job choices and reduce wage b/c

• Advanced age
• Poor health
• Little education
• Discrimination
• Bad luck
• Demands of caring for small children

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Why Household Incomes Differ

• The median income of households is the middle
  income when incomes are ranked from lowest to
  highest.
• In any given year, half the households are above
  the median income and half are below its
• Number of household members who are working
  differs.

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examples

• Median income for two earners is nearly double
  that for households with only one earner and
  about four times that for households w/ no
  earners
• Labor earnings differ
• Education, ability, job experience
• More educated earn more
• Professionals w/ education earn 4 times more than
  a high school graduate.

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Official Poverty Rate

• US poverty level of income is many times greater
  than the average income for most of the worlds
  population.
• Other countries set a much lower income level as
  their poverty level.

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Poverty and Marital Status

• Families headed by females w/ no husband
• Families headed by males w/ no wife present
• Married couples
• 1st trend. Poverty rates among female-headed
  families 5 to 6 times greater than rates among
  married couples
• 2nd trend. Poverty rates among female-headed
  families are 2 to 3 times greater than those for
  male-headed families.
• 3rd trend. mid 1990s poverty rates trend down
  slightly until 2001 recession.

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Social Insurance

• Social insurance programs are designed to help
  make up for the lost income of people who
  worked but are now retired, temporarily
  unemployed, or unable to work because of
  disability or work-related injury.
• Social Security provides retirement income for
  those with a work history and a record of making
  payments to the program.

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Medicare

• Another social insurance program, provides health
  insurance for short-term medical care, most for
  65 older, regardless of income.
• Redistribute income from rich to poor.
• Receive more benefits than they paid into the
  program.
• Other programs workers compensation, injured
  workers.

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Income-Assistance programs

• Income-assistance- (welfare programs)
• Assistance of goods and services.
• Programs that pay money directly to recipients
  are called cash transfer program.
• No work history required
• Means-tested program, a households income and
  assets must fall below a certain level to qualify
  for benefits.

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Cash Transfer Program

• Temporary Assistance for Needy (TANF) provides
  cash to poor families with dependent children.
• Supplemental Security Income (SSI), which
  provides cash to the elderly poor and the
  disabled.
• Each state has a fixed grant to help fund TANF
  program.

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continued

• SSI program provides support for the elderly and
  disabled poor, people addicted to drugs, children
  w/ learning disabilities, and homeless.
• In-Kind Transfer Program- provide goods and
  services such as food stamps, health care,
  housing assistance, and school lunches to the
  poor.

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In-Kind Transfer Programs

• Medicaid- funds medical care for those with
  incomes below a certain level who are elderly,
  blind, disabled, or are living in families with
  dependent children.
• Largest program, cost twice as much as other
  programs.
• To get some idea of how much the federal
  government spends on programs to help help the
  poor, also called income redistribution programs.
• This figure shows the composition of federal
  outlays since 1960s.

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Earned-Income Tax Credit

• Earned-income tax credit supplements wages of the
  working poor.
• Ex. Family w/ two children and earning 13,000 in
  2001would not pay federal income income tax and
  would receive a cash transfer of about 4,000.