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Chapter 12 Poverty, Welfare, and Women

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welfare lowers MVT of work. earnings penalty lowers effective wage. welfare acts as nonearned income. with a lower MVT for work, ... – PowerPoint PPT presentation

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Title: Chapter 12 Poverty, Welfare, and Women


1
Chapter 12 Poverty, Welfare, and Women
  • Poverty in the U.S.
  • Welfare
  • programs
  • incentives
  • reform
  • EITC

2
Measuring poverty
  • Bureau of the Census
  • 12.1 population is poor 2003
  • official poverty rate
  • where does that come from?

3
Calculating 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)

4
  • 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

5
criticisms
  • 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

6
poverty varies
  • household type
  • education
  • race
  • sex
  • age
  • state

7
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11
by state, 2002
  • New Hampshire 5.8
  • New York 14
  • New Jersey 7.9
  • Pennsylvania 9.5
  • Mississippi 18.4

12
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13
feminization 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

14
child poverty, 2004
  • of people lt 18 living in poverty
  • 17.2 (all)
  • 29.4 (Hispanic)
  • 33.2 (Black)

15
Why are women more likely to be 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

16
Why are people poor?
  • lack of education, skills
  • spotty work history
  • low wages
  • adverse eventsdivorce, job loss, disability
  • bad attitudes?
  • small of those in poverty are their for a long
    time

17
  • Do programs to help the poor actually encourage
    poverty?

18
What is welfare?
  • means-tested assistance
  • several different programs
  • federally and state funded
  • administered by states
  • states get wide latitude

19
  • housing assistance (HUD)
  • rent vouchers
  • subsidized housing
  • housing renovation
  • home heating
  • food assistance
  • food stamps (dept. of Agriculture)
  • WIC
  • school lunch program

20
  • medical care
  • Medicaid
  • state subsidized health insurance
  • childcare subsidies
  • cash assistance
  • AFDC/TANF
  • SSI

21
  • unemployment compensation
  • is NOT welfare
  • have to qualify
  • --work history
  • funded through payroll taxes

22
Cost of welfare
  • 2001 82 billion
  • total federal budget 1.85 trillion
  • 4.5 of the federal budget

23
Welfare and work
  • prior to 1996,
  • no time limit on benefits
  • benefits cut (earnings penalty)
  • when recipients work

24
Welfare and work incentives
  • welfare is nonearned income
  • income effect
  • earnings penalty
  • makes working costly
  • substitution effect

25
recall 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

26
  • with a lower MVT for work,
  • cut back on work to boost overall utility
  • allocate more time to leisure, housework

27
evidence
  • studies show that AFDC reduces labor supply of
    its recipients

28
Welfare Reform
  • many states experimented with reforms in late
    1980s early 1990s
  • Federal reform 1996

29
1996 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

30
  • limits on benefits for noncitizens
  • focus on family formation
  • discourage unwed/teenage motherhood
  • family caps
  • child support enforcement
  • programs that encourage marriage

31
Evidence
  • huge TANF caseload decline 1996-1999
  • 4.4 million to 2.1 million
  • success of reforms? and/or
  • rapid economic growth

32
  • studies
  • 1/3 of decline due to reforms
  • 1/5 of decline due to economy

33
  • impact on marriage
  • state evidence suggests that work requirements
    reduce marriage
  • women more self-sufficient,
  • women have less time for relationships

34
EITC
  • 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.

35
EITC vs. welfare
  • family must have earnings
  • married single parents eligible
  • structure rewards works
  • greater political support
  • alternative to minimum wage

36
Impact 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
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