Poverty, Welfare, and Women

Chapter 12

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

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

Weighted Size of family unit average Eight

2004 thresholds None One Two Three Four Five Six Seven or more

One person (unrelated individual).... 9,645 Under 65 years....................... 9,827 9,827 65 years and older.................... 9,060 9,060

Two persons............................ 12,334 Householder under 65 years........... 12,714 12,649 13,020 Householder 65 years and older...... 11,430 11,418 12,971

Three persons.......................... 15,067 14,776 15,205 15,219 Four persons........................... 19,307 19,484 19,803 19,157 19,223Five persons........................... 22,831 23,497 23,838 23,108 22,543 22,199Six persons............................ 25,788 27,025 27,133 26,573 26,037 25,241 24,768Seven persons.......................... 29,236 31,096 31,290 30,621 30,154 29,285 28,271 27,159Eight persons.......................... 32,641 34,778 35,086 34,454 33,901 33,115 32,119 31,082 30,818Nine persons or more................... 39,048 41,836 42,039 41,480 41,010 40,240 39,179 38,220 37,983 36,520

Related children under 18 years

Poverty Thresholds 2004

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

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

Why Are Women More Likely to be Poor

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

the government

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

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

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

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

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

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

AFDC

AFDC provides a strong benefit not to work – Income effect

The benefits reduction play against the incentive to work– Substitution effect

Choosing Household Production

MVTL MVTH

0

24

0

24

L

H

MVTH Before AFDC

MVTH

After AFDC

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

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)

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

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

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

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

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