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Economics and poverty

 
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PostPosted: Sat Feb 06, 2010 1:24 am    Post subject: Economics and poverty Reply with quote

Ok, I don't think the link will work, b/c I paid for this course. So I'll copy outline, but its kind of big. I will plug it tho, the Teaching Company, they sell lectures by college professors. This lecture is part of Modern Economics Issues. I thought it was hard data, and actually speaks to quite a few issues about some of the current threads (there is a lecture on health care, and climate change as well). Its interesting to hear these issues from a purely economic standpoint. (all bold is mine)

[url=anon.eastbaymediac.m7z.net/anon.eastbaymediac.m7z.net/teachingco/CourseGuideBooks/DG5610_P2BEH4.PDF]Poverty and Families[/url]

Quote:
Lecture Nineteen
Poverty and Families
Scope: Average incomes in the United States are about the highest in the world, but according to the Census Bureau 37 million Americans live in poverty. How can this be? Is there anything we can do about it? In this lecture we will begin by examining how the poverty rate is calculated, trends in official poverty statistics, and who lives in poverty according to these measures. Then we will explore criticisms of these statistics and identify forces that have prevented the poverty rate from falling, especially the rise of single-parent families. Finally, we will explore the economic and social impact of marriage and close by considering how we combat poverty among our neediest citizens, with a focus on the Temporary Assistance to Needy Families program and the Earned Income Tax Credit.

Outline
I. The poverty thresholds used by the federal government have their origins in guidelines developed in 1963 by Mollie Orshansky, an economist at the Social Security Administration.
A. The thresholds were constructed by estimating the dollar cost of the Department of Agriculture’s “economy food plan” for different family sizes.
1. The food costs measured were then multiplied by three to construct the poverty thresholds (based on a 1955 survey that showed that on average one third of after-tax income was spent on food).
2. The initial poverty thresholds were officially adopted in 1969, and the dollar cutoffs have been adjusted each year since then based on changes in the cost of living as measured by the consumer price index.
3. The census has several thresholds based on family unit size that in 2004 ranged from $9,600 for a single person to $39,000 for nine people or more.
B. According to the U.S. Census Bureau, the overall poverty rate fell substantially during the 1960s; since then, the overall rate has stayed the same, equaling 12.6% in the most recent year available (2005).
1. The rate is lowest among the elderly, at 10%, and highest among children under 18, at 17.6%.
2. The rate is 25% among blacks, 22% among Hispanics, 11% among Asians, and 8% among non-Hispanic whites.
3. Regional variation ranges from about 11% in the Northeast and the Midwest to 14% in the South.
4. The biggest variation is by family structure, with about 7% for two-parent families and 40% for one-parent families.
C. Some critics think the statistics do an adequate job and need minor tweaking; others say they are essentially meaningless and that the official poverty trend is fundamentally incorrect.
1. Friendly criticisms of the poverty rate say that it would be improved by recognizing that the cost of living differs from place to place.
2. A second criticism concerns how households are measured. If a married woman and man live together with their children, they are counted as a household, but if an unmarried woman and man live together with children they are counted as two separate households.
3. Official poverty measures include only incomes before taxes and transfers, ignoring, for example, the value of cash payments like welfare payments and the Earned Income Tax Credit.
D. More fundamental criticisms say that official poverty measures are virtually meaningless. Some Americans are still very poor, but these critics argue that the purchases and possessions of those officially categorized as impoverished show that many (and perhaps most) are not truly poor.
1. They point out that the average annual consumption expenditures of the poor are about 125% higher than their income.
2. According to the 2000 census, 46% of all impoverished households owned their own home—and the median value was only 30% below the overall median; nearly three quarters of poor households own a car, and 30% own two or more; 62% have cable or satellite TV.
3. When asked, 89% of poor households reported they had “enough food to eat” during the year.

E. Despite these important criticisms, considerable attention is paid to the official poverty rate and its failure to fall in the long term.

1. One reason the official rate has not fallen is the consumer price index bias, which effectively sets the bar about 1% higher each year.
2. Another key to the persistence of the poverty rate is the rise in income inequality. 3. Almost as important have been changes in family structure, especially the doubling of the percentage of households headed by single females.
4. While the official poverty rate has dipped since 1969 among households with American-born heads, it has risen by about 6% among immigrant households, whose population share has tripled from 4% to 12%.
5. Rising income inequality seems to be driven mainly by technological changes and is difficult to combat because doing so generally reduces economic flexibility and pushes up the unemployment rate.

II. Let us turn our attention to the other key force that has elevated the official poverty rate: the decline of marriage.
A. One of the most well-documented findings in labor economics is that married men earn between 10% and 30% more than unmarried men. Studies show that most of the gap arises after marriage; that getting married causes men to earn more, to become more productive at work, and to be promoted more rapidly.
B. Marriage also encourages people to save and behave more responsibly with their money.
C. Marriage appears to have a profound impact on health—especially for men.
D. Marriage has important positive effects on children as well.
1. Infant mortality rates are considerably lower for babies born to married mothers.
2. Children in one-parent families are twice as likely to drop out of school as those in two-parent families.
3. Boys raised in single-parent homes are about twice as likely to have committed a crime that leads to incarceration by their 30s.
4. The gap between the black and white poverty rates appears to be driven mainly by differential marriage patterns.
III. Several important government policies discourage marriage among the poor. The most important of these are eligibility criteria for need-based assistance programs that penalize married couples in comparison to those that cohabitate.
A. Total spending on welfare transfers in the United States was about $460 billion in 2004 (around 4% of GDP according to the Tax Foundation). The most important of the nonmedical, antipoverty, in-kind programs are for energy assistance (about $3 billion per year), housing assistance (about $23 billion per year), and food assistance.
B. The food stamp program was established in 1964 as part of Lyndon Johnson’s War on Poverty.
1. It initially gave poor households paper certificates that could be used only to buy food at registered retail stores; now electronic debit cards are used.
2. In a typical recipient household, food stamp benefits equal almost one third of their cash income; in recent years, only about 45% of eligible working people received food stamps, leading some critics to argue that it is too difficult for poor families to use the system.
C. The traditional cash welfare assistance program, Aid to Families with Dependent Children, was replaced by Temporary Assistance to Needy Families (TANF) under the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
1. One key change is that states have been given much greater discretion in designing their own public assistance programs, funded via block grants from the federal government rather than through matching funds.
2. The law required that by 2002 at least 50% of all recipient families and 90% of two-parent families must be working or in work preparation programs and limited individuals to a lifetime maximum of 60 months of TANF-funded aid.
3. Welfare reform occurred after a bipartisan consensus was reached that the traditional welfare system was not working because it encouraged dependency, ultimately increasing poverty in the long run; research on the impact of this welfare reform has concluded that it has been fairly benign.
4. Despite an overall reduction in the average gap between the income of single-female families and the poverty line, there is some evidence that welfare reform has coincided with a rise in deep poverty (the percentage living more than 50% below the poverty line).

D. The new emphasis on taxpayers helping the working poor and encouraging the poor to work can be seen in the Earned Income Tax Credit (EITC), which has become the largest federally funded, means-tested cash assistance program in the United States.
1. The EITC goes only to low-income households with labor market earnings.
2. In the range between $0 and the maximum payment, households with more than one child receive a subsidy equaling 40% of their labor earnings; the subsidy rate is 34% for one-child households and 7.65% for childless households.
3. A family with two children and one full-time worker earning about the minimum wage ($11,700 per year) will receive an EITC of $4,536, boosting the effective wage from $5.85 to $8.12 per hour.
4. One notable advantage of the EITC is that it is inexpensive to administer, adding only slightly to the costs of running the Internal Revenue Service; however, because there is little investigation into recipients’ eligibility, the system is open to abuse.
E. Supplemental Security Income (SSI) provides a monthly stipend to poor aged, blind, or disabled people. It is a need-based supplement to the Social Security system that pays about $38 million annually to roughly 7 million recipients.
F. Economists strongly prefer the EITC and its incentives—which have modest impacts on total employment—to the minimum wage, which tends to reduce employment.

Essential Reading:
Schwartz, Joel. “The Socio-Economic Benefits of Marriage: A Review of Recent Evidence from the United States.”
Supplementary Reading:
Blank, Rebecca. “Evaluating Welfare Reform in the United States.”
Hoynes, Hilary, Marianne Page, and Ann Stevens. “Poverty in America: Trends and Explanations.”

©2007 The Teaching Company.

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PostPosted: Sat Feb 06, 2010 2:28 pm    Post subject: Reply with quote

Very interesting. I was able to download the PDF from the link and have been reviewing it. Thanks!
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PostPosted: Sat Feb 06, 2010 4:31 pm    Post subject: Reply with quote

Very interesting, indeed. The issues of wealth redistribution (incl. universal health care) cannot be discussed without recognizing the extent to which personal choices and lifestyle have on one's income. If we subsidize the behaviors which lead to poverty, we don't make peoples lives better by just throwing a bunch of money at them. What's wrong with helping people with the root causes of their situation?

Also, the definition of "poor" is something I've always thought to be problematic. If you have a home, a car, enough to eat, luxury entertainment items like cable, you're not poor. Having trouble paying the bills isn't poverty. That's spending too much.
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PostPosted: Sat Feb 06, 2010 5:37 pm    Post subject: Reply with quote

Yeah, I agree with that. We were just talking about it another thread too.

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PostPosted: Sun Feb 07, 2010 1:33 pm    Post subject: Reply with quote

Yea, we've talked about definition of poverty, income inequality, even the importance of family (and how to define what family is). I thought this data certainly encompassed a few discussions.

I think I agree w/the economists who believe poverty should be define on consumption, not income. I mean, how poor are you if you're buying TV, cable, cars, homes and cell phones?
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PostPosted: Sun Feb 07, 2010 5:48 pm    Post subject: Reply with quote

Well, you could still be poor. But you be foolish as well. I don't mind it being determined on income, but debt should probably be factored in there somewhere as well.

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PostPosted: Sun Feb 07, 2010 6:07 pm    Post subject: Reply with quote

Just because people buy tv's, cars, cable, cellphones and homes doesn't mean they can afford them. After all, "credit" allows one to purchase almost anything with little or no money.
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PostPosted: Sun Feb 07, 2010 6:46 pm    Post subject: Reply with quote

Ok, so you want to encourage behaviors that can help get out of poverty. I'm good with that. At the same time, it's completely one-sided not to recognize that the way business does business is part of the creation of inequality and poverty. And some of the points [maybe all of them] leave things out [at least from the outline, I only got blank pages fromt he link].
Just a few examples off the top of my head:
Home ownership: in non-urban areas, it's often cheaper to own a house than rent...sounds like the right decision, if you're poor and can get approved.
Cable tv: if you're urban poor, you probably don't own, you rent...and cable is free in many urban apartment complexes. [and even a fair number of sub-urban ones.]
Cars: In many places it is nearly impossible to even think of being employed without owning cars.
Poverty and index: poverty isn't dropping because the index goes up by 1%? But if cost of living and wages create more than 1% gap [which it has been for a long time] there are actually more people who should be considered to be living in poverty, not less.

And the issue isn't entirely "what do they have," it also has to include "what would they have without assistance?"
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PostPosted: Mon Feb 08, 2010 1:05 pm    Post subject: Reply with quote

There are alot of people out there that have a job that are debt paupers. I was in a class this Sunday with 24 other families. Just to see where the debt was, we all wrote our debt down on a piece of paper and put it in a hat... this is debt that doesnt include your house.

Remember this is debt that doesnt include the mortgage. Guess how much debt 25 families had accumulated? If you guess under a million dollars you would be wrong.

Alot of debt paupers in that room.
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PostPosted: Mon Feb 08, 2010 5:27 pm    Post subject: Reply with quote

But then, as somebody upthread suggested, that isn't a poverty problem, it's a management problem.

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