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Poverty, Welfare, and Women

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.

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Poverty, Welfare, and Women

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  1. Poverty, Welfare, and Women Chapter 12

  2. 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

  3. 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

  4. Poverty Thresholds 2004

  5. 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

  6. 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

  7. Why Are Women More Likely to be Poor • Labor Market Earnings • Transfers from their families • Transfer payments or tax credits from the government

  8. 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

  9. 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

  10. 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

  11. 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

  12. 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

  13. 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

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

  15. Choosing Household Production MVTL MVTH Before AFDC MVTH MVTH After AFDC 0 24 0 24 L H

  16. 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

  17. 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)

  18. 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

  19. 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

  20. 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

  21. 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

  22. 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

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