Social Welfare Policy

1
Social Welfare Policy

• Contending with Poverty
• In America

2
The Concept of Poverty A Social Indicator

• 1. Technical topic vs. broader issue (what is a
  poverty lifestyle? how do the poor spend their
  money?)
• 2. Lack of definitive methodology and
  replication/robustness issues
• 3. Identification of causes and remedies the
  policy issues
• 4. Modesty, please!

3
Poverty Measurement Issues, Trends, Results

• Resources vs. needs
• Absolute vs. relative poverty
• Whats poor, officially speaking and interpreted)
  
• Whos poor? Generational differences from latest
  (2005) Census report
• Why are they poor?
• a. economic change
• b. demographic change
• c. public policy effects

4
Dissatisfaction with Poverty Measurement and the
NAS Report

• Should We Revise Our Techniques?
• Poverty Math

5
Another Key Focus Working Poor with Kids

• Working poor (14.3 million families with kids
  75 percent of all such units)
• a. employment matters
• b. work alone wont do (volatility, cyclicity)
  and low education
• c. need jobs, houses, affordable child care, some
  type of subsidy

6
Working Poor with Kids (cont.)

• 2. a. overall, children, elderly levels and
  trends
• b. why? taxes, transfers, and low earnings
  (working poor higher in USA)
• c. real living standards absolute levels of
  economic well-being for kids, if you could choose
  where to be born

7
Poverty Why Do We Care? The Effects of Deep
Poverty on Young Children

• Education related effects (ready for school)
• Health and Development effects
• Parental effects (stress, violence, time)
• Neighborhood effects (stuck)
• Immobility effects (Katrina and cars, gas
  resulting health effects)

8
What Do We Know Stylized Facts on American
Inequality

• The U.S. had the highest level of income
  inequality across modern rich nations and a low
  income population with less spending power than
  is found among the low income population in all
  other rich countries, except the United Kingdom,
  in the 1990s.

9

• There has been a structural widening of income
  inequality in America over the past 30 and 50
  years. Most of the driving force in producing
  this change has been economic (mens earnings,
  couples earnings) and to a lesser extent,
  demographic (single parents, immigration). Public
  policy (via tax and transfer policy) has done
  little to directly lessen this trend. The strong
  economy of the late 1990s increased real incomes
  at all income levels, but since then average
  income has been flat. However, inequality has not
  declined over the past 25-30 years, it has
  increased greatly.

10

• The causes of the widening of earned income
  inequality (i.e., differences in earnings within
  and between groups) include skill-biased
  technological change, international trade,
  immigration of lower skilled workers, and
  de-industrialization, with each of these forces
  playing some role in this transition and with the
  largest role probably being played by
  technological change.

11

• The U.S. suffered a declining middle class from
  1967-1998 (defining middle class by the real
  income levels of those living between the 90th
  and 20th percentiles of the income distribution
  in 1977). The middle-class grew from 70 percent
  of the population in 1970 to 75 percent by 1979,
  and then fell to less than 65 percent by the late
  1990s.

12

• About 2/3 of those who moved out of the
  middle-class moved up (winners) in the
  distribution about 1/3 moved down (losers).
  The winners (those who moved and/or stayed up)
  were the highly educated, particularly double
  income couples with and without children. The
  losers (those who moved down and/or stayed down)
  were the less educated particularly minorities
  and single parent households.

13

• The U.S. population seems to exhibit no greater
  inter-temporal income mobility than is found in
  other modern nations in the 1980s and 1990s.
  Further income mobility in the 1990s in the
  United States is no greater, and perhaps less,
  than that found in the 1970s. And generational
  mobility is also low or falling.

14

• There has been a widening of inequality in
  measurable net worth (housing and financial
  assets) from 1963 to 1998 with changes in net
  worth generally reinforcing income changes. Since
  then, everyone has taken a hit, especially the
  wealthy, due to stock market declines but
  inequality has not changed and the stock market
  is now back up.

15

• The simple rule of thumb for the wealth
  distribution is 1/3 of net worth each to the top
  1 percent (1.15million households with Forbes
  400 having only 2 percent of the total national
  wealth) the next 9 percent and bottom 90 percent
  of households. The bottom 20 percent of
  households owe more than they own they have
  negative net worth. Therefore, income and wealth
  inequality reinforce one another.

16

• Moving from 1998 to 2005 income inequality
  remained high and even rose. Indeed, 1999 was the
  8th straight year of economic expansion 2000 was
  neutral 2001 a recession but then 2002-2005
  were 4 years of recovery.

17

• Finally, even the average American
  (non-elderly, middle class family) is not doing
  well and may be in a state of downward
  mobility.