Poverty and the Distribution of Income

Poverty Rates 14.3% of the population (43.6 million Americans) live in poverty (2009)  25% of African-Americans  23% of Hispanics  21% of children  40% of Hispanic children  46% of African-American children By education level:  In 2007, the median earnings of individuals with less than a 9th grade education was $16,615 while high school graduates earned $31,337, holders of bachelor’s degree earned $56,826, and individuals with professional degrees earned $100,000 By job loss:  In 2007, the poverty rate was 21.5% for individuals who were unemployed, but only 2.5% for individuals who were employed full time By family type:  In 1991, 8.3% of children in two-parent families were likely to live in poverty; 19.6% of children lived with father in single parent family; and 47.1% in single parent family headed by mother

Poverty Line $11,000 for an individual, $21,756 for a family of four Poverty level based on 1955 household survey data, where food = 32% budget and housing 34%; amount to provide a minimally adequate diet was multiplied times 3 to set the poverty level By , food equaled 18% and housing 42% of average household budget, and ½ of low-income renters spent over 65% of their income on housing alone. Food + housing = 85% of income, not 66% Today’s poverty line would have to be 50% higher to match standard of living set in 1967, which would double the number of Americans living in poverty

Effects Childhood poverty alone:  Reduces productivity & output by 1.3% GDP  Raises cost of crime by 1.3% GDP  Raises health care costs by 1.2% GDP  Costs $500b/yr., or 4% of GDP

Effects Lower life expectancy and higher rates of chronic illness and disease Lower levels of educational attainment  H.S. Graduation rate 69% Total 55% Hispanics 51% African-American

Effects Fewer job opportunities/work experience  Spatial isolation (inner city vs. suburbs)  Employment population ratio, ages % Total 14.4% African-Americans Lower lifetime earnings and household wealth  Black median household income was 61.6% of white income (2008)  Black median family wealth was $5,000 in 2007 vs. $100,000 for white families

Effects De facto segregation  Black and Latino schoolchildren more segregated from whites now than at any time since the 1960s 40% of black and Latino children attend schools almost entirely composed of minorities Religious institutions as segregated today as in the 1960s Middle-class black Americans are as segregated as poor counterparts  Fewer opportunities to network for employment

Welfare for the Poor Major federal programs:  Medicaid = $204b (2008)  K-12 and vocational education = $50b (2007)  Hospital and medical care for veterans = $40b (2007)  TANF (Welfare) = $20b  Food stamps = $56 b (2009)  SCHIP (except Arizona) = $11 b (2009)  For comparison’s sake: Annual cost of extending Bush tax cuts permanently = $400b/yr. Annual costs of “wealth-building” federal policies (tax breaks, tax credits, preferential tax rates) = $400b Recipients  White (=40%)  Black (=40%)  Hispanic (=20%)

Time receiving aid (1990):  20% less than 6 months  15% 7-12 months  20% 1-2 yrs.  27% 2-5 yrs.  20% over 5 yrs. Number of children:  1 (43%)  2 (30%)  3 (16%)  4 or more (10%) Age of mother:  Teen (8%)  (48%)  (32%)  40 or older (12%) Status of father:  Divorced/separated (28%)  Not married to mother (55%)  In 1989, only ½ of mothers on welfare received full child-support payments from dads; for women under the poverty level, the average amount was $1,889/yr.

How Successful Has Welfare Reform (TANF) Been at Alleviating Poverty? In 1996, Republican Congress and President Clinton passed welfare reform from AFDC to TANF to limit assistance (60 months in lifetime) and add a work requirement for eligibility (Welfare to ‘Workfare’) In 2005 state TANF programs provided cash assistance to just 40 percent of families who are poor enough to qualify for TANF cash assistance and who meet the other eligibility requirements for these programs. During the 1980s and early 1990s, by contrast, the former AFDC program provided cash assistance to about 80 percent of very poor families that qualified for assistance. In the mid-1990s, the former AFDC program lifted 64 percent of otherwise deeply poor children — children with incomes below half the poverty line — out of deep poverty. In 2005, by contrast, the TANF program lifted just 23 percent of deeply poor children above 50 percent of the poverty line.

Distribution of Income Highly unequal in the U.S.

Lorenz Curve and Gini Coefficient US income Gini indices over time Gini indices for the United States at various times, according to the US Census Bureau:United StatesUS Census Bureau 1929: 45.0 (estimated) 1947: 37.6 (estimated) 1967: 39.7 (first year reported) 1968: 38.6 (lowest index reported) 1970: : : : 46.2 [7] [7] 2005: : 47.0 (highest index reported) 2007: : : 46.8

Aggregate U.S. household income distribution, 2007 Percentage of total US household income earned by income group 10%20%30%40%50% 3.1 % less than $20,000 – 19.04% of all households 8.1%$20,000 to $37,500 – 19.45% of all households 13.8%$37,500 to $60,000 – 19.44% of all households 22.3% – $60,000 to $95, % of all households 40.8% – $95,000 to $250,000 – 20.15% of all households 11.9%$250,000 or more – 1.92% of all households Use of Quintiles:

Income Inequality Due to  Unequal education (quality, type, amount)  Unequal wealth (uneven opportunities)  Unequal skill  Differing choices  Discrimination  Monopoly power  Government policies

Concluding Questions: 1. Why do you think that there is such a discrepancy between the distribution of wealth in the U.S. that Americans want and what it actually is? 2. What do you think are the most damaging effects of high levels of income/wealth inequality? 3. Describe how at least one policy change (on a national level) could decrease poverty in the U.S.

Poverty, Marriage, and Education Marriage is a “wealth-generating” institution  Married end up 4x richer than those never married  On average, drink less, fewer drugs, work more  Divide labor within the household  92% of children whose families make more than $75,000/yr. live with two parents; only 20% of children whose families make less than $15,000/yr. live with two parents Women w/ college degree:  4% out-of-wedlock birth rate for their children  16.5% divorced 10 years later (married ’90-’94) Women w/o high school diploma (dropouts):  15% out-of-wedlock birth rate for their children (67% among African-American dropouts)  46% divorced 10 years later (38% w/ diploma, no college) Out-of-wedlock births  Living together, then child, then marriage = 2/3 divorce rate w/in 10 yrs.  Living together, then marriage, then child = ½ divorce rate w/in 10 yrs.  Marriage, then living, then child = lowest divorce rate  “Sliding Versus Deciding”

Inequality/Distribution of Income charts from Dave Gilson and Carolyn Perot, from March/April 2011 Issue of Mother JonesDave GilsonCarolyn PerotMarch/April 2011 Issue