Effectiveness of the Safety Net Lecture 24 Center for Budget and Public Policy, “ What does the Safety Net Accomplish? ” htm htm

Additional Sources Aloc Sherman, “Public Benefits: Easing Poverty and Ensuring Medical Coverage,” Center for Budget and Policy Priorities, acc.htmhttp:// acc.htm

Purpose of the Safety Net To prevent families and individuals from falling into poverty (or becoming poorer), and losing health insurance coverage as a result of: –Job loss (not quitting) –Illness –Death of a worker –Disability –Divorce Name the unique programs associated with each event? What programs cover all events? What events would you like to add to the list?

Accomplishments of the Safety Net Reduces the number of poor Americans by 27 million people, including 14 million elderly people and nearly 5 million children Reduces the severity of poverty for those who remain poor by increasing their average disposable income from 29 to 57 percent of the poverty line; and reduces the ranks of the the uninsured by tens of millions.

Accomplishments of the Safety Net, cont. Medicaid –70 percent of expenditures go to elderly and disabled –Reduces infant mortality and child deaths –Increase the likelihood that low-income women receive preventive screenings for cancer –Increased availability of medication the chronically ill Food and Nutrition: WIC –Reduces low-weight births –Each $1 or WIC reduces future expenditures by $3.50 –Reduces child anemia

Program Effectiveness How do we measure the anti-poverty effectiveness of safety-net programs? –What is CBPP’s definition of being “lifted out of poverty?” Which category of programs have the greatest overall antipoverty effectiveness; –Social insurance or means-tested programs, including tax credits? –Cash-transfer or in-kind benefits

Program Effectiveness, cont. Which subgroups of the poor population are helped most by the safety net? Why? Which programs are most effective for each of the subgroups? –Elderly –Families with children –Childless, non- elderly adults –Immigrants

Who is left behind? What measures can help us answer this question? Using these measures, who is left behind? –Elderly –Families with children –Childless, non- elderly adults –Immigrants

How does the U.S. Safety Net Compare to The Safety Nets of EU Nations? Compared to the U.S. most Western industrialized nation have: –more effective anti- poverty policies –lower overall poverty rates –lower child poverty rates  Percent of low- income children lifted to half the national median: –U.S.: 1 in 9 –Canada: 1 in 3 –Britain, Netherlands, Belgium, Germany: 1 in 2

How does the U.S. Safety Net Compare to The Safety Nets of EU Nations?, cont Timothy Smeeding, “Poor People in Rich Nations: The United States in Comparative Perspective,”Journal of Economic Perspective, (January) cpr.maxwell.syr.edu/faculty/smeedin g/pdf/JEP%20V5_2006.pdf Only the U.S. and Britain publish poverty statistics annually. (See handouts for differential impact) Poverty in older age is almost exclusively and older women’s problem –For 75+ years 75% are women 60% are women living alone

How does the U.S. Safety Net Compare to The Safety Nets of EU Nations?, cont Absolute Poverty Rates: Table 2 –U.S. falls second to the United Kingdom in having the highest overall poverty rate Antipoverty Effects of Gov’t Spending: Table 4: –U.S has: Below average market poverty rate (23.1 %) Highest poverty rate after taxes and transfers (17.0%) Smallest share of GDP devoted to anti-poverty programs (2.3%) Least overall poverty reduction (26.4%)

Comparison of U.S. and EU Safety Nets Experience of poor families: Table 5 One-parent families –Poverty rates highest everywhere for one- parent families –U.S. market income rate below average (46.0%) –U.S. after tax and transfer rate second highest (41.1%) –Poor U.S. families pay higher net taxes than  families in all other nations –Tax/transfers reduce poverty least (10.0% vs. 46.3% average) Two-parent families –Poverty rate much lower everywhere –U.S. just about average (13.7%) –U.S. tax/transfer programs reduce poverty least (3.6% vs. 44.3% average) – ditto

Comparison of U.S. and EU Safety Nets Annual Hours Worked: Table 6 Poor U.S. families work more hours than elsewhere Poor U.S. single parents average almost twice as many hours as the average (1,000 vs. 500) U.S. families have fewer idle hours to convert to work and earnings

What can we learn from the EU nations? Not much –Inequality plays an important role in creating incentives for savings, hard work, and investment in education –U.S. economy performs better Employment and economic growth higher Unemployment lower A lot, particularly from Britain –Devoted an additional 0.9 percent of GDP to poor families with children since 1999 –Child poverty rate fell by 27% (from 15 to 11%) –U.S. rate rose from 15 to 18% –U.s. needs to do a better job of combining incentives to work with targeted benefits