Providing a Safety Net

Why Households Differ One of the main reasons why household income differs is because the number of household members who work differs. They also differ based on education, ability, job experience, and so on. On average, people with more education earn more at every age. Those with a professional degree earn about four times more than those who only have a high school education. Age also has an important impact on income; workers typically make more as they get older. Low income households are typically headed by single mothers who are young, poorly educated, and not in the labor force.

Official Poverty Rate The federal government determines the official poverty level and adjusts this benchmark overtime to account for inflation. While it is difficult to completely objectively measure poverty, the official rate in the U.S. for a family of four was $22,350 in The poverty rate was around 12% in 1969, around 24 million people. It dropped from from 15.1% to 11.3%. However, it rose to 14.3% in 2009, around 43.6 million people. The U.S. poverty rate is many times greater than the average income for most of the world’s population.

Poverty and Married Status Births to single mothers make up the primary source of poverty in the United States. The U.S. has the highest teen pregnancy rate in the world. Because fathers in such cases typically assume little responsibility for child support, children born outside marriage are much more likely to be poor than other children are.

Programs to Help the Poor The government’s first line of defense is to promote job opportunities. Since the 1960’s spending on wealth redistribution at all levels of the government have increased sharply. There are 2 categories of this: – Social insurance – Income assistance

Social Insurance Programs – These are designed to help people who lose income due to retirement, temporary unemployment, or inability to work resulting from a work-related injury. – Social Security It provides retirement income for those who have a work history and a record of making payments to the program. – Medicare Provides health insurance for short-term medical care, mostly to those age 65 and older, regardless of income. – Other programs include unemployment insurance and workers’ compensation.

Income Assistance Programs These are typically called welfare programs. They typically provide money and in-kind assistance to poor people. These programs are mean tested: – A household’s income and assets must fall below a certain level to qualify.

Income Assistance Programs Cash Transfer Programs Temporary Assistance for Needy Families (TANF) – Provides cash to poor families with dependent children. Supplemental Security Income (SSI) – Provides cash to elderly poor and the disabled. Each state sets eligibility standards. SSI programs help the elderly, and disabled poor, including people addicted to drugs, and alcohol, children with learning disabilities, and, in some cases, the homeless.

In-Kind Assistance Programs These programs provide for goods and services such as food vouchers, healthcare, housing assistance, and school lunches to the poor. Medicaid – Funds medical care for those with incomes below a certain level who are elderly, blind, disabled, or are living in families with dependent children. – This is the largest welfare program, costing nearly twice as much as all cash transfer programs combined. – Each state sets the qualifying level of income. – Some states are quite strict, therefore the proportion of poor covered by Medicaid varies greatly across states.

In-Kind Assistance Programs There are about 75 federal welfare programs. Welfare programs account for about half of federal spending today.

Earned Income Tax Credit This supplements wages of the working poor. This takes away income taxes from poor working families, and provides cash to families to give them an incentive to work.

Welfare Reform Today, the federal government gives the states a sum of money to run their welfare programs. Typically today, states require recipients to look for jobs, and impose limits of 5 years or less to receive aid.

Welfare Reform Welfare reform today has reduced welfare roles and increased employment. However, most of these jobs are very low paying, and a lot of times part-time. Those who getting off welfare by finding jobs can also continue receiving food vouchers, childcare, and Medicaid.