1. Types of Social Welfare Policies LO 18.1: Compare and contrast entitlement and means-tested social welfare programs. Social Welfare Policies Policies that provide benefits, cash or in- kind, to individuals, based on either entitlement or means testing. To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

2. Types of Social Welfare Policies Entitlement Programs Government programs providing benefits to qualified individuals regardless of need. Means-Tested Programs Government programs providing benefits only to individuals who qualify based on specific needs. LO 18.1 To Learning Objectives

3. Income, Poverty, and Public Policy LO 18.2: Assess the extent of economic inequality in America and the role of government in lessening it. U.S. has one of the world’s highest per capita incomes. According to Census Bureau in 2009, the median U.S. household income was $49,777. No industrialized country has wider extremes of income than the United States. To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

4. Income, Poverty, and Public Policy Who’s Getting What? Income distribution – The way the national income is divided into “shares” ranging from the poor to the rich. In 2008, people whose income placed them in the lowest 20% of households got 3.4% of nation’s income and those in the highest 20% got half of nation’s income. To Learning Objectives LO 18.2

5. To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman LO 18.2

6. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy Who’s Getting What? (cont.) In recent decades, the share of the highest fifth has grown while those of the lowest fifths have gotten smaller. Relative deprivation – A person perceives that he or she is not doing well economically in comparison to others. To Learning Objectives LO 18.2

7. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy Who’s Getting What? (cont.) Income – The amount of money collected between any two points in time. Wealth – Value of assets owned, such as stocks, bonds, bank accounts, cars, and houses. ⅓ of wealth is held by 1% of the population, ⅓ is held by 9%, and ⅓ is held by 90%. To Learning Objectives LO 18.2

8. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy Who’s Poor in America? Poverty line – Income below this amount means people are poor, based on what a family must spend for an “austere” standard of living, set at three times the cost of a subsistence diet. 43.6 million people, or 14.3% of population, were poor in 2009, according to Census Bureau. To Learning Objectives LO 18.2

9. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy Who’s Poor in America? (cont.) In 2009, the poverty threshold for a single adult was $11,161, for two adults it was $14,366, and for a single parent with two children it was $17,268. Poverty rates are higher for African Americans, Hispanics, unmarried women, children, and inner-city residents. To Learning Objectives LO 18.2

10. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy Who’s Poor in America? (cont.) Feminization of poverty – The increasing concentration of poverty among women, especially unmarried women and their children. Poverty rate for female-headed families is almost 30%, as opposed to less than 6% for families with two parents. To Learning Objectives LO 18.2

11. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy How Public Policy Affects Income Progressive tax – A tax by which the government takes a greater share of the income of the rich than of the poor. For example, when a rich family pays 50% of its income in taxes, and a poor family pays 5%. To Learning Objectives LO 18.2

12. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy How Public Policy Affects Income (cont.) Proportional tax – A tax takes the same share of income from everyone, rich and poor alike. Regressive tax – A tax in which the burden falls relatively more heavily on low- income groups than on wealthy taxpayers. To Learning Objectives LO 18.2

13. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy How Public Policy Affects Income (cont.) Earned Income Tax Credit – A refundable federal income tax credit for low income working individuals and families. In 2010, workers raising 1 child with incomes less than $16,420 could get up to $3,043 in EITC. To Learning Objectives LO 18.2

14. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Income, Poverty, and Public Policy How Public Policy Affects Income (cont.) Transfer payments – Benefits given by the government directly to individuals either cash transfers, such as Social Security payments, or in-kind transfers, such as food stamps and low-interest college loans. To Learning Objectives LO 18.2

15. To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman LO 18.2

16. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Helping the Poor? Social Policy and the Needy “Welfare” As We Knew It Social Security Act of 1935 created the Social Security program and the Aid to Families with Dependent Children program. In 1964 President Lyndon Johnson declared a War on Poverty, and added welfare programs to the policies that fight poverty. LO 18.3 To Learning Objectives

17. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Helping the Poor? Social Policy and the Needy “Welfare” As We Knew It (cont.) In 1981, President Ronald Reagan declared war on antipoverty programs, and persuaded Congress to cut welfare benefits and lower the number of Americans on the welfare rolls by arguing that welfare had proved to be a failure. To Learning Objectives LO 18.3

18. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Helping the Poor? Social Policy and the Needy Ending Welfare As We Knew It: The Welfare Reform of 1996 Personal Responsibility and Work Opportunity Reconciliation Act is the welfare reform law of 1996, which implemented the Temporary Assistance for Needy Families (TANF) program. To Learning Objectives LO 18.3

19. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Helping the Poor? Social Policy and the Needy Ending Welfare As We Knew It: The Welfare Reform of 1996 (cont.) TANF replaced Aid to Families with Dependent Children as the program for public assistance to needy families. TANF requires people on welfare to find work in 2 years and sets a lifetime maximum of 5 years. To Learning Objectives LO 18.3

20. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Social Security: Living on Borrowed Time The Growth of Social Security In 2010, average monthly check for retired workers was $1,100. 1 st check was $22.54 in 1936 to Ida Fuller of Brattleboro, VT. Social Security Trust Fund – The account that Social Security contributions are put into and used to pay eligible recipients. LO 18.4 To Learning Objectives

21. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Social Security: Living on Borrowed Time The Growth of Social Security (cont.) Current payroll taxes are 12.4%. Workers contribute 6.2% of their wages up to $102,000, and their employers match it. Trust Fund must invest money in U.S. Treasury bonds, which has been earning about 6% a year. To Learning Objectives LO 18.4

22. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Social Security: Living on Borrowed Time The Growth of Social Security (cont.) Social Security – Most expensive public policy in the U.S.A.! A recipient’s benefits require a Social Security payroll tax of 10.3% per worker (31/3 = 10.3). Cost to each worker may rise to 15.5% of earnings (31/2 = 15.5). To Learning Objectives LO 18.4

23. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Social Security: Living on Borrowed Time Reforming Social Security President Bush – Proposed diverting ⅓ of individuals’ Social Security contribution to private retirement funds, such as a private account, a stock, a bond, or another investment. President Obama – More likely to propose raising payroll taxes. To Learning Objectives LO 18.4

24. Social Welfare Policy Elsewhere LO 18.5: Distinguish American social welfare policy from that of other established democracies. Most industrial nations tend to be far more generous with social welfare programs than the United States. Greater generosity is evident in programs related to health, child care, unemployment compensation, and the elderly. To Learning Objectives Copyright © 2011 Pearson Education, Inc. Publishing as Longman

25. Social Welfare Policy Elsewhere We see poverty and welfare as individual concerns, and Europeans support greater governmental responsibility for these problems. 71% of Americans believe that the poor could escape poverty if they worked hard enough, compared to 40% of Europeans. To Learning Objectives LO 18.5

26. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Social Welfare Policy Elsewhere Europeans often have a more positive attitude toward government. Americans are more likely to distrust government action in areas such as social welfare policy. To Learning Objectives LO 18.5

27. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Social Welfare Policy Elsewhere Europeans pay a high price for generous benefits. Tax rates in Western European nations far exceed those in the United States; in some cases top tax rates exceed 50% of income. Funding problems are greater in Europe due to level of benefits and shrinking populations. To Learning Objectives LO 18.5

28. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Understanding Social Welfare Policy Democracy and Social Welfare In the social welfare policy arena, the competing groups are often quite unequal in terms of political resources. The elderly are relatively well organized and often have the resources needed to wield significant influence in support of programs they desire. LO 18.6 To Learning Objectives

29. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Understanding Social Welfare Policy Democracy and Social Welfare (cont.) The elderly are usually successful in protecting and expanding their programs. Influencing political decisions is more difficult for the poor because they vote less frequently and lack strong, focused organizations and money. To Learning Objectives LO 18.6

30. Copyright © 2011 Pearson Education, Inc. Publishing as Longman Understanding Social Welfare Policy Social Welfare Policy and the Scope of Government Nothing more clearly accounts for the growth of government than social welfare spending. Growth of government is driven by the growth of social welfare. American social welfare system grows generation by generation. To Learning Objectives LO 18.6