Poverty and Social Services - Essay Example

Poverty and Social Services Review Questions Topic 1: Poverty Definition/Poverty & Inequality Trends/Explanations For each of the following, explain whether they are poor under the official U.S. definition. • A homeless schizophrenic man who has $500,000 in a bank account but lives off the money he gets from returning deposit bottles that he finds. Such a person cannot be considered as being poor because poverty in the United States is determined by the amount of income at someone’s disposal. This person has enough money in his disposal and so his problem is not poverty but mental health. • A young woman who lives with her wealthy aunt in a beautiful home. She receives free room and board. She and her aunt enjoy each other's company. She accompanies her aunt to various social events such as the theater, and she happily helps her aunt by doing various chores around the house (shopping, some light cleaning). When she needs money her aunt gives it to her. In a typical year, her aunt gives her $3000. She may not be defined as poor as she has access to enough amount of, not and live in a good house in a family house. Although poverty is defined in terms of family, there is no clear definition on whether the family is only the nucleus or the extended. In this case, the woman lives in a household where there is not poverty and so she is not poor. • A similar young women but who is not related to the owner of the house. She may be defined as poor as she has no access to enough amount of money. Her income is below the threshold for an individual person and it cannot be said clearly that the other woman’s aunt’s income can be tied to her. • A graduate student couple that lives on a total of $11,000. They share a room in a group apartment. The couple pays $200/month for the room (obviously this is not the Bay Area). This couple would fall under the definition of poor because their income is under the threshold for two people which is $ 14,937. • That same couple if they spend more than 1/3 of their income on food. This would remain the same because their income remains under the threshold of poverty for two people. • That same couple if they spend less than 1/3 of their income on food. This would remain the same because their income remains under the threshold of poverty for two people. • An eighty-year-old widow who has lived for sixty years in a house that is now worth $500,000. Her total income is barely adequate to pay the taxes on the house. She survives by keeping the house heated to 60 degrees in the winter, by skipping meals or eating at the local soup kitchen. There are no inexpensive houses in her neighborhood which is the only place where she has a network of friends and feels comfortable. The woman would be considered to be poor because although the value of house if high, that does not give her continue income for her expenditure. • That same woman except that she receives $2,400 per year in food stamps and now spends $3,000 per year on food (including the $2,400 in food stamps). According to the poverty measurement, in calculating he amount of income for an individual, Only cash aid is counted. In this regard, aid received in kind, such as food stamps, is not considered as part of the individuals income, this would mean that the person. Q) Describe the principal criticisms of the official definition of poverty? For each, explain whether correcting it would lower or raise the official poverty estimate. It fails to recognize the individual needs due to the fact it is paternalistic. As a result, it doesn’t solve the problem that is supposed to solve. Q) How would our assessment of the prevalence of poverty be likely to differ if, instead of the official definition, we relied on measures of inadequacy of consumption such as homelessness and hunger? The current definition fails to recognize that different people have different needs depending on where they stay and the composition of the family. If other factors such as inadequacy of consumption such as homelessness and hunger were to be considered, so many people who are not considered poor today would be under the definition of poor. Q) Which socio-demographic groups (e.g. age groups, race/ethnic groups) have the highest poverty rates? Which are a majority of the poor? The issue of socio-demographics and how they realte to poverty is a complex one. In terms of defining whether age or race causes the highest rates of poverty, it is necessary to understand that the ratios of race in America are different and not all the races are represented in the population equally. In this regard, if it was to be assumed that all people are of the same race, age group would have the biggest impact on poverty with many young people being poor because they have not been able to enter the economic system well. Most of these are young people who have just come from college, they have no work and they are in debt. On the other hand, if individual races were to be considered, the ratio of poverty in within every race would indicate that some races have higher poverty rates. In a nutshell, white Caucasians make the beigest percentage of poor people in America but the ratio of poor and rich people among the white Caucasians is lower than that in other races such as African Americas. For each of the following, describe the broad trends in poverty rates over the last several decades and explain the causes of those trends. • The overall poverty rate This has increased and it can be explained by globalization which has left American industries at a less strategic point, killing millions of jobs. Inflation has also affected influenced this as the rate of inflation has been higher than the rate of income increase among households. • The elderly The rate of poverty among the elderly has increased and this can be explained by the fact that the elderly enjoyed the economic boom of the post world war II era. This boom is however not there anymore, they have also had to pay for college fees for their children, leaving their banks empty. • Female-headed families The trend has been a reduction of poverty as women today are more empowered and can access decent jobs. • Blacks This had increased but can only be explained as a result for the general increase on poverty rather than specific causes with regard to the specific group. • Children This had increased but can only be explained as a result for the general increase on poverty rather than specific causes with regard to the specific group. Q) Most poverty spells are short but most of the poor are in long poverty spells. How can we reconcile these two facts? Explain. Poor people are most likely to be in longer poverty spells. Those who are not chronically poor can only likely enter the poverty spell for a short time. To reconcile those in long poverty spells and those in short poverty spell, it is necessary to make sure that the poor are assisted so that they come out of poverty. Q) Why does Richard Freeman believe that a "rising tide" cannot eliminate a substantial? fraction of existing poverty? Are there arguments against this view? Poverty is a complex social issue and does not only have to do with income and material wealth. At the same time, the economy is a self balancing system and where one individual is doing well, this affects another and in the end, the economy will go back to the ways things were. This is why even a rising tide is not a guarantee that the people will be raised from poverty. Most of them can only enjoy the good times for a short period. Q) Why did the official poverty rate fail to decline after 1973 even though GDP per capita grew rapidly? GDP only measures the amount of output from an economy and assumes that this output was evenly produced by all the people. This creates a gap with regard due to various factors such as differences in education level, the role of technology etc. Q) What are the major demand factors that may have increased wage inequality over the last thirty years? People are constantly looking for the most affordable and the best quality products. This has led to manufacturing always under pressure to produce the best products at the lowest costs. Achieving this means cutting costs down and one of the main costs to be considered is the wage bill. Q) How have changes in the supply of different types of labor affected wage inequality over the last thirty years? Many firms are today looking for professional employees with high levels of education. Those who don’t have high levels of education are only able to access t eh low jobs on the market which pay poorly. Q) How have institutional factors affected inequality over the last thirty years? Institutions act as avenues for wealth creation for many people, this means that they asl act as avenues of inequality. Topic 2: Anti-Poverty Programs: Welfare, EITC (Work Incentives) Q) Describe the major trends in federal spending on anti-poverty programs over the last thirty-forty years. Which programs have grown and which have declined? How would these changes be expected to affect the official poverty rate? Which programs are most targeted to the poor? In the early years, federal assistance was directed generally towards children and therefore assistance was given to families with children. However with time, this help is being disbursed even to those who don’t have children. At the same time, federal spending has seemed to take over projects which were previously run by states or in conjunctions with the states. Q) What are the economic arguments for preferring cash transfers rather than in-kind transfers to the poor? What are the economic arguments for in-kind transfers? The main advantage of giving cash instead of in-kind assistance is the fact that different families have different needs. Giving these families in-kind assistance only limits them in accessing those goods. However cash is better because the person chooses what to spend the money on, giving them flexibility and ability to achieve what they need most. On the ever hand, in-kind help is also important because it is hard for the beneficiaries to misappropriate. Money on the other hand can be used in the incorrect way. Q) How did AFDC (i.e., the old welfare program) affect incentives to work? Why might mothers who were eligible for AFDC have lower levels of consumption if they worked than if they did not work? The AFDC program promoted laziness among women because for some of them to qualify, they would have to have low incomes. This meant that those who already qualified would not be motivated to join the workforce because they would be disqualified from the work. Q) It is generally accepted that high implicit tax rates in cash transfer programs such as AFDC discourages work. What are the tradeoffs between high implicit tax rates and other aspects of cash transfer programs? The government can choose to get the money through high tax rates or it can choose to let the people spend the money and have the money go back to the government through other channels in the economy. Q) Why did many Americans in the early 1990's believe that welfare reform was necessary? Because they believed that the welfare program that were in place were inefficient in achieving their purposes. Most people saw the welfare programs as the main hindrance in the development of the economy, with most of these programs seen as promoting laziness while placing a burden on the tax payer. Q) What were the principal elements of PRWORA? PRWORA was intended towards creating a welfare system that would help in addressing some of the issues which most people were concerned with in regard to the fact that most people were arguing that the recipients of the welfare were undeserving. Q) How is the change in the way that TANF is funded (relative to AFDC) change states' incentives to provide welfare? The assistance by the federal government increases incentives for states to give these welfares. At the same time, the less control by the federal government, the easier it is for states to give these welfares. Q) What are the issues surrounding the work requirement under PRWORA? They make it harder for some people who deserve and need assistance to be able to access this help. Q) Why might a lifetime limit on how much time someone can spend on welfare cause people to leave welfare well before they hit the time limit? This would make them aware that they need to do something about their life and that they will need to take responsibility of their lives. Q) Why did welfare caseloads decline in the second half of the 1990's? The welfare reforms made it possible to discourage people from depending to much on welfare. Q) Did welfare reform increase labor force participation among low-skill women with children? Yes, because these parents realized that it was necessary to take care of themselves and not to depend too much on welfare. Q) What is meant by "work first?" What are the arguments for and against work first rather than skill-based training programs? This means that people should first have work and experience and training will come later. Q) What outcomes beyond welfare caseloads are important to examine when evaluating the longer-run effectiveness of welfare reform? It is necessary for welfare programs not to promote laziness or indifference towards poverty. Q) Describe schematically how the earned-income-tax credit affects the budget constraint. It means that the government will have limited access to revene, while at the same time giving more. Q) Explain how it affects work incentives at different points along the budget line. Those who stand to pay more tax if they work harder are discouraged to work harder. Q) In $2006 a single-parent with two children with earned income between $11,000 and $15,100 is eligible for the maximum earned-income tax credit of $4,400. All two children families are eligible for some EITC if their earned income is less than $36,348 and investment income is less than $2,700. Suppose that a single mother with two children would earn $30,000 and have no investment income in the absence of EITC. Why might the earned-income tax credit reduce the labor supply of this individual? Because if the persons took a job that increased her income just enough to be disqualified for the earned-income tax credit, she would end up losing more money and therefore such a person would prefer to remain where she is. Q) Suppose that a job training program costs more than the (appropriately discounted) amount by which it increases worker earnings over their lifetimes. Why might it nevertheless be better to give training than to give cash transfers? Because giving the people training increases their value in the labor market, making it better for the economy. Read More