Chapter 10

1. Chapter 10 The Poor, the Underclass, and Public Policy

2. The Beginnings of Welfare: Roosevelt • During the Great Depression, the Roosevelt administration worked with Congress to provide Americans suffering under the extremely poor economic conditions with various forms of government relief. • One initiative was a large-scale program that provided “direct relief”—cash payments to families in desperate need. It was managed by the individual states. • The 1935 Social Security Act established a national social insurance program. • Enrolled individuals would receive full coverage after 10 years of contributions made by employees and employers. • A system of unemployment insurance was also established. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

3. The Beginnings of Welfare:Roosevelt, cont. • These types of programs are referred to as entitlements. • All who meet specified prerequisites are entitled to receive them, and the government is committed to providing the necessary funding. • Some entitlements, such as Aid to Families with Dependent Children (AFDC) and related public assistance programs, are “means-tested” -- they are only available to people with incomes below a specified threshold. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

4. Rediscovery of Poverty: Kennedy and Johnson • During the Kennedy and Johnson administrations (1961-1968), three new programs were initiated: • the food stamp program • Medicare • Medicaid • Johnson regarded what he called the “War on Poverty” as one of the top priorities of his administration. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

5. The Official Definition of Poverty • Mollie Orshansky (1974), an economist with the Social Security Administration, developed a measure of poverty that would become the official federal standard. • Orshansky put two pieces of information together from government surveys: • The cost of a minimum nutritious diet for a family of four. • The proportion of income the average family then spent on food. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

6. The Official Definition of Poverty, cont. • In 1960 Orshansky calculated the poverty line for a family of four to be $3,000. • By 2008 the poverty line was $22,000. • The official poverty line is adjusted annually for inflation, but it does not take into consideration standard of living. • The poverty line measure has been criticized for underestimating the number of Americans in poverty. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

7. How Many Poor? Who are the Poor? • Between 37 and 65 million Americans are poor. • Race and poverty • There are many more white poor than black or Hispanic poor. • Blacks, although a minority of the poor, are 3X more likely than whites to be poor. • Hispanics are two and half times more likely than whites to be poor. • Age and poverty • A high proportion of the poor are children. • Few of the poor are elderly. • The rate of poverty among seniors declines significantly after accounting for cash transfers. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

8. How Many Poor? Who are the Poor? cont. • Gender and poverty • There are about as many poor in families headed by married couples as in families headed by single women. • Even after cash transfers to female-headed households with children, a large percentage remain in poverty. • Geography and poverty • Only a minority of the poor live in the central cities of metropolitan areas. • The majority are spread out among suburbs, small towns, and rural areas. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

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13. Trends in Poverty • Similar to the trends we observed for wages, income, and wealth, poverty rates have shifted with the transition from the Age of Shared Prosperity to the Age of Growing Inequality. • The rate of poverty among families with children has not seen the same level of decline witnessed among seniors. • The proportion of people with household incomes under half the poverty level has climbed substantially since the late 1970’s. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

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16. The Underclass and the Transitory Poor • Many Americans experience poverty temporarily due to loss of a job, physical injury, or divorce. • Those who experience poverty as a result of these events are often able to climb out of poverty after a short period of time. • However, many others are unable to lift themselves and/or their families out of poverty, often due to the following conditions: • Disability, • Meager retirement incomes, • Low-wage jobs, and • The inability to hold a job for a variety of reasons. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

17. The Underclass andthe Transitory Poor, cont. • University of Michigan’s Panel Study of Income Dynamics (PSID) has tracked the incomes of a large national sample of families since 1969. • Their data indicates about a quarter of all families will be poor at least once in a 10-year period, but only a fraction of them will remain poor for an extended period. • The majority of children who are raised in poverty are not in poverty as adults. • However, the likelihood of blacks remaining in poverty is 1 in 4 compared to a 1 in 10 for whites. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

18. The Underclass andthe Transitory Poor, cont. • The term “underclass” is applied to a smaller subset of the poor who are bound to their impoverishment by personal characteristic or structural circumstances. • This is a controversial term since the label often implies flawed character. • Sociologist William J. Wilson accepts the grim portrait of the poor and defines members of the underclass as having marginal economic positions coupled with geographic isolation. • Wilson focuses on the inner-city poor who are caught in the postindustrial economic trap of shrinking job opportunities. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

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20. Restructuring Welfare • As the entitlement programs enacted during the 1960’s and 1970’s began to consume a greater proportion of the national budget, public opposition to them increased. • Under the Clinton administration, the Personal Responsibility and Work Opportunity Act (1996) scaled back three of the major means-tested programs: • Aid to Families with Dependent Children (AFDC) • Supplemental Security Income (SSI) • Food Stamps © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

21. Restructuring Welfare, cont. • The 1996 welfare reform legislation instituted major changes in the way AFDC was distributed. • AFDC lost its entitlement status and became Temporary Assistance for Needy Families (TANF). • States’ distribution of this form of assistance was now subject to two key limitations: • Families could not receive more than five years of assistance, whether consecutive or nonconsecutive. • Most adults benefiting from TANF would be required to begin work of some sort within two years of receiving assistance. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

22. Restructuring Welfare, cont. • The welfare reform of 1996 coupled with other factors (including a period of economic expansion and declining unemployment) reduced welfare dependency. • However, the welfare reform of 1996 was less successful in reducing poverty in the United States. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

23. The Mystery of Persistent Poverty • Since the early 1970’s, the United States’ economy has more than doubled, and mean family income has increased by nearly 50%. • This remarkable economic growth has not resulted in reduced poverty levels, which are similar to what they were in the early 1970’s. • Three factors may help account for the current rate of poverty: • economic change, • a society-wide revolution in family patterns, and • shifts in federal policy. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

24. The Mystery of Persistent Poverty, cont. • Economic Trends • The Age of Growing Inequality has seen a proliferation of unattractive, low-wage, and sometimes hazardous jobs. • This period has also witnessed a significant decline in the number of better-paying blue-collar jobs. • Recessions and high unemployment have also had an effect on the rate of poverty. • Finally, even as more members of poor families have been working more hours in recent years, they have been working longer hours for lower real wages. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

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27. The Mystery of Persistent Poverty, cont. • Changing Family Patterns • Since 1960 sweeping changes in family patterns have reinforced levels of high unemployment. • Americans have become less likely to marry and more likely to divorce. • Children are 6X more likely to be born to unwed parents. • Families with children are almost 2X as likely to be headed by females. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

28. The Mystery of Persistent Poverty, cont. • The proportion of the poor population living in female-headed families has nearly doubled from 18% in 1960 to 35% in 2007. • Divorce and unwed motherhood are no longer stigmatized as they once were; Americans have become much more tolerant in this regard. • Single mothers face a number of difficulties that have an effect on their job earnings. • For example, the conflict between the nurturer and provider roles are especially tough for single mothers who bear the burden of raising their children alone. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011

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30. The Mystery of Persistent Poverty, cont. • Government Policy • The failure of the government to uphold the value of the minimum wage and maintain the protections of the unemployment insurance system have certainly pushed some working poor families below the poverty line. • In addition, since the 1980’s, national policy has focused on reducing inflation rather than maintaining employment as well as on increasing profits rather than upholding wages. © Pine Forge Press, an Imprint of SAGE Publications, Inc., 2011