Microeconomics Chapter 18

education

Affirmative action programs and gains in_____ seem to have increased employment opportunities among black workers.

The number of female householders has increased. The percentage of births to unmarried mothers is five time higher now than it was in 1960. One in ten children lives with a single parent who has not been married. Female householders accounted for an overwhelming amount of the increase in poor families since 1965.

Although the poverty rate among single mothers has decreased since 1960, the number of poor children from such families has more than doubled. Explain.

two thirds

As a result of state reforms, federal welfare reform, and a strengthening economy, welfare rolls dropped by about _____ since 1994.

Social insurance programs (Social Security, Medicare, etc.) are mainly for people who have worked and paid taxes to the program. Income assistance programs do not require beneficiaries to have worked or paid into the programs. They are based on income.

Distinguish between social insurance programs and income assistance programs. Identify examples of each.

Estimating the cost of a nutritionally adequate diet and multiplying that food cost by three. Adjustments for different family sizes and for inflation are made. They consider only cash income.

How does the US Department of Agriculture calculate the official poverty level?

As earned income increases, government benefits are reduced. Working may result in little or no increase in total income because earned income is offset by drops in cash and in-kind transfers. This high marginal implicit tax rate discourages employment. Those who might have a chance for employment in the regular economy may choose the underground economy instead because they can earn income and still receive public assistance. This allows them to avoid the implicit tax.

How does the implicit tax on earned income (in the form of lost benefits from government assistance programs as earned income increases) affect work incentives? How do some people avoid the implicit tax?

At the bottom end, there have been more young women having children outside of marriage, and that has become a source of poverty. At the top end, women have made huge strides in education and earnings, and those people tend to select marriage partners who fall in a similar category. The result of that is a high-income couple, who pass along their advantages to their children, which reinforces the income gap in the next generation.

How have marriage trends widened the gap between low-income and high-income households?

The share of US income going to the highest fifth has increased while the share going to the lowest fifth has decreased. The increase of in two-earner households and the growth of income share going to the top five percent of the population has increased the income share of the highest quintile of the population. The growth of unmarried-parent households has contributed to the decrease in the income share going to the lowest quintile of the population.

How would you explain the shift of the US income distribution the last three decades?

Deregulation,declining unionization, and freer international trade and migration have reduced the pay for workers with less education. New computer based information have reduced the demand for low skilled clerical workers. Computer controlled machinery has also taken over jobs. The supply of less educated workers increased more than the supply of more educated works, thus increasing the rewards of education.

Identify economic trends that have hurt those with few skills and little education, and at the same time have helped those with more skills and good education.

Number of household members working, education, job experience, etc.. Marriage trends have also widened the gap between low-income and high-income households.

List some reasons why household incomes differ. Which factors are the most important?

1970

Money income in the US has become less evenly distributed since_____.

unmarried mothers

More_______ are working now than ever before.

High marginal tax rate on earned income

One undesirable effect of income assistance is a ____________, which discourages employment and encourages welfare dependency.

The elderly have benefited from an increase in Social Security and Medicare spending. In contrast, poverty rates among households headed by unmarried females are substantially higher than for other types of households. Increased divorce rates and a dramatic rise in the percentage of births to unwed mothers have greatly increased the number of female householders since 1965. Thus, more children are living in the types of households with the highest poverty rates.

Poverty among the elderly fell dramatically between 1959 and 1974 and has continued to decline. However, poverty among that portion of the US population that is less than 18 years old is no lower today than in the 1970's. Why have the experiences of these two age groups differed?

Daughters; Daughters

Research suggests that _______ from welfare families are more likely than _______ in other families to participate in the welfare systems themselves and are more likely to have premarital births.

elderly; Social Security; Medicare

The poverty level has dropped most among the______, thanks to _______ and_______.

black and white

The wage gap between _____ and _____ workers narrowed between 1940 and 1976, widened until the early 1990s, and has been narrowing again since 1993.

states

The_____ began experimenting with different systems to encourage more personal responsibility.

Social security, unemployment insurance, workers' compensation, TANF (Temporary Assistance for Needy Families), SSI (Supplemental Security Income), and General Assistance. They do not consider Medicaid, food vouchers, housing assistance, the school lunch program, energy assistance, and so forth.

What government assistance programs does the Census Bureau consider when calculating household income? What programs are ignored?

There have been declines in the number of people on welfare due to work requirements. Welfare declined in states that made more effort to get people to work. The biggest reform was in 1996 with legislation that replaced AFDC (Aid to Families with Dependent Children) with TANF (Temporary Assistance for Needy Families), which gave the states more control over welfare. TANF has a 5 year lifetime limit on cash transfers and requires a certain percentage of people be moved from welfare to work.

What has happened to the number of people on welfare since 1944? What best explains the change over time?

A curve showing the percentage of total income received by a given percentage of households whose incomes are arrayed from smallest to largest.

What is a Lorenz curve?

Median income of all households is the middle income when incomes are ranked from lowest to highest. The mean household income is the average of all household incomes.

What's the difference between the median household income and the mean household income?

Types of discrimination: School admissions, funding, quality, housing, employment, and career advancement. Each of these affect the poverty rates for blacks and whites. Discrimination in one group affects opportunities in other groups. To detect discrimination you could look at poverty rates or earning levels within specific groups that have been adjusted for education and experience. Blacks still earn less than whites after adjustments.

Which types of discrimination may cause an earnings gap between white and black workers? Consider schooling as an example. How would researchers detect racial discrimination in employment and in housing?

It would have a major impact on the total income levels of the elderly. The elderly have relatively high voter participation rates and are a strong political force. It would also affect the relatives of the elderly. People under 65 would be concerned about future benefits, but the elderly's family would have to spend more to take care of them.

Why is it difficult to pass legislation to reduce the growth in Social Security or Medicare benefits?

Young, single motherhood

______ is a recipe for poverty.