Distribution of Income in U.S. (2000)

U.S. Income Distribution in 20013.5%

8.7%

14.6%

23.0%

50.2%


9.6%

15.9%

24.0%

46.6%


10.3%

16.9%

24.9%

43.7%


10.8%

17.4%

24.5%

43.3%

2

Distribution of Income in U.S. (2000)

Group Annual Family Income

Bottom 5th Under $24,000

Second 5th $24,001 - $41,000

Third 5th $41,001 - $61,378

Fourth 5th $61,379 - $91,700

Top 5th $91,701 and over

(Top 5% $160,250 and over)

3

More inequality: Rich get richer and poor get poorer?

1996 1976 nominal 1976 real 1956 nom 1956 real

bottom 20% 19680 7505 19824 2438 12923

second 20% 34315 12499 33015 4103 21749

third 20% 51086 17386 45924 5443 28852

fourth 20% 75316 24012 63426 7380 39119

Income cut off for each group over time

4

What SHOULD the distribution of income look like? Three theories

UtilitarianismMaximize overall happiness

Diminishing marginal utility of money

Liberalism“Veil of Ignorance”

LibertarianismNo redistribution at al

5

The Definition of Poverty

Threshold developed in 1963-64– Calculated money necessary for nutritionally

adequate diet “designed for temporary or emergency use when funds are low”

– Multiplied this amount by three – Adjusted by the size of the family, number of

children, and if householder is over age 65 Changes Over time

– Adjusted for the rate of inflation (CPI)

6

Poverty Threshold in 2003

Under Age 65 Over Age 65One Person $9,573 $8,825

One Adult Two AdultsTwo People $12,682 $12,321Four People $18,725 $18,660Six People $24,126 $24,586Eight People $30,019 $30,275

Source: http://www.census.gov/hhes/poverty/threshld/thresh03.html

7

Problems with the Threshold

May Understate Poverty– Work expenses– Child care expenses– High cost of living areas– Food now less than 1/5th

of American’s budgets– Does not consider health

status– Does not consider taxes,

particularly Payroll Taxes

May Overstate Poverty– Does not include in-kind

transfers– Low cost of living areas– Ignores assets

8

Additional Words of Caution

Poverty is an absolute measure, but we may also care about relative well-being

It is not just “in” or “out” of poverty that matters, but socioeconomic well being depends on how far below or above the poverty line a family is

9

Who Are The Poor?

We will examine who are the poor by:– Age– Race– Family Structure– Region– Urbanization

% of poor population vs. group poverty rate

10

Poverty by Age

Percent of Poor Poverty RateUnder 5

11%

5 to 1724%

35 to 4412%

25 to 3413%

18 to 2413%

45 to 549%

55 to 648%

65+10% 20.3

16.6 16.512.8

9.67.6 8.9 10.2

0

5

10

15

20

25

Und

er 5

5 to

17

18 to

24

25 to

34

35 to

44

45 to

54

55 to

64

65+

Pov

erty

Rat

e

Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html

11

Poverty by Race

8.2

24.4 22.5

11.8

0

5

10

15

20

25

30

White(non-Hisp.)

Black Hispanic Asian

Pov

erty

Rat

e

White (non-Hisp.)45%

Asian4%

Black25%

Hispanic26%

Percent of Poor Poverty Rate


12

Poverty by Family Structure

Percent of Poor Families Poverty Rate

2-parent41%

single mom51%

single dad8%

5.4

13.5

28

0

5

10

15

20

25

30

2-parent single dad single momP

over

ty R

ate


13

Poverty by Region


Midwest19%

West23%

N.East17%

South41%

11.3 10.7

14.112.6

02468

10121416

Nor

thea

st

Mid

wes

t

Sou

th

Wes

t

Pov

erty

Rat

e


14

Poverty by Urbanization


City40%

Suburb39%

Rural21%

17.5

9.1

14.2

0

5

10

15

20

City Suburb RuralP

over

ty R

ate


15

Trends in Poverty Over Time

0

5

10

15

20

25

30

35

40

45

1959

1963

1967

1971

1975

1979

1983

1987

1991

1995

1999

2003

# in poverty (millions) % in poverty

35.9

12.5%


16

The Labor Market Impacts Poverty

The Ability To Find A Job– Unemployment – Discouraged Workers

The Quality of Jobs– Full-Time vs. Part-Time Work– Wage Rate

17

Ohio’s Labor Market

Ohio Was Hit Hard by the 2001 Recession– Lost 234,000 jobs (3.9%) between 2000 and 2003 – In July 2004, Ohio still had 217,000 fewer jobs than

when the recession began March, 2001– Only two other state (MI and MA) had as big or

bigger % job loss as Ohio The manufacturing sector has been declining

since 1990 – from 21.7% of state’s jobs in 1990 to 15.4% in 2004

Source: Policy Matters Ohio: The State of Working Ohio

18

Poverty by Work Status All Families


no workers

39%

FTYR25%

PT or PY36%

27.2

3.5

25.3

0

5

10

15

20

25

30

no workers FTYR PT or PYP

over

ty R

ate


19

Poverty by Work Status Families with Children


no workers

31%

FTYR28%

PT or PY41%

79.2

5.3

40.6

0

20

40

60

80

100

no workers FTYR PT or PYP

over

ty R

ate


20

Wages in The U.S.

Median Income has fallen since 1999 from $44,922 to $43,318 in 2003

20.4% of jobs in the U.S. pay below the poverty threshold for a family of four

Source: Working Hard, Falling Short; http://www.aecf.org/initiatives/jobsinitiative/workingpoor.htm

21

Wages in Ohio

Ohio’s median wage fell in 2003 to $13.14, below the national median

19.5% of jobs in Ohio pay below the poverty threshold for a family of four

Source: Working Hard, Falling Short; http://www.aecf.org/initiatives/jobsinitiative/workingpoor.htm

22

Distribution of Government Transfers

bottom27%

lower middle26%

middle19%

upper middle14%

top14%

Program Name Target Group

Number of

CurrentRecipients

Average Benefit

per Recipient($ per month)

Total Annual

Payments($ billions)

% of Federal

Spending(Approx.)

SSI: Supplemental Security Income Aged and disabled poor 7 $355 $29 1.45%

TANF: Temporary Aid to Needy Families Poor families with children 6.9 $160 $22 1.10%

EITC: Earned Income Tax Credit Working Poor 18.6 $120 $27 1.35%

GA: General Assistance poor people not covered elsewhere 1.4 $190 $3 0.15%

Total 33.9 $81 4.05%

Cash Assistance Programs (2000)

Program Name

Number ofCurrent

Recipients

Average Benefitper Recipient($ per month)

Total AnnualPayments

($ billions)

% of FederalSpending(Approx.)

Food Stamps 20 $92 $22 1.1%

Medicaid 42 $367 $185 9.3%

Housing Assistance 11 $159 $21 1.1%

School lunch program 26 $26 $6 0.3%

Women, Infants, and Children (WIC) 8 $31 $4 0.2%

Total 107 $238 12.0%

In-Kind Welfare Programs (1998)

Program NameBenefits Paid

(billions)

% of FederalSpending(Approx.)

Social Security Old Age 334 16.7%

Social Security Disability 51 2.6%

Medicare 223 11.2%

Unemployment Insurance 23 1.2%

Workers' Compensation 52 2.6%

Veterans' Benefits 42 2.1%

Total 725 36.3%

Major Social Insurance Programs (1999)

26

Medicaid Spending

Medicaid Spending by Age

age 65 +32%

children under 21

16%

adults with children

13%

disabled and blind38%

other1%

Medicaid Spending by Age

inpatient27%

skilled nursing13%

physicians7%

home health5%

other15%

drugs7%

nursing home26%

Documents

Distribution of Income in U.S. (2000)