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1. Capitalism and Labor Markets2. Measuring Poverty
a. Absolute Measurements: pros and consb. Relative Measures: pros and cons
3. Returns4. Problems with CEM…
A word on notes…my slides sometimes contain a lot of text…your job is not to transcribe, but to summarize ideas in your own words and jot down notes…that helps you learn
Slides will be put online on a semi-regular basis
Poverty in Perspective
Poverty in America is a relatively new problem related to Blacks and other minority groups. In the past, other groups came to America, worked hard and prospered. They did not experience the sorts of social problems we now see in poverty stricken areas.
What do you think of this statement? Myth or truth?
Poverty in Perspective
“The “greatest danger” to America’s future is the “existence of of an ignorant, debased and permanently poor class in the great cities…The members of it come at length to form a separate population. They embody the lowest passions and the most thriftless habits of the community. They corrupt the lowest class of working poor around them. The expenses of police, prisons, of charities and means of relief, arise mainly from them.”
A Quote About the Poor…
The “greatest danger” to America’s future is the “existence of of an ignorant, debased and permanently poor class in the great cities…The members of it come at length to form a separate population. They embody the lowest passions and the most thriftless habits of the community. They corrupt the lowest class of working poor around them. The expenses of police, prisons, of charities and means of relief, arise mainly from them”
1854, Charles Brace. Referencing the Irish of NYC…
Jews in Poverty… Jewish slums of Lower East Side
Former neighborhood of Irish immigrants
500 people per acre on Lower East Side of NYC Homeless families…abandoned kids…
desperately poor
Poverty and Crime
NYC Police Commissioner claims Jews account for ½ the crime in NYC
“…perhaps half of the criminals should be of that race when we consider that ignorance of language, more particularly among men not physically fit for hard labor, is conducive to crime…They are burglars, firebugs, pickpockets, and highway robbers…” Steinberg, p.113
Prostitution: “…stay away from Allen, Chrystie & Forsyth St…there is an official flesh trade in the Jewish quarter.” Steinberg, p.114
Poverty in Perspective…Nothing New…
Researchers estimate that between 1880 and 1910, between 35 and 47 percent of all Americans lived in poverty.
05
10
1520
253035
4045
50
1870 1890 1910 1935 1944 1955 1970 1982 2004
Percent in Poverty
Capitalism
Societies that possess capitalist economies are relatively new to the planet… Some date origins to the 16th century Full blown capitalist societies do not really emerge until
the late 19th century America post civil war
What sorts of things characterize a capitalist economy?
Capitalism
a form of economic activity in which some people own the means of production (factories, mines, hotels, software companies etc.) and in which others, lacking access to the means of production, are forced to sell their labor power for a wage in a labor market.
Production is geared toward the pursuit of profit and is regulated through market competition.
Profits that are generated belong to the owners of the means of production.
I know…that’s a mouthful…lets focus in…
The “Labor Problem” In a capitalist society, human labor (a person's ability
to work) becomes something that is bought & sold, just like blankets, coal or steel…
Just as farmer sells chicken to gain money…Workers sell their ability to work to gain $ “Labor for sale…Labor for sale!”
In a capitalist society, a person’s well being/standard of living will primarily be determined by their participation in the labor market
Given these societal rules…who might we predict will have a low standard of living?
Poverty and the Labor Market Given these societal rules…who
might we predict will have a low standard of living?
Poverty and the Labor Market In a capitalist society, a person’s well being/standard of
living will primarily be determined by their participation in the labor market
People who would like to work but can not find someone to buy their labor Unemployed in search of jobs Currently six people competing for every one job opening
People who find it hard to sell their labor Elderly, disabled, single parents , people with few skills
People who sell their labor, but are paid so little they are poor Working poor (most of the poor families in America fall into this
category)
People who choose not to sell their labor Able bodied idle…
Poverty in America
Tables like this raise many questions…one of which is, what exactly are researchers measuring?
Measuring Poverty…
Your readings mentioned an “absolute” measure of poverty…anyone catch what this is about?
Absolute Poverty
Absolute Poverty
“a truly basic- absolute- needs standard” (Iceland, p.21)
A measurable subsistence level of income or consumption below which people are deemed economically disadvantaged or deprived (Iceland, p.21)
A monetary figure below which a “family or person risked being without adequate shelter, clothes, or food.” (Iceland, p.22)
Unable to maintain a “subsistence standard” that is the amount of money required to survive…” (Iceland, p.36)
Poverty in America
US Government Uses an Absolute Measure of Poverty Anyone remember how it was/is
determined?
1. Chapter 2 of the Rank book introduces you to a woman named Molly Orshansky. Who was Molly and how did she conceptualize poverty. What was her basic formula for calculating a poverty threshold?
US Uses and Absolute Measure of Poverty
Molly Orshansky of Social Security Administration uses “Economy Food Plan”
1955…Cost of food estimated to be 1/3 of after tax income
Took this cost and multiplied it by 3 Adjusted it for family size
Threshold adjusted annually for inflation using Consumer Price Index (CPI)
Today the Govt. adds up before tax cash income from all sources: earnings, pensions, interest, rental income, asset income, cash welfare…if below threshold…household is considered poor.
Absolute Poverty…Why Some Like this Meaure Conceptually Easy
If people don’t have enough to eat and are starving…there is little debate that they are in poverty…
No need to compare people to the overall standard of living in a society…
Absolute Poverty…Why Some Don’t Like it
Government Definition of Income does not include non-cash government benefits designed to help people make ends meet (p.23-24)
Food stamps, subsidized housing, Earned Income Tax Credit
The average monthly Supplemental Nutrition Assistance Program (Food Stamp) benefit was about $96 per person and about $215 per household in FY 2007 (http://www.fns.usda.gov/fsp/faqs.htm#9)
When calculate in these benefits there are less poor people than government statistics suggest
Most Social Scientists Feel Government Measure is Inadequate Very Crude and Outdated
Food budget times 3…no longer adequate formula There are actually more poor people than
government statistics suggest
Does not take into account “variation in expenses that are necessary to hold a job and earn income- expenses that reduce disposable income.” Taxes, transportation costs, cost of child care
Does not account for what it actually cost to live in most regions…except for Alaska and Hawaii, no geographic variation…tour-audio
8. The Pathway’s PA table suggests a different poverty threshold for people living in Delware County. The table above says a two person family is not poor if they make more than $14, 570. What does Pathways PA think it you need to make ends meet for a two person family such as an adult and an infant? Base on your answer to number, explain why there is such a difference in thresholds.
Family of Two…$14,000 or $41,000
Absolute Poverty…Why Some Don’t Like it
As standards of living change, so do should society’s conception of what poverty is (Iceland, p.23)
A developed nation should be concerned with more than whether its citizen are “Unable to maintain a “subsistence standard” that is the amount of money required to survive…”
“People are poverty stricken when their income, even if adequate for survival, falls markedly behind that of the community.” , John Kenneth Galbraith, economic advisor to FDR and JFK:
Relative Deprivation?
Sociological concept…heard it before?
Relative Deprivation
Research on jobs satisfaction Army Air Force has many opportunities for advancement Military Police has few opportunities for advancement
Military Police happier…compare themselves to others who have not been promoted while the Army Air Force would compare themselves to others who had been promoted
Job satisfaction studies have less to do with salaries than with how people’s salaries compared to others
New Research on Health…The Higher Status your job, the healthier you are, even controlling for income and other factors…
So how does it relate to poverty…?
Relative Deprivation
Argument that poverty should be thought of as a relative phenomenon… “How does an individual or family compare to the mainstream standard of living”
You don’t need a car, a TV, a computer, an internet connection, a cell phone or periodic vacation or trip to the zoo to survive…
But if you can’t afford these things, you’re outside the mainstream and at a relative disadvantage
Socially excluded from mainstream; May lack skills that will be of use in the job market
“Being relatively poor in a rich country can be a great capability handicap, even when one’s absolute income is high in terms of world standards.” Amatya Sen, Noble Prize in Economics, 1998 (Cassidy, p.7)
A Relative Measure
Relative Poverty
“a condition of comparative disadvantage, to be assessed against some relative, shifting or evolving standard of living” (Iceland, p.21)
“Relative poverty can be defined as comparative economic deprivation” (Iceland, p.25)
“Those whose resources are significantly below the resources of others, even if they are physically able to survive, may not be able to participate adequately in social organizations and relationships, and thus are incapable of fully participating in society” (Iceland, p.25)
Organization of Economic Cooperation and Development (OECD)
Relative Measures are more appropriate for rich nations where most people are not faced with starvation and death…
“…poverty should be thought in terms of exclusion from standards of living generally available to others in the society” (Iceland, p.26)
Need to measure “deprivation relative to social norms and standards” (Iceland, p.36)
So how do you develop a relative measure of poverty
Median income in 2006 = $48,201
So How Do You Set a Measure?
Usually some percentage of the median income
Median=mid point
UK 50% of median
Others range from 40% to 60%
So…median income in the US in 2006 was $48,201…
Using the UK formula…Poverty threshold would have been $24,100.50 instead of $10,400
Relative Poverty, 2005
Outline Relative Measure of Poverty
NYC’s Choice Some Snapshots of the poor Poverty Compared
Social Market Economies and Liberal Market Economies
As you saw on Tuesday… lots of notes in this class. Will post slides. As for all the data, don’t need to that X of poor lived in cities, but will need to know how levels of urban poverty compare to suburban poverty
Absolute Poverty
Absolute Poverty
“a truly basic- absolute- needs standard” (Iceland, p.21)
A measurable subsistence level of income or consumption below which people are deemed economically disadvantaged or deprived (Iceland, p.21)
A monetary figure below which a “family or person risked being without adequate shelter, clothes, or food.” (Iceland, p.22)
Unable to maintain a “subsistence standard” that is the amount of money required to survive…”(Iceland, p.36)
A Relative Measure
Relative Poverty
“a condition of comparative disadvantage, to be assessed against some relative, shifting or evolving standard of living” (Iceland, p.21)
“Relative poverty can be defined as comparative economic deprivation” (Iceland, p.25)
“Those whose resources are significantly below the resources of others, even if they are physically able to survive, may not be able to participate adequately in social organizations and relationships, and thus are incapable of fully participating in society” (Iceland, p.25)
Relative Poverty, 2005
Relative Measure Pros…Why some like it?
Organization for Economic Cooperation and Development (OECD)
Relative Measures are more appropriate for rich nations where most people are not faced with starvation and death…
“…poverty should be thought in terms of exclusion from standards of living generally available to others in the society” (Iceland, p.26)
Need to measure “deprivation relative to social norms and standards” (Iceland, p.36)
Relative Measure…Why some dislike it
Poverty should be seen as an “objective” phenomenon, not something that changes based on notions of what a decent standard of living is
Poverty becomes a moving target…harder to confront
Measure can be deceptive…?
Poverty levels might fall during bad times when median income drops
Poverty levels might rise during good times when median income rises sharply Example of Ireland in text (p.27)
Absolute vs. Relative
Some suggests that“…we should accept that there is no definitive way to decide who is impoverished (Cassidy, p.4)
National Academy of Sciences concluded that the Census Bureau measure “no longer provides an accurate picture of the differences in the extent of economic poverty among population groups or geographic areas of the country.” (Cassidy, p.4)
Solution: Rework a “new poverty threshold…by determining, for a reference family of two adults and two children, a dollar amount for food, clothing, shelter and utilities and then increasing that dollar amount by a modest percentage to allow for other needs (such as household supplies, personal care, and non-work related transportation. (Iceland, p.31)
New York City
The Bloomberg administration is considering changing the way poverty is measured in New York City. Why do they feel the need to revise the poverty threshold? What are they planning to do?
New York City…
In its new formula, the city would set its poverty threshold at about 80 percent of the median amount spent by American families on essential goods, which would include food, rent, clothing, utilities, and a little extra. Costs would be adjusted to reflect New York prices.
The city’s formula would take into account the money families must spend annually on necessities including rent, utilities and child care. But it would also factor in the value of financial assistance received, like housing vouchers or food stamps.
Poverty in NYC 2008…Poverty rate of 23% or 19%? Twenty-three percent of New York City residents live in
poverty, according to a new formula unveiled by Michael Bloomberg yesterday, which he says is more accurate than the one used by the federal government, which puts the poverty number for the city at 18.9 percent.
According to the current federal formula, a family of two adults with two children is at the poverty line if they make $20,444 or less. Under Bloomberg's formula, that income level deemed at the poverty level jumps to $26,138. Under the federal formula, the poverty level for a single adult is $10,488. Under Bloomberg's, it is $12,114. (http://www.observer.com/2008/politics/official-explanation-bloombergs-new-poverty-numbers)
Poverty Rates by Measure, 1999-2000: Which way should we go? Why?
11.3
13.8
21.1
0
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Absolute NAS Relative
Poverty
Absolute Poverty Unable to maintain a
“subsistence standard” that is the amount of money required to survive…”
Relative Poverty “…poverty should be thought
in terms of exclusion from standards of living generally available to others in the society.
The “Labor Problem” In a capitalist society, human labor (a person's ability
to work) becomes something that is bought & sold, just like blankets, coal or steel…
Just as farmer sells chicken to gain money…Workers sell their ability to work to gain $ “Labor for sale…Labor for sale!”
In a capitalist society, a person’s well being/standard of living will primarily be determined by their participation in the labor market
Given these societal rules…who might we predict will have a low standard of living?
Poverty and the Labor Market Given these societal rules…who
might we predict will have a low standard of living?
So now we have a measure…let’s look at who the poor are and dispel some myths
Most poor people live in inner cities?
Where do the Poor live?
2000 42 percent in inner city 36 percent in suburbs 22 percent in small towns and rural areas
American FactFinder
2005:For First Time, Poverty Shifts to the Suburbs - Newsweek Society - MSNBC.com
Currently, 38 million Americans live below the poverty line, which the federal government defines as an annual income of $20,000 or less for a family of four. But for the first time in history, more of America's poor are living in the suburbs than the cities—1.2 million more, according to a 2005 survey.
Source: Henslin, chapter 7, 2006
So now we have a measure…let’s look at who the poor are and dispel some myths
Most poor people are in female headed families…usually very large families.
Family Structure
Myths about Family Size
Family Size for Families on Temporary Aid for Families in Need (TANF)
Avg. 1.9 kids
78% have two or less 49 % have 1 kid 28% have 2
So now we have a measure…let’s look at who the poor are and dispel some myths
Most poor people minority group members.
Who are the poor?
2007: Poverty By Race
8.2
24.5
21.5
9.8
0
5
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15
20
25
White Black Hisp Asians
Poverty
So now we have a measure…let’s look at who the poor are and dispel some myths
Most poor families do not have anyone in the labor market.
Work and Poverty
The Work History of Families in Poverty, 2000
Source: US Census; Poverty in the US, 2000 (2001: Table C) in Kerbo, p.259
Work History 2000
No full time worker 46.1%
1 full time worker 44.5%
2 or more full time workers 9.4%
Working…but poor.
Most poor families have at least one worker: 61% of poor families had at least one worker in
2005 (4.6 million families) http://www.epi.org/publications/entry/webfeatures_viewpoints_econ_oppty_and_poverty
Overall, 63% of U.S. families below the federal poverty line have one or more workers, according to the Census Bureau. They're not just minorities, either; nearly 60% are white. About a fifth of the working poor are foreign-born, mostly from Mexico. And the majority possess high school diplomas and even some college -- which 30 years ago would virtually have assured them a shot at the middle class. (Business Week MAY 31, 2004)
Another fact to note…Education
22.2
9.2
5.9
3.2
0
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25
<H.School High School SomeCollege
College
Poverty
2. Rank notes that poverty can be reduced, and offers the case of elderly poverty in America as an example. Please describe the trend regarding elderly poverty and explain the reasons for this trend. Be sure to cite statistics from the text as evidence in your answer.
Lowering Poverty…
Government policies (Social security was key) led to a major reduction in poverty among seniors
4. Is the poverty rate in the US higher or lower to comparable nations around the world?
Absolute Poverty, mid-1990s source: Iceland, p.63
13.615.6
6.3
4.3
0.3
-1
1
3
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US UK Sweden Norway Lux
Poverty
Relative Poverty, 2005
Absolute Child Poverty, 2001 (source: Iceland, p.66)
18.5
12.4
3.72.8
1.102
46
810
1214
1618
20
US Germ Swed Norway Lux
Child Pov
Child Poverty, Relative Measure
Children in Single Mother Families: Percent Poor, 2003
22
30
6
2
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20
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US Finland Sweden
PoorExtremely Poor
4. Is the poverty rate in the US higher or lower to comparable nations around the world?
What does Ranks suggest are the main reasons for this discrepancy? Be sure to incorporate a cite from the text in your answer
4. Is the poverty rate in the US higher or lower to comparable nations around the world?
What does Ranks suggest are the main reasons for this discrepancy? Be sure to incorporate a cite from the text in your answer.
Weaker Safety Net…More low wage jobs
Capitalism, Society and “Safety Nets”
We already noted the following: “ “In a capitalist society, a person’s well being/standard of living will
primarily be determined by their participation in the labor market BUT different societies possess different institutional arrangements that will also impact well being/standards of living”
Market is chief source of well being In capitalist society labor (one’s ability to work) is a commodity
that is sold for a wage (income) which is used to buy food, shelter, clothing, child care, health care, etc.
Family is another source of well being Kin help each other by pooling money, transferring money,
passing money on, and by providing services such as child care
Government can be another source of well being Role of government in insuring well being will vary, for instance
government might provide universal access to child care as a right
Capitalist Democracy: Politics Can Replace Markets Social Market Economies vs. Liberal Market
Economies
Capitalist Economies are Embedded in Larger Societies
Different societies possess different institutional arrangements that will impact things like inequality and poverty
Liberal Market Economies (Can think Free Market) Limited government regulation, few universal government
programs and more means tested public assistance programs Free day care for low income, the rest purchase in market Limited child allowances for children provided to low income
household
Social Market Economies supplement labor market with social wage
Significant government regulation, many universal government run social insurance programs Free day care for all citizens Generous Child allowances provided to all from government
Different Capitalist Economies Employ Different Institutsions
Public Assistance Means tested programs designed mainly for the poor
(Marger: 213)
Targeted programs designed for certain populations
Means tested income tested… “person or family has to earn below a certain
amount to qualify” (Iceland 2003: 126)
Social Insurance Programs that provide cash or benefits to all eligible
citizens (Marger: 213)
Universal programs
Social wage the share of a nation’s resources that is distributed according to
social rather than strict market criteria.
Capitalist Economies are Embedded in Larger Societies
Different societies possess different institutional arrangements that will impact things like inequality and poverty
Liberal Market Economies (Can think Free Market) Limited government regulation, few universal government
programs and more means tested public assistanceprograms Free day care for low income, the rest purchase in market Limited child allowances for children provided to low income
household
Social Market Economies supplement labor market with social wage
Significant government regulation, many universal government run social insurance programs Free day care for all citizens Generous Child allowances provided to all from government
Capitalist Democracy: Politics Can Replace Markets Social Market Economies vs. Liberal Market
Economies
Spending Levels of Social Programs Vary
They are the result of decades long political struggles between unions and business, and different political parties.
Social Welfare Spending, (as pct. of gross national product)
0
5
10
15
20
25
30
35
40
Sweden Neth Den Fran Germ Italy UK US
Spending Levels of Social Programs Vary
They are the result of decade long political struggles between unions and business, and different political parties.
Regardless of the outcome, all social spending comes from taxes.
Funding the Welfare State: Household Tax Wedge, 2003
4. Is the poverty rate in the US higher or lower to comparable nations around the world?
What does Ranks suggest are the main reasons for this discrepancy? Be sure to incorporate a cite from the text in your answer.
Weaker Safety Net…More low wage jobs…more on this next week....but for now note the following
Persistent Problem…the low wage labor market in America
“America’s bottom end workers fare worse than their counterparts in other industrialized countries. Comparable German workers earn more than twice as much” (Iceland, 2003)
Bottom 10% of US workers earn 37% of US median wage
Other industrialized countries earn 60-76% of median wage
How would this reduce poverty?
Why do you think this is the case…why would a janitor here make 37% of the median and a janitor in Germany make 70%?
Persistent Problem…the low wage labor market in America “America’s bottom end workers fare worse than their
counterparts in other industrialized countries. Comparable German workers earn more than twice as much” (Iceland, 2003)
Bottom 10% of US workers earn 37% of US median wage
Other industrialized countries earn 60-76% of median wage
Unions are weaker in the United States so low wage workers have less bargaining power They simply can’t demand as much
Employment and wages are less regulated in US liberal market economy, we are a more laissez faire society (elbow society, cowboy capitalism)
Extension laws in Germany extend Union contracts to all firms in sector
France has higher minimum wage that is linked to inflation
Low Wage Labor markets
Poverty Reduction
US -28.5%
Germany -65.5
Italy -64.7
England -50
Canada -50
Denmark -72.1
Belgium -80.6
Sweden -80.4
Pct. Unionized ‘98
Sweden 91%
Italy 44%
Germany 29%
Canada 37%
Netherlands 26%
Australia 35%
UK 33%
US 15.4%
Next…
The “Fluidity” of poverty Structural Underpinnings of Poverty
