U.S. Income Distribution in 20013.5%
8.7%
14.6%
23.0%
50.2%
U.S. Income Distribution in 19903.9%
9.6%
15.9%
24.0%
46.6%
U.S. Income Distribution in 19804.3%
10.3%
16.9%
24.9%
43.7%
U.S. Income Distribution in 19704.1%
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
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
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
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
13
Poverty by Region
Percent of Poor Poverty Rate
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
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
14
Poverty by Urbanization
Percent of Poor Poverty Rate
City40%
Suburb39%
Rural21%
17.5
9.1
14.2
0
5
10
15
20
City Suburb RuralP
over
ty R
ate
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
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%
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
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
Percent of Poor Poverty Rate
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
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
19
Poverty by Work Status Families with Children
Percent of Poor Poverty Rate
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
Source: U.S. Census Bureau; http://www.census.gov/hhes/www/poverty.html
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%