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Economics of Poverty Week 3

by: Aaron Notetaker

Economics of Poverty Week 3 ECON 2456

Marketplace > University of Connecticut > Economics > ECON 2456 > Economics of Poverty Week 3
Aaron Notetaker

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Reviewing in more depth the welfare reforms of 1996 and beginning on basic statistical concepts
Economics of Poverty
D. Kennedy Jr
Class Notes
Economics, poverty, welfare, Government, Policy
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This 4 page Class Notes was uploaded by Aaron Notetaker on Tuesday September 20, 2016. The Class Notes belongs to ECON 2456 at University of Connecticut taught by D. Kennedy Jr in Fall 2016. Since its upload, it has received 18 views. For similar materials see Economics of Poverty in Economics at University of Connecticut.


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Date Created: 09/20/16
Economics of Poverty Week 3 Keys features of PRWORA of 1996 - TANF replaced AFDC. Welfare was no longer an ‘entitlement.’ States received fixed amount of money with less regulation. States could, for the most part, design their own welfare system, creating an incentive for states to reduce welfare spending. - Work became required for receiving welfare, but the definition of work has been hotly contested. (i.e. Time spent in education should count towards work requirements) - Time limits – total of 5 years of support. Although states could provide noncash support to people whose eligibility for TANF had expired. (opponents were concerned about the ‘children going hungry.’ Families with younger children react differently than families with older children) - Increased Federal involvement in enforcing payment of child support by absent parents - Increased funding for child care (program itself is noncontroversial, but the funding is contested) - Minors are eligible only if they live at home and participate in a training program, but this policy has done nothing to decrease the high rates of teen pregnancy. - Denied public assistance to legal immigrants (very controversial), put legal strain on sponsors if immigrant got into financial trouble Number of people on welfare started to decline around 1993, it is not clear how much is due to welfare reforms as opposed to the ‘tech boom’ which created many jobs. Many studies conducted on TANF look at how it performed during the 2008 recession. Difficult to do, no evaluation plans and no provisions for testing were built into the legislation. 4 types of testing and study - Examined simple time trends in the outcomes of interest before and after ‘96 st - Variation of 1 compared changes in outcomes over time for the groups most affected by reform - Different states enact different programs prior to 96 allowing for a comparison of women in different states - Series of randomized experiments, beginning before 96 which tested elements of PRWORA legislation through rigorous experimentation Outcomes of study - Caseload – less caseloads of welfare, mostly due to decreased entry, rather than increased exit - Employment – increased employment of those on welfare - Earnings – those who left welfare showed increased earnings than others in household, mixed evidence on why wages grow - Family income – income rose little because the loss of benefits almost cancels out the increase in earnings. - Childbearing and Marriage – no discernable effect National caseload declined by an average of 50%, but some of those eligible for benefits did not apply (caseload outcome). ‘Nonassistance’ payments such as emergency payments, child care, transportation, and other services accounted for 70% of TANF funds, but did not count in caseload number. More research is needed why there’s not much increase of welfare during recession. Number of families on welfare grew 1.91 million in Dec 2007 to 1.94 million in Dec 2010 (17% increase). National caseload remains lower than it was in 2005 before the recession. Caseload counts vary because of - State caseloads vary - Participation rates have declined (79% of those eligible in 1996 to 36% in 2007, choosing not to receive benefits) - Nonassistance and state actions affect the caseload counts (because they are not counted in caseload numbers) In 2009, ‘child-only’ cases made up almost half of all caseloads (up from one fifth in 1997) Studies of caseload changes has dropped off in recent years. Factors affecting caseload changes and decreased entry. Results mostly unclear in providing specific - TANF program with the economy as a whole - Specific TANF programs (i.e. time limits) Policies that encourage work and increase exits, may also discourage entry. The welfare reform significantly increased exits, but the results on entry are mixed (expansion of economy coming into play) August 2016 update – TANF performance has been ‘dismal’ in the last 10 years, with mixed results at best. - Has provided assistance to fewer families in need - Has contributed to an increase in deep/extreme poverty (even when decreasing overall poverty) - States spent little of their TANF funds to increase recipient’s employability - Less and less children who are in poverty are Great Recession of 2008 TANF was not a very effective safety net in time of recession. Not many criteria for judging effectiveness, but 1 criteria TANF failed at. Typically, if more people are out of work and closing in on poverty (like in a recession) more people should be seeking support. This is not what happened with TANF. However, some say that TANF did not do as terribly as some critics say it did, citing 5 empirical methods of judgment. In some sense, the US experienced 51 different recessions (in all the states) and 51 different responses by TANF ARRA – emergencies measures in 2009 expanded other programs (like SNAP), which were shown to have been more effective support for the poor Percentage of those taking advantage of Unemployment benefits has decreased since 1980s In late 2007, when the recession started, Bush implemented temporary measures. Obama took similar steps after the recession worsened in late 2008. Between 2005 and 2010, gov’t assistance became more effective against poverty and deep poverty. Official statistics paint a bleaker story, but they do not account for ‘Nonassistance’ benefits and ‘safety net’ programs. But most of the temporary safety net programs are now expired. 2 programs have not expired (EITC and Child Tax Credit), but will expire in 2017. Estimated to have kept 1 million children out of poverty in 2013. MEASURING POVERTY AND INEQUALITY Review of basic statistics Probability – tool used to study randomness, the likelihood of an event occurring Population – collection of persons, things, or objects to be studied Sample – selected portion (or subset) of the larger pop to gain info about that pop Parameter – a number that is a property of the population Nominal scale – data on a nominal scale is qualitative Categorical – places things into categories Ordinal – places things into orders/ranks Interval scale – set interval of distance between units, but no defined start or end (temperature) Ratio scale – there is a set beginning/boundaries (stats can be compared in multiples, i.e. 20 is 4 times the amount of 5, which cannot be done on an interval scale that has no boundaries) Frequency – number of times a value of data occurs Relative frequency – ratio (fraction or proportion) of number of times a value of data occurs


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