Download Effectiveness of the Safety Net Lecture 24

Effectiveness of the Safety Net
Lecture 24
Center for Budget and Public Policy, “What
does the Safety Net Accomplish?”
http://www.cbpp.org/pubs/accomplishments.
htm
Additional Sources
• Aloc Sherman, “Public Benefits: Easing
Poverty and Ensuring Medical
Coverage,” Center for Budget and
Policy Priorities, http://www.cbpp.org/719-05acc.htm
Purpose of the Safety Net
• To prevent families and
individuals from falling
into poverty (or
becoming poorer), and
losing health insurance
coverage as a result of:
–
–
–
–
–
Job loss (not quitting)
Illness
Death of a worker
Disability
Divorce
• Name the unique
programs
associated with
each event?
• What programs
cover all events?
• What events would
you like to add to
the list?
Accomplishments of the
Safety Net
• Reduces the number of poor Americans by
27 million people, including 14 million elderly
people and nearly 5 million children
• Reduces the severity of poverty for those who
remain poor by increasing their average
disposable income from 29 to 57 percent of
the poverty line; and reduces the ranks of the
the uninsured by tens of millions.
Accomplishments of the
Safety Net, cont.
• Medicaid
– 70 percent of
expenditures go to
elderly and disabled
– Reduces infant mortality
and child deaths
– Increase the likelihood
that low-income women
receive preventive
screenings for cancer
– Increased availability of
medication the
chronically ill
• Food and Nutrition: WIC
– Reduces low-weight
births
– Each $1 or WIC reduces
future expenditures by
$3.50
– Reduces child anemia
Program Effectiveness
• How do we measure the anti-poverty
effectiveness of safety-net programs?
– What is CBPP’s definition of being “lifted out of
poverty?”
• Which category of programs have the
greatest overall antipoverty effectiveness;
– Social insurance or means-tested programs,
including tax credits?
– Cash-transfer or in-kind benefits
Program Effectiveness, cont.
• Which subgroups of
the poor population
are helped most by
the safety net?
Why?
• Which programs are
most effective for
each of the
subgroups?
– Elderly
– Families with
children
– Childless, nonelderly adults
– Immigrants
Who is left behind?
• What measures can
help us answer this
question?
• Using these
measures, who is
left behind?
– Elderly
– Families with
children
– Childless, nonelderly adults
– Immigrants
How does the U.S. Safety Net Compare to
The Safety Nets of EU Nations?
• Compared to the
U.S. most Western
industrialized nation
have:
– more effective antipoverty policies
– lower overall poverty
rates
– lower child poverty
rates 
• Percent of lowincome children
lifted to half the
national median:
– U.S.: 1 in 9
– Canada: 1 in 3
– Britain, Netherlands,
Belgium, Germany:
1 in 2
How does the U.S. Safety Net Compare to
The Safety Nets of EU Nations?, cont
• Timothy Smeeding,
“Poor People in Rich
Nations: The United
States in Comparative
Perspective,”Journal of
Economic Perspective,
(January) 2006.
http://wwwcpr.maxwell.syr.edu/faculty/smeedin
g/pdf/JEP%20V5_2006.pdf
• Only the U.S. and
Britain publish poverty
statistics annually.
• (See handouts for
differential impact)
• Poverty in older age is
almost exclusively and
older women’s problem
– For 75+ years
• 75% are women
• 60% are women living
alone
How does the U.S. Safety Net Compare to
The Safety Nets of EU Nations?, cont
• Absolute Poverty Rates: Table 2
– U.S. falls second to the United Kingdom in having
the highest overall poverty rate
• Antipoverty Effects of Gov’t Spending: Table 4:
– U.S has:
• Below average market poverty rate (23.1 %)
• Highest poverty rate after taxes and transfers (17.0%)
• Smallest share of GDP devoted to anti-poverty programs
(2.3%)
• Least overall poverty reduction (26.4%)
Comparison of U.S. and EU Safety Nets
Experience of poor families: Table 5
• One-parent families
– Poverty rates highest
everywhere for oneparent families
– U.S. market income rate
below average (46.0%)
– U.S. after tax and
transfer rate second
highest (41.1%)
– Poor U.S. families pay
higher net taxes than 
families in all other
nations
– Tax/transfers reduce
poverty least (10.0% vs.
46.3% average)
• Two-parent families
– Poverty rate much lower
everywhere
– U.S. just about average
(13.7%)
– U.S. tax/transfer
programs reduce poverty
least (3.6% vs. 44.3%
average)
– ditto
Comparison of U.S. and EU Safety Nets
• Annual Hours Worked: Table 6
Poor U.S. families work more hours
than elsewhere
• Poor U.S. single parents average almost twice
as many hours as the average (1,000 vs. 500)
• U.S. families have fewer idle hours to convert
to work and earnings
What can we learn from the EU
nations?
• Not much
– Inequality plays an
important role in creating
incentives for savings,
hard work, and
investment in education
– U.S. economy performs
better
• Employment and
economic growth higher
• Unemployment lower
• A lot, particularly from
Britain
– Devoted an additional 0.9
percent of GDP to poor
families with children
since 1999
– Child poverty rate fell by
27% (from 15 to 11%)
– U.S. rate rose from 15 to
18%
– U.s. needs to do a better
job of combining
incentives to work with
targeted benefits