Archive for April, 2015

Videos on Information Asymmetry

April 22, 2015 Leave a comment

Categories: Microeconomics, Videos

How Poor Are the Poor?

April 1, 2015 Leave a comment

We’ve been talking about poverty and how to measure it this past week in Intermediate Microeconomics.

Here are two thoughtful approaches to this project, coming from different political perspectives, but with analysis and discussion of real problems in tackling poverty, not just “slogans” and “common sense.”

First, a recent article from the New York Times:

The Jencks article and the response among those I contacted reveals how politically explosive and ideologically charged the seemingly arcane debate over the determination of the poverty rate is.

Democratic supporters of safety net programs can use Jencks’s finding that poverty has dropped below 5 percent as evidence that the war on poverty has been successful.

At the same time liberals are wary of positive news because, as Jencks notes:

‘It is easier to rally support for such an agenda by saying that the problem in question is getting worse than by saying that although the problem is diminishing, more still needs to be done.’

The plus side for conservatives of Jencks’s low estimate of the poverty rate is the implication that severe poverty has largely abated, which then provides justification for allowing enemies of government entitlement programs to further cut social spending.

Here’s another perspective on this question, from Robert Rector:

The remaining poverty in the U.S. can be reduced further, particularly poverty among children. There are two main reasons that American children are poor: Their parents don’t work much, and fathers are absent from the home.

In good economic times or bad, the typical poor family with children is supported by only 800 hours of work during a year: That amounts to 16 hours of work per week. If work in each family were raised to 2,000 hours per year-the equivalent of one adult working 40 hours per week throughout the year- nearly 75 percent of poor children would be lifted out of official poverty.

Father absence is another major cause of child poverty. Nearly two-thirds of poor children reside in single-parent homes; each year, an additional 1.5 million children are born out of wedlock. If poor mothers married the fathers of their children, almost three-quarters would immediately be lifted out of poverty.

While work and marriage are steady ladders out of poverty, the welfare system perversely remains hostile to both. Major programs such as food stamps, public housing, and Medicaid continue to reward idleness and penalize marriage. If welfare could be turned around to require work and encourage marriage, poverty among children would drop substantially.

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