Thinking About Economics And Poverty Policy

What is the Problem? Old Age Insurance (Social Security) O People living longer, are unable to work, and are unable to take care of themselves O Families unable to take care of their elders O State and localities forced to provide care- costs were increasing Social Security Act of 1935

What is the Problem? Unemployment Compensation O Great Depression resulted in millions out of work, from no fault of their own O No safety net for those workers O Government (Federal and State) forced to provide benefits because of employer practices Social Security Act of 1935

What is the Problem? Aid to Dependent Children (ADC) O High rates of poverty among children O Piecemeal private charities not helping the issue Social Security Act of 1935

What is the Problem? AFDC (Aid to Families with Dependent Children) becomes TANF (Temporary Aid to Needy Families O Culture of dependency O High case loads = Increasing costs to states and federal government Welfare Reform of 1996

Lack of congruence between policy (aka intervention or solution) and the problem

Thinking Through The Problem of Poverty With Economics In Mind

Utility “Individuals seek to maximize their own utility, which is a similar concept to happiness, only broader” (Wheelan, 2010, p. 6) O How does this concept apply to people in poverty? O Poor people are not supposed to engage in maximizing their utility O Trade off utility now for benefits later O How does this concept apply to some of the policies currently in place? O Lack of choice (housing options, job opportunities) O Sacrifice utility in order to receive benefit

Incentives Matter! O Is there an incentive to keep people in poverty? O How does poverty help the economy? O Are we part of the problem? O If one of the causes of poverty is lack of equality (equal access), would equality create additional problems? O Lack of innovation (e.g. universal healthcare) O How are incentives used in existing policies? O Do our policies create any disincentives? Cliff Effect