U.S. Census Bureau Data

Most of the statistical data we have on the demographics of the U.S. population come from Census Bureau data

Very detailed and voluminous

Population and Income Data is expressed in Quintiles or fifths – from the lowest fifth to the highest fifth

U.S. Household Income by Quintile, 2002

Income Range % of Total Income

Received

Lowest Quintile $0-$24,000 4.2%

Second Quintile $24,001-$41,127

9.7%

Third Quintile $41,127-$62,500

15.4%

Fourth Quintile $62,501-$94,151

22.9%

Fifth Quintile $94,152 & Higher

47.7%

Who are the Rich & the Poor

The lowest income household in the U.S. today is likely to consist of a single black woman over the age of 65 living somewhere in the South with less than a junior high school education.

The highest income household in the U.S. today is likely to consist of a college educated white married couple between 45 and 54 years of age living together with two children somewhere in the West.

Last Word on Income Distribution

From 1947-1979 – All Americans tended to share in the post-World War II prosperity

However, from 1979-2001, the rich and the super rich received most of the income gains

The rich are getting richer, and the poor are getting poorer

The Nation’s Wealth Even More Unevenly Distributed

In the mid 1970’s – the richest 1% of our population owned 20% of the nation’s total wealth

By the late 1990’s – the richest 1% of our population owned 40% of the nation’s total wealth

Poverty

A state in which a household’s income is too low to be able to buy the quantities of food, shelter and clothing that are deemed necessary.

Poverty rates fell during the 1990’s but remains a bigger problem for black and Hispanic households than for white households.

Poverty rates have increased in 2005

Some Anecdotes About Poverty

“We’ve created a lot of $6-an-hour jobs and not much $6-an-hour housing” – John Donahue, Chicago Coalition for the Homeless

“God must love the poor – he made so many of them” – Abraham Lincoln

“The best way to help poor people is not to be one of them” – Reverend Ike, New York City Preacher

How Inequality ArisesOther Factors

Cost of Living, especially basics like housing, transportation, medical care

Increasing population of mentally ill, drug and alcohol dependence

Single mothers

Discrimination according to race and/or sex is another possible source of inequality.

How Inequality ArisesWealth passed on within families

Savings and Bequests – Gifts from one generation to the next

Debts cannot be bequeathed

Tendency to marry within one’s own socioeconomic class (Assortative Mating)

Addressing Inequality Thru Income Redistribution

Three main ways in which governments in the U.S. redistribute incomes

1. Income Tax Rate Differencesa. Progressiveb. Proportional (Flat Tax)c. Regressive

Addressing Inequality Thru Income Redistribution

Three main ways in which governments in the U.S. redistribute Income

2. Income Maintenance Programsa. Social Security Programsb. Unemployment Compensationc. Welfare Programs

Addressing Inequality Thru Income Redistribution

Three main ways in which governments in the U.S. redistribute income

3. Subsidized Servicesa. Educationb. Health Care for needy

Scale of Income Redistribution

Poorest 20% of households receive 80% of their income from the government

Second 20% receive about 33% of their income from the government

The richest 20% receive almost nothing from the government

Solutions to PovertyLiberals vs Conservatives

The Common Ground – Get the long term poor off welfare roles and into self supporting employment

The Conservative View• Overly generous public assistance programs perpetuate

a dependent underclass• Government dole robs people of the incentive to work• Government support is better than low paying jobs, so

why work when you can fall back on public assistance, food stamps, unemployment insurance, etc.

Solutions to PovertyConservative Solutions

Scrap the Welfare System in its entirety

Working aged persons have no recourse but the job market, family members, friends, and public or private locally funded services

Solutions to PovertyLiberals vs Conservatives

The Liberal View• Although money welfare payments increased from 1968 to

1980, real welfare payment purchasing power did not keep up with inflation

• Welfare families breeding welfare families does not stand the test of analysis – (Debatable)

• The Civil Rights revolution sparked an exodus of black families from historical black “ghettos” leaving behind those with the greatest problems – When blacks were confined to the “Ghetto” there was much more of an extended family environment to take care of problems that arose – a social buffer in the Ghetto was lost

• The key now is to find jobs and redevelop a work ethic that has been lost in the inner city

Solutions to PovertyLiberal Solutions

While conservatives claim the government has done too much, liberals claim it has not done enough

The solution is for the government to provide decent paying jobs

• Rebuilding the nation’s crumbling highways• Staffing hospitals, schools, libraries and day care centers• Rebuilding dilapidated inner city housing• Cleaning up toxic waste sites

Other Social Support Programs to deal with all the social issues that accompany welfare dependency

Welfare Reform

The Personal Responsibility and Work Opportunity Reconciliation act of 1996 – The most significant piece of welfare legislation since 1935

• Federal guarantee of cash assistance for children ended• Head of every welfare family would have to work within two

years or lose benefits• Adults on assistance must work or perform public service• Lifetime benefit limited to five years• Lump sum payments to states to run their own programs• Up to 20% on assistance – the least employable – excused

from the work requirements

Tradeoff’s & Challenges The Big Tradeoff – We trade off efficiency to

achieve fairness – There is a cost associated with redistribution – Do not destroy incentives to work with taxes that are too high

Major Challenge – Young, single women with children1. Education and training is a long term solution2. Short term solution is welfare to aid in achieving

long term solution-- Minimize disincentives to pursue long term

goal-- Personal Responsibility and Work

Opportunities Reconciliation Act of 1996 (TANF)