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