Announcements for Wednesday, October 10,
2001
Two New Handouts:
Blue - Exam Review Guide
Yellow - Lecture Handout
Pink - Berger Paper
For Monday:
Review chapter 8
Read short paper by Mark Berger
For Today:
Return Reaction Papers
Return Quizzes
Take a look at exam review sheet
"Why Welfare Reliant Women Don't Work"
Underclass and Race
Poverty and Education
On Monday:
Finish Chapter 8 Lecture
Some Review Discussion
Wednesday, October 17 EXAM
Chapter 3, “Why Don’t Welfare-Reliant Mothers Go to
Work
What do women on welfare base their decision
to work on?
Do these women base their decision on “CostBenefit analysis and “Rational Choice”?
Authors argue yes (p. 63-65) and give some evidence.
Most welfare recipients have work experience.
What are the lessons learned by low-wage
women in the labor market?
 Returning to low wages jobs held before doesn’t help
 Risk of loss of job leads to uncertain income
 Employment in low-paying jobs seldom leads to higher
paying jobs
 JOBS clubs had little benefit since it simply got them the
same type of jobs they held before
 Children’s well-being at risk
What is the relationship between welfare and
work disincentives?
p. 66, loss of housing subsidies and Medical Card
(Medicaid)
What is the relationship between welfare and job
training?
 JOBS prepares for low-paying jobs
 Training inadequate for jobs that pay well enough to
get off of welfare
Do welfare recipient want off of welfare? (p. 77)
 Yes – majority do at some time
 Child-care and lack of training major obstacles
 Not willing to get off for minimum wage job
What does it take to get off of welfare?
o Extra costs of working (p. 84)
 child care, $58 $91
 health coverage, $37
 private housing
 transportation, $67
 clothing, $27
 Total = $189
o So welfare mothers spent $1,077 so need $1,300
a month or $8-9
 What do these experiences suggest for welfare
reform?
o Authors argue (p. 86) reform is predicated on:
 Most welfare-recipient mothers have little or
no work-experience
 Employment at a low-wage job will provide
access to better jobs in the future
 What characterized the welfare mothers that
did go to work?
o Reduced costs of child-care, special arrangements
o Reduced rent
o Child Support
o Some health coverage
Underclass: Culture and Race
(Chapter 8 Schiller)
While the U.S. economy has grown, the standard of
living have risen, and billions of dollars have been
channeled into welfare programs to assist the poor,
poverty still exists at a higher rate than many people
would like.
What does the “culture of poverty” theory say
about the persistence of poverty in light of
overall economic prosperity in the U.S.?
 An underclass exists – a set of the population so poor
and socially isolated that it does not respond to
mainstream prosperity, incentives and values.
 The poor lack sufficient desire and motivation to
escape poverty.
 This culture spawns
 single parent households
 discourages labor force participation and
 perpetuates poverty.
Assumptions about underclass that lead to these
behaviors:
 they don’t value economic security in the same
way middle and upper class Americans do
 they might not see educational attainment as a
good route to improving economic status
 they prefer non-deferred gratification and engage
in self-indulgence
-sex, consumption, not saving – MYOPIC
Culture is determined by norms and values
– since these aren’t really directly observable, we make
inferences by observing behavior.
Does this theory rely on arguments based on
flawed character, restricted opportunity, or big
brother?
What are the long-term, intergenerational
implications of this theory?
Does Schiller believe in “the culture of poverty?”
 He looks at how schooling choices of the poor might
reflect restricted opportunity more than flawed
character.
 He looks at how saving and investment choices of the
poor might reflect restricted opportunity more than
flawed character.
Page 129 of text:
“In reality, the poor do not have an equal opportunity
to fulfill, or even to pursue, their goals. Hence, there
may be a sharp divergence between the aspirations and
the behavior of the poor that does not exist among
middle-class groups.”
What is William Julius William’s Underclass Theory?
 Restructuring of the U.S. economy and economic activity
have reduced the number of jobs inner cities and left
certain areas with few jobs that pay well and have upward
mobility.
 In inner city areas heavily populated by African Americans,
those with middle and upper class income status are likely
to move out of the area.
 Poorer African Americans remain in social and economic
isolation.
 This core of the impoverished who remain begins to
develop a distinct culture of “ghetto poverty.” (This core
refers to about 1% of the U.S. population and 10% of all
people in poverty.)
 A unique set of values may develop in this isolated setting
that leads to a unique set of behaviors.
Does Wilson attribute the formation of this culture to
flawed character or other external forces?
 Behaviors come across as mechanisms to cope with
conditions imposed by external factors.
There are No Children Here, book about life of two
children in a Chicago housing project complex.)
Generally, does an underclass stem from
“dysfunctional culture” or “external forces?”
Schiller examines the aspirations of the poor to see if
they resemble the middle class.
 When poor mothers asked about career ASPIRATIONS for
eldest child,
70% had goal of a white collar job
 When poor mothers asked about career EXPECTATIONS for
eldest child,
46% had expectation of white collar job
 When poor children were asked if they plan to attend
college 90% said yes. Nonpoor – 96% yes
Schiller concludes from this that lower educational and
occupational attainment of the poor reflects restricted
opportunity more than insufficient aspirations.
Are most poor people happy with being in
poverty?
Poverty and Race:
 For African Americans and Hispanics, 1 out of 4 are in
poverty.
 For whites, 1 out of 12 are in poverty.
There is a correlation between race and poverty,
but what causes it?
Theories we will look at:
 Restricted Opportunity (chapter 9 and 10)
 Discrimination (chapter 10)
 Culture of Poverty and Underclass Theory (tied to
race) (chapter 7)
 Racial Inferiority (chapter 7)
What is “racial inferiority theory?”
Does Schiller believe that some races are inferior
and that this explains the increased rate of
poverty these groups experience?
How does Schiller support his view?
 Raw, innate intelligence is very difficult to observe
and quantify.
 I.Q. test results
 Average scores of blacks 15-20 points lower than
whites
 While race is connected to lower scores, does not
necessarily mean lower intelligence.
 Outcome of IQ test profoundly affected by
economic status and environment and experience
of child.
 Structure and design of test favors experience of
racial majority children.
 Additional evidence:
 Blacks fare differently based on geographic region.
 Average black economic status has improved
significantly over time.
 How do you explain the extreme successes?
 What does “race” mean anyway? Are races pure?
Why does Schiller go here? Why does he talk
about racial inferiority?
He isn’t using this study to rule out flawed character
arguments, only to rule out racial inferiority arguments.
Causes of Poverty and Education
Outline: Poverty and Education
I. Education and Income
II. Education and Earnings in Kentucky
On survey we completed on first day of class, students
said that lack of education was the leading cause of
poverty.
I.
Education and Income
Does Education Pay? (What is the impact of education
on earnings?)
More education means more human capital to bring to
the labor market.
If education does pay, what are the policy implications
for poverty reduction?
Table 8.1 in text: Education and the Labor Market (for
males aged 25-64) U.S. Dept. of Labor
High School High School
College
Dropouts
Graduates
Graduates
Unemployment rate (%)
6.3
3.9
1.6
Labor Force Participation Rate
76.1
76.2
93.3
(%)
Full-time workers (%)
61.7
77.8
85.6
Occupational Status
Blue collar
Clerical
Professional
Average Earnings
$19,223
$29,018
$63,529
Education and Poverty
Table 8.2 in text: Incidence of Adult Poverty, by
Education 1998, 25 years old and above, U.S. Bureau of
the Census
Education
No High School
Diploma
High School Graduate no college
Some College
College Graduate
Poverty Rate within group
23.4
10.1
6.5
3.0
Is the earnings gap for educational attainment
widening? (Increasing skill premiums?)
See Berger's figures 3 and 4 to see widening gap
Why has earnings gap increased?
1) Higher demand for skilled labors has driven up
wages. Technological advance and international
competition have increased demand.
2) Steady flow of immigrants and low-wage goods
have held wages of less-skilled workers down.
What relevant factors, other than education, affect
earnings?
Holding constant education level,
1) Average earnings of whites exceeds blacks
2) Average earnings of males exceeds females
3) Labor market conditions/Condition of economy/the
hiring queue
II. Education and Earnings in Kentucky
Mark C. Berger, "Education and Earnings in Kentucky,
1964 - 1996"CBER Annual Report, 1998, p. 19-25
This paper describes research that examines the
connection between education and labor market
success in Kentucky. The stronger this link, the more
likely policy designed to improve education and reduce
drop out rates will improve the economic status of low
income Kentuckians as well.
Facts:
In Kentucky (1990):
35.4% not completed high school; 13.6% had BA or more
In US:
24.8%
20.3%
In Kentucky only 62-69% of high school freshman complete
highschool.
Table 2 - Berger
Average Weekly
Earnings
Level of
Education
All
Less than High
School
High School
Some College
BA
Graduate or
Professional
Men
United
Kentucky States
533
557
Women
% of
United
US Kentucky States % of US
95.7
401
520
578
767
340
576
628
966
117.9
90.3
92.0
79.4
176
303
371
706
206
382
391
571
85.4
79.3
94.9
123.6
1628
1386
117.5
1006
794
126.7
Figures 1-4 show changes in earnings gaps over time
based on gender, schooling, KY, and nation.
 Male high school graduates earn 40% more than
dropouts in Kentucky (Drop out penalty)
 Weekly earnings of Male BA approximately 60% more
than that of high school graduates
 Weekly earnings of Male graduate or professional
degree approximately 75% more than that of high
school graduate
 Women BA’s earn double a HS graduate and women
with a graduate or professional degree earn 200%
more.
 While there is payoff to attending some college in
Kentucky, the payoff of completing the degree is
significantly higher.