Lecture 5: Who are the poor?

Today’s readings:•Schiller Ch. 3: Counting the Poor, pp. 60-66

•Current Population Report, P60-229, pp. 9-15, 24-25, 45-58•DeParle, Ch. 3: The Crossroads: Chicago, 1966-1991

Today’s Topics

• Sen’s definition of poverty and its implications

• What we learn from studying poverty spells--the dynamics of poverty

• Who are America’s poor?

• Calculating poverty rates

Sen’s Capability Deprivation

1. What definition of poverty does Sen propose?

2. Is it feasible to measure poverty using this definition?a) Human Poverty Index,

1. For definition see: http://www.adb.org/Statistics/Poverty/H.asp 2. For for values, rankings, and trends, see:

http://hdr.undp.org/reports/global/2005/pdf/HDR05_HDI.pdf (p. 228)

b) Human Development Index, http://en.wikipedia.org/wiki/Human_Development_Index#Top_thirty_countries

3. How do you think Sen might respond to the claims of some that by world standards, no Americans are poor?

Sen’s Capability Deprivation

4. What are the implications of Sen’s analysis for the formulation of policies to aid the poor?

– Hint: consider the following quotation:“What the capability perspective does. . . . is to enhance the understanding of the nature and causes of poverty and deprivation by shifting primary attention away from the means [income] . . . . to ends and . . . . and to the freedom’s to be able to satisfy these ends.” (p. 90)

Poverty Spells

Mary Jo Bane and David Ellwood,“Slipping into and Out of Poverty: The

Dynamics of Spells,” The Journal of Human Resources, Vol. 21, No.

1 (Winter, 1986), 1-23. (Source for the following 6 slides.)

1. What are poverty spells?

2. Why study poverty spells?

3. What is the distribution of poverty spells by length?

4. How do poverty spells begin?

5. How do poverty spells end?

6. What does the analysis of poverty spells tell us about welfare

dependency?

Bane and Ellwood “Slipping Into and Out of Poverty”

• What are poverty spells? – Continuous periods during which income falls below the

poverty line.

• Why study poverty spells? – Because we need to distinguish between the larger

population of people who are ever poor, and those who

are poor at a point in time if we are the understand the

effects of culture, dependency, and the allocation of

assistance.

Poverty Spells: Bane and EllwoodDistribution of Completed Spells of Poverty

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 9+

(1) Prospectivedistribution forspell beginners(2) Snap shot ofCompleted Spells

Poverty Spells: Bane and EllwoodDistribution of Completed and Uncompleted Spells of Poverty

0

10

20

30

40

50

60

1 2 3 4 5 6 7 8 9 9+

(1) Prospectivedistribution forspell beginners(2) Snap shot ofCompleted Spells

(3) Snap shot ofUncompletedSpells

Bane and EllwoodConclusions of “Slipping Into and Out of Poverty”

1. Most of those who ever become poor will have a short stay in poverty.

2. The majority of those who are poor at a given time will have very long spells of poverty.

3. Most people use aid programs briefly.4. The bulk of aid goes to a small group that has very long stays in

poverty.5. Changes in family structure and life cycle events explain nearly one-

half of spell beginnings.6. A fall in the head’s earnings explain a small minority of beginnings.7. Increase earnings of all household members is the primary route out

of poverty.8. The poverty population is extremely heterogeneous.

Poverty Spells

• Consequences of Bane and Ellwood’s Work

– Survey of Income and Program Participation (SIPP)--a longitudinal survey that allow the analyst to observe how the status of the same group of people changes over time; ie., to study the dynamics of poverty. http://www.census.gov/hhes/www/poverty/newguidance.html#sipphighlight

– Methodology applied to spells of welfare receipt

Who are America’s Poor?Snapshots from the CPR

• Schiller: Characteristics of the Poor (pp. 60-65)

• Age and Family Statusa. Which age group has the highest poverty rates?b. Which family type has the highest poverty rates?c. Is the risk of poverty greater for recent immigrants or native-

born Americans?d. Rank the following racial categories from highest poverty rate

to lowest poverty rate: American Indian/Alaskan Native, Asian, Black, Hispanic, White.

• Geography and Residence: Where are you most likely to encounter the poor?e. Northeast, Midwest, South, or West?f. Metro or nonmetro areas?

Who are America’s Poor?

Your answers should be:a. Children (less than 18 years)--17.9 %b. Female householder, no husband present--28.4%c. Recent immigrants--21.6% vs. 12.1%d. Black--24.6; American Indian/Alaskan Native--24.4;

Hispanic--22.2; Asian--10.8%; White--10.6% (rates are 2 year average 2003-2004)

e. The South--one of every seven people is poor.f. Nonmetro areas--14.2% vs. 11.6%. Applies to

every racial category.

Who are America’s Poor?

g. Which families were most likely to be poor when family type and race are considered?

Hint: 2 of every 5 of these families were poor in 2004.

h. True or False: Most poor adults do not work.

i. On average, how much income was needed to pull poor families out of poverty in 2004?

Calculating Poverty Rates(People in Thousands,Table B-1, P60-229, 2004)

1 2 3 4 5 6

RaceTotal

NumberPercent of all

PersonsNumber

in PovertyPoverty Rate

(%)Percent of all Poor Persons

aWhite

Alone, Not Hispanic 195,054

195,054/290,605=.671 x 100 =

67.1%16,870

16,870/195054 =

.086 x 100 = 8.6%

16,870/36,997 = .456 x 100 =

45.6%

b Black Alone 36,42336,423/290,605 =

.125 x 100 = 12.5%

9,0009,000/36,423

= .247 x 100 = 24.7%

9,000/36,997 = .243 x 100 =

24.3%

c Hispanic (Any Race)

41,68841,688/290,605 =

.143 x 100 = 14.3%

9,1329,132/ 41,688 = .219 x 100=

21.9%

9,132/36,997 = .246 x 100 =

24.6%

d All Persons 290,605 100% 36,997 12.7% 100%

Over and Under-representation Among the Poor

• Which racial groups are over-represented among the poor? Which are under-represented?– Compare group’s poverty rate to overall poverty

rate. • If PRG > PRall, Group is over-represented.• If PRG < PRall, Group is under-represented.

– Compare columns (3) and (6) by row.– Conclusions:

• Blacks and Hispanics are over-represented.• Whites are under-represented.