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50

Poverty and Inequality in IllinoisBy Elizabeth T. Powers and Emilie Bagby

1 US Census Bureau,Historical Poverty Tables:Table 2, Poverty Status ofPeople by FamilyRelationship, Race, andHispanic Origin: 1959 to2006. http://www.census.gov/hhes/www/poverty/histpov/hstpov2.html.

2 http://www.npr.org/programs/specials/poll/poverty/summary.html

3 http://brain.gallup.com/documents/questionaire.aspx?STUDY=P0608031

4 The survey results reportedhere were obtained fromsearches of the iPOLLDatabank and otherresources provided bythe Roper Center forPublic Opinion Research,University ofConnecticut.http://www.ropercenter.uconn.edu.

5 Presidential candidate FredThompson expressedthis worldview succinctlyin an Autumn 2007debate when he said“People who play by therules and work hard canexpect to live theAmerican dream…Ifthey need help in thiscountry, they get help.And those who can helpthemselves are expectedto do so.” (Transcriptavailable athttp://www.cfr.org/publication/14459/).

In the 1960s, the concentrated efforts of the‘war on poverty’ were based on the goal ofextinguishing poverty in the United States.After some impressive gains among certaingroups in the 1960s and 1970s, U.S. povertyhas experienced a long period of drift. Thepoverty rate of 12.3 percent in 2006 differslittle from 1996’s rate of 13.7 percent or1986’s rate of 13.6 percent and is identical to1975’s rate.1 In fact, one has to reach back tothe mid-1960s to find poverty rates substan-tially higher than today’s rate. It is a stub-born feature of the last three decades thatmore than one out of every 10 Americanslives in a very low income household.

Opinion polls reflect discouragement over theseeming intractability of poverty in theUnited States. On the one hand, mostAmericans acknowledge that povertyremains a legitimate public concern. Whenasked directly about poverty, 55 percent ofpeople in the 2001 “Poverty inAmerica” sur-vey by NPR, the Kaiser Family Foundationand the Kennedy School of Government atHarvard University2 indicated that poverty isan “important” problem facing government.

On the other hand, when considered as oneissue among many for government toaddress, public opinion typically assigns thepoverty problem a low priority. Whenrespondents in the 2001 poll were askedwhich issues were most important for gov-ernment to address, poverty ranked beloweducation, taxes, health care, Social Security,and the economy. In fact, ‘don’t know’ was amore popular response than poverty. Only 6percent of respondents reported “poverty,more help for the poor, or homelessness”among the top two issues government oughtto tackle. More recently, the 2006 Gallup PollSocial Series on Work and Education3 foundthat less than 4 percent of respondentsranked poverty, hunger, or homelessness asthe country’s most important problem.

Why doesn’t the general public viewpoverty as an important policy problem? Itmay be in part due to Americans’ strongbelief in self-determination; that a person’swell-being – or lack of it – is largely of theirown creation. In a 2006 NBC News/WallStreet Journal/Hart and McInturff ResearchCompanies poll,4 nearly 40 percent ofrespondents attributed poverty to the poorperson’s lack of effort, rather than the resultof circumstances largely beyond the person’scontrol. Similarly, those who believe theyare doing well financially are quick to attrib-ute their success to their own effort and abil-ities rather than, for example, society, theefforts of others, or luck.5 In the 2001“Poverty in America” poll, 86 percent ofthose reporting good financial healthclaimed direct responsibility for the situa-tion, as opposed to 43 percent of those whothought they were doing poorly.

Given this strong belief by manyAmericansthat they control their own economic des-tinies, it is not surprising that poverty is per-ceived in many quarters as a problem of‘self-help.’ Nearly 70 percent of respondentsin the “Poverty inAmerica” survey believedthat jobs are readily available to anyone whowants to work, for example. Correspondingly,many also took a dim view of governmentprograms aimed at poverty relief. In the samesurvey, nearly half the respondents agreedwith the statement that poor people “have iteasy” because they can get government help.

While public sympathy for the poor isclearly not overwhelming, public views onpoverty are somewhat nuanced. For exam-ple, the problem of the ‘working poor’seems to be generally understood by thepublic. In the 2001 “Poverty in America”poll, 61 percent of respondents believed themajority of poor families have workers,which is true. Americans also appear to havestrong concerns about specific problems that

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are closely associated with the larger issue ofpoverty, such as the low quality of somepublic schools and a lack of access to goodhealth care by low-income people.

If poverty persists as an important feature ofAmerican society, why is it that we appear tocare less about its solution today than in thedistant past? It is evidently not because thepoverty problem is perceived to have beensolved, as the public continues to recognizethe significance of this issue. However, manyperceive the poor as responsible for theirown situation and may hold the corollarybelief that government anti-poverty pro-grams are part of the problem, not the solu-tion. Others may prefer to tackle the povertyproblem with policies that work through theindirect channels of improving publicschools and public health, as opposed toproviding direct relief to the poor. Whilebeliefs about the causes of poverty arediverse, there is clearly a strong current inpublic opinion that favors ‘self-help’ as thechief anti-poverty strategy.

In this chapter, we discuss the characteristicsof poverty in Illinois and contrast the situa-tion in Illinois with those of the nation andIllinois’ neighboring states. We also discusscurrent Illinois policies that help to fightpoverty. In the conclusion, we return to thequestion of whose ‘fault’ poverty is and thetopic of effective anti-poverty policies.

Poverty in Illinois

The poverty rate is based on official federalincome thresholds that vary according tofamily size and composition (children andadults). For example, in 2006 the federalpoverty line was $13,896 for a single motherwith one child, $16,242 for a single motherwith two children, and $20,444 for a two-parent, two-child family. Every member of afamily is considered poor if the family’s

annual income – counting cash transferssuch as Temporary Assistance to NeedyFamilies (TANF) and Social Security benefitsbut excluding in-kind transfers and theEarned Income Tax Credit (EITC) – fallsbelow the appropriate threshold.

Demographic Factors

Table 1 (pg.52) contrasts the characteristics ofthe poor and non-poor in Illinois. Thecolumns indicate both the share of the poorwith the particular characteristic and theratio of the share of poor with the character-istic to the share of non-poor with the char-acteristic. The latter is an indication of thedegree of over-representation of that charac-teristic in the poor population (the degree ofover-representation is higher the more theratio exceeds one). The first two columnscompute these statistics for Illinois, while thelast two do so for the entire United States.For instance, the first row reports that 29percent of poor households in Illinois havechildren under 15, that the concentration ofthat characteristic is 1.5 times as high in thepoor as non-poor population, and that thecorresponding figures for the U.S. are 30 per-cent and 1.6.

The first rows of Table 1 indicate the age dis-tributions of the poor and non-poor inIllinois and the U.S. Children are dispropor-tionately in poverty. The incidence ofpoverty steadily declines with age; thoseyounger than 25 are over-represented inpoverty, while those older than 25 are under-represented. Part of this age pattern has todo with the typical life cycle of education,training, and work. For instance, college stu-dents are transitorily poor because their pri-mary activity (going to school) generates noincome, but their earnings rise dramaticallywhen they enter the workforce. While somechildren’s poverty status is due to residingin households led by younger adults,

If povertypersists as animportantfeature ofAmericansociety, why is itthat we appearto care lessabout itssolution todaythan in thedistant past?

because childhood is brief and formative,even transitory poverty may have anadverse impact on children. We demonstratebelow that the relatively low poverty amongthe aged, formerly among the poorest ofdemographic groups, is due in large part todirect government income support in theform of Social Security.

The incidence of poverty also varies acrossracial and ethnic groups. Whites are under-represented in poverty in Illinois, whileblacks are grossly over-represented. African-Americans comprise only 12 percent of thenon-poor Illinois population but more thanone-third of the poor, while whites make up65 percent of the Illinois population as awhole and only 40 percent of the poor.Hispanics are also substantially over-repre-sented in the poverty population. Illinois’

distribution of racial minorities over thepoor and non-poor populations differs fromthe nation at large. For example, while theshare of blacks in the U.S. and Illinois popu-lations is reasonably similar (at 11 and 12percent, respectively), blacks make up 24percent of the poor population in the UnitedStates but 36 percent in Illinois. The situationof the foreign born is quite different inIllinois than the rest of the country. The for-eign born are under-represented in thepoverty population in Illinois, but over-rep-resented nationally.

The next rows of Table 1 show that employ-ment is highly correlated with poverty. Just 8percent of poor families contain a year-round, full-time worker, in contrast to 39percent of non-poor families. On the otherhand, only 45 percent of poor householdslack any worker. Thus, in most poor familiessomeone worked either part-year and/orpart-time during the past year. Becausemore-skilled workers generally earn higherwages and are better attached to the laborforce, it is not surprising that those with loweducational attainment are over-representedin the poverty population while those withhigh educational attainment are under-rep-resented.

As noted, child poverty is a special concern,both because those under 18 comprise 35percent of all poor individuals and becausechildren may be particularly vulnerable toany adverse effects of poverty on lifetimepotential. The last few rows of Table 1 pro-vide more detail on childhood poverty inIllinois. Among children, poverty is particu-larly concentrated according to race andfamily structure. While there are more whitechildren in poverty in Illinois, white chil-dren’s poverty is roughly proportionate totheir representation in Illinois’ population,while black children’s poverty is grossly dis-proportionate to their presence in the popu-lation as a whole. Comprising just 3 percentof Illinois’ non-poor population, black chil-dren comprise 14 percent of Illinoisans inpoverty. Finally, it is evident that child52

The Illinois Report 2008

Table 1Characteristics of the poor relative to the non-poor in Illinois andthe U.S.

Illinois USPoor Ratio of Poor Ratio of

persons poor to persons poor tonon-poor non-poor

Children under 15 29.3% 1.46 30.0% 1.57All Children 35.3% 1.47 35.2% 1.5018-24 13.7% 1.30 13.8% 1.5425-44 26.4% 0.95 24.6% 0.8745-64 15.4% 0.89 17.1% 0.6465 and older 9.3% 0.80 9.3% 0.74White 40.7% 0.60 43.9% 0.63Black 35.9% 2.94 23.7% 2.26Hispanic 18.3% 1.46 25.4% 1.85Native born 89.8% 1.04 84.4% 0.96Foreign born 10.2% 0.73 15.6% 1.28Worked full-time

year round 7.5% 0.19 8.0% 0.20Did not work last year 45.1% 1.89 44.8% 1.88No H.S. diploma 23.7% 1.88 26.8% 1.88H.S. or equivalent 23.2% 1.03 22.6% 0.95Some college 15.2% 0.67 14.4% 0.67B.A. or higher 8.7% 0.39 6.3% 0.29White (non-Hispanic)

children 10.9% 0.76 11.5% 0.79Black (non-Hispanic)

children 14.0% 4.18 9.9% 3.57Hispanic (all races)

children 8.0% 2.01 11.2% 2.62Children in married

couple families 9.7% 0.51 11.5% 0.63Children in female

headed families 23.2% 6.28 20.2% 5.17

Source: US Census Bureau. Current Population Survey, Annual Social and Economic Supplement. 2007.

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poverty is strongly associated with familystructure. Children in married-couple fami-lies are under-represented in poverty. In con-trast, more than 1 in 5 of Illinois’ poorresidents is a child living without his or herfather, while children in this living arrange-ment make up only 4 percent of Illinois’ non-poor population.

Regional Variation

There are two distinct landscapes of povertyin Illinois; highly urbanized areas andsparsely populated and/or depopulatingareas. Figure 1 (pg. 54) provides a countymap of Illinois. Each county is color-coded toindicate the major economic activity takingplace there. The poorest 14 counties (thosewith a 2004 poverty rate above 14 percent)are indicated with stars.

Densely populated counties such as Cookand Peoria have high poverty rates. Despitea backdrop of vibrant area economic activity,high poverty persists in dense concentra-tions in these areas. The question here iswhy deep poverty persists in such closeproximity to abundance. In other areas inIllinois, it appears that those unable to fleean eroding regional economic base remainbehind in poverty. Counties such asVermilion, McDonough and Macon, forexample, are experiencing populationdeclines and high rates of poverty. Thesouthern counties of Illinois are also charac-terized by a high level of poverty.

The figure also reveals a relationshipbetween the type of economic activity in anarea and its poverty level. Several countiesdo not have a strong private economic baseand rely primarily on federal and state gov-ernment activity – either direct transfers orgovernment institutions such as prisons – foreconomic support. These counties tend tohave high poverty rates.6 Reliance on min-ing activity is associated with high povertyalong the Kentucky border, and reliance onmanufacturing activity is associated withhigher poverty in some central and southern

counties. Both sectors have shrunk rapidlyover the last 20 years.

Poverty Trends

Figure 2 (pg. 55) shows the poverty trends inIllinois, the region, and the nation since 1980.Poverty is a counter-cyclical phenomenon(i.e., robust economic growth tends to reducepoverty rates), and this generates year-to-year variation in the poverty rate as theoverall strength of the economy waxes andwanes. In most years, Illinois tends to have alower poverty rate than the entire UnitedStates but a high poverty rate for theMidwest region. Michigan has followed asimilar historical pattern to Illinois, butWisconsin and Minnesota tend to havelower poverty rates most of the time.Overall, there is little evidence in Illinois orthe United States that much progress hasbeen made in reducing the overall povertyrate since 1980.

Using information from the DecennialCensuses, it is possible to look at evenlonger-range poverty trends. Substantialdeclines in the poverty rate occurredbetween 1959 and 1969 both nationally andregionally. However, since 1969, povertyrates have remained quite static for thenation and Illinois. In fact, Illinois’ childpoverty rates actually increased between1989 and 1999 from 11 to 14 percent. Therehave been steady declines in poverty rates ofwhites both nationally and in the state (from17.9 percent to 8.2 percent and 12 percent to6.3 percent over the period 1959-1999,respectively). Corresponding to nationaltrends, the white poverty rate was cutalmost in half in Illinois between 1959 and1999. In contrast, the poverty rate for blacksin Illinois, while down from higher rates in1979 and 1989, is similar in 1969 and 1999 at26 percent. This runs counter to nationaltrends of a strong decline in black povertyrates of 10 percentage points over the period1969-1999, although other states in theregion also show a similar lack of progress inthe black poverty rate.

6 In counties classified asgovernment dominated,government-sourceincome exceeds 15 per-cent of income and alsoexceeds the county’searnings from manufac-turing and mining. Notethat several counties inthe ‘government’ cate-gory have strongeconomies. For example,Champaign County isthe site of the Universityof Illinois, a state andfederally-funded entitythat dominates area eco-nomic activity but pro-vides many high-skilled,well-paying jobs.

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The Illinois Report 2008

Figure 1Illinois county typologies and poverty rates

Sources: USDA. SAIPE, Census Population Estimates. Census 2000 Health Insurance

Farming-dependent counties

Mining-dependent counties

Manufacturing-dependent counties

Federal and State Government-

dependent counties

Service-dependent counties

Non specialized Source: USDA Economic Research Service

10.13%

14.18%

9.91%

13.52%

10.60%

10.99%

2004 Poverty Ratesabove 14%

Alexander 23.8%Pulaski 20.7%Jackson 20.2%McDonough 16.4%Gallatin 16.1%Saline 16.1%Pope 15.4%Franklin 15.4%Hardin 15.3%Cook 15.2%Vermilion 14.9%Coles 14.4%Macon 14.3%Union 14.1%

2000 HealthUninsurance Rates

Alexander 19.0%Pulaski 17.2%Jackson 16.7%McDonough 12.3%Gallatin 13.6%Saline 13.3%Pope 11.9%Franklin 13.0%Hardin 10.5%Cook 16.0%Vermilion 12.8%Coles 10.9%Macon 10.6%Union 13.0%

2004 Poverty Rate

In the 2001“Poverty inAmerica” poll,86 percent ofthose reportinggood financialhealth claimeddirectresponsibilityfor the situation,as opposed to 43percent of thosewho thoughtthey were doingpoorly.

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Anti-Poverty Policy in Illinois

There are two basic approaches to fightingpoverty. Direct income assistance addressesthe immediate concern of insufficientincome. It may or may not effectivelyaddress the long-term poverty problem. Infact, many believe this approach encouragesdependency on government assistance andinadvertently reinforces individual choicesassociated with poverty. Alternatively, poli-cies that address the root causes of povertymay have a more lasting impact on reducingpoverty. However, the impact of today’sspending on these programs is not reflectedin today’s poverty rates, and their eventualimpact can be difficult to assess.

Direct Income Assistance

There are several categories of programsproviding economic support to poor fami-lies. First, means-tested income support suchas TANF and Supplemental Security Income(SSI) programs provide cash benefit pay-ments to families with children, elderly per-sons, and the disabled. The Earned IncomeTax Credit (EITC), which subsidizes theearnings of workers in families with lowadjusted gross incomes, is also a means-tested program. In addition, the social insur-ance programs (Old Age, Survivors andDisability Insurance), while not explicitlydesigned to reduce poverty, in fact have amajor poverty-reducing impact on the aged.There are also in-kind programs such asFood Stamps and Medicaid that providemeans-tested in-kind support, and Medicare,a universal program, provides valuablehealth benefits to the aged.

Table 2 (pg. 56) presents poverty rates calcu-lated with and without various transfers.The first column presents the poverty ratewhen government cash and in-kind transfersare excluded from income. While children infemale-headed households still have thehighest poverty rate, when governmenttransfers are ignored, aged poverty rates aresimilar, at around 50 percent. The next col-

umn re-computes the poverty rate whenmeans-tested transfers are added back intohousehold income. It is evident that the‘welfare’ programs have very little effect onthe poverty rate. This is not surprising, asbenefits are not intended to be generousenough to lift a family out of poverty. In con-trast, non-means-tested transfers have amajor poverty-reducing effect overallthrough their dramatic impact on elderlypoverty rates. The difference in poverty ratesbetween columns 3 and 2 is very large forthose 65 and older. Note that the povertyrates reported in Column 3 correspond tothe official definition. Column 4 presents thepoverty rates with in-kind transfers ‘cashedout’ at face value. Poverty rates of children,particularly children in female-headedhouseholds, decline several percentagepoints due to the value of Food Stampsassistance they receive.

It is important to note that the U.S. govern-ment defines income for poverty purposesas pre-tax, post-transfer cash income.Because the EITC is part of the tax system,this source of means-tested income is notcounted for purposes of the official poverty

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Figure 2Poverty Rate 1980 - 2006

Source: US Census Bureau. Historical Poverty Tables, Table 21. Number of Poor and Poverty Rate by State: 1980 to2006. http://www.census.gov/hhes/www/poverty/histpov/hstpov21.html

1980 1985 1990 1995 2000 2005

0

2

4

6

8

10

12

14

16

18

Pove

rty

Rate

Year

US

Illinois

Non-weighted average ofIndiana, Iowa, Michigan,Minesota and Wisconsin

Illinois tends tohave a lowerpoverty ratethan the entireUnited Statesbut a highpoverty rate forthe Midwestregion.

rate, overstating poverty. The last column ofthe table presents poverty rates whenincome is counted ‘after tax.’ While somehouseholds appear poorer after subtractingtheir tax liability, the EITC uses the tax sys-tem to subsidize the wage earnings of low-AGI households with children. Therefore,while there is a slight increase in the overallpoverty rate and a fairly large increase in theelderly poverty rate, if income is measuredon a post-tax basis in targeted householdswith children, the tax system has a notice-able net poverty-reducing impact.

Indirect Policies

Despite clichés that the United States is a“Horatio Alger” society that presents broadopportunities for individuals to leap acrossthe income distribution, rigorous researchfrom long-range longitudinal studies finds avery high degree of intergenerational corre-lation of both income and earnings.7 Thechildren of high earners have a strong ten-dency to replicate their parents’ economicsuccess, while children of low earners tendto follow in their parents’ less fortunatefootsteps. More generally, higher-incomefamilies beget higher-income families. Thishigh degree of immobility between economicclasses in U.S. society, in fact, helps to

explain the intransigency of poverty ratesover lengthy periods. Given this reality,long-run solutions to the poverty problemmust directly attack this link between gener-ations and break it down for those at thelow end of the income/earnings spectrum.Policies to increase human capital by focus-ing on the early years of life offer the mostpromise for reducing poverty in futuregenerations.

It is well documented that poverty can beavoided through education. The extensiveeconomic literature on the returns to educa-tion indicates that an additional year ofschooling in the U.S. has a real financialreturn (in earnings) of 8-10 percent per year.8Figure 3 helps illustrate the link betweenincome inequality and education for the U.S.and the Midwest region.

While Illinois has an above-average share ofcitizens with at least a Bachelor’s degree(second in the region only to Minnesota), italso has a fairly high share of individualswithout a high school diploma (within theregion, only Indiana’s dropout rate ishigher). Recall that Illinois consistently hasabove-average poverty rates for its region,which makes sense given the relationshipbetween education and poverty.

Illinois Poverty Rate2004

IllinoisAll personsChildren (0-17)Children in FemaleHeaded HouseholdsAdults 18-64Aged (65+)

Selected Cash MarketIncome Sourcesexcept capital gains +Educational Benefits +Contributions fromOutside theHousehold and Other(1)

19.90%20.40%

52.00%13.70%49.80%

First Column +Government Means-tested Cash IncomeSources except FederalEITC(2)

19.60%20.20%

51.20%13.40%49.70%

Second Column +Government Non-means-tested CashIncome Sources =Official Definition(3)

12.30%18.10%

47.60%10.60%8.80%

Official Definition +Government Means-tested NoncashBenefits (in-kindtransfers)(4)

11.00%15.60%

41.00%9.80%7.60%

Official Definition +Government Means-tested Noncash Benefits(in-kind transfers) +Taxes Deducted fromIncome and Federal EITC(5)

11.10%

13.40%35.50%10.20%10.70%

Table 2:Illinois 2004 poverty rates under alternative income definitions

Source: US Census Bureau. Current Population Survey, Annual Social and Economic Supplement. 2005.

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The Illinois Report 2008

7 For more on this topic, seeBehrman. Jere R., andPaul Taubman. 1990.“The IntergenerationalCorrelation betweenChildren’s Adult Earningsand their Parents’Income: Results from theMichigan Panel Survey ofIncome Dynamics.”Review of Income andWealth 36 (2), 115-27 andmore recently,Mazumder Bhashkar,2005. “Earnings Mobilityin the US: A New Look atIntergenerationalInequality.”Review ofEconomics and Statistics82 (2, May), 235-55.

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Unfortunately, a very large body of researchindicates that remedial education of youth oradults, such as programs to help people geta GED or to retrain displaced workers, yieldsmall or no earnings gains. If anything, theaccumulation of evidence on child develop-ment and learning increasingly suggests thatit is imperative to intervene very early in life.Even by kindergarten, children in low-resource households are significantly disad-vantaged in ways that may permanentlydiminish their lifetime learning potential.Illinois’ extensive child care subsidy pro-gram is helpful in making it possible for chil-dren in low-resource households to be caredfor part of the day in settings with trainedstaff and developmentally age-appropriatematerials. However, it still falls to parents tochoose the mode of child care, and there isno guarantee that the most developmentallybeneficial environment is chosen.9Evaluations of the Head Start program,which has been in place for three decades,suggest that a rigorous preschool programhas long-lasting beneficial effects on chil-dren’s later learning and eventual economicoutcomes as young adults. Given this evi-dence, Illinois’ eventual implementation of auniversal preschool program (a movement

begun by the Ryan administration) mayprove to be one of its most effective povertyprevention strategies.

An area in which Illinois has moved aggres-sively under the Blagojevich administrationis in providing state-subsidized health insur-ance to children. Figure 4 indicates that chil-dren below 100 percent of the FPL have thehighest rates of health insurance coverage inthe region, with the exception of Minnesota.Illinois has also achieved relatively goodcoverage of the ‘near-poor.’ Recall thatFigure 1 also provides information on thedegree of overall health insurance coveragein the Illinois counties with the highestpoverty rates. Clearly the correlationbetween poverty and non-insurance is high.Those in poor health have a much weakerattachment to the labor force and this con-tributes to immediate poverty. While there islittle evidence that poverty is reduced byincreasing adult access to health care, this isan intuitively appealing idea. An emergingconcern among health experts, however, isthat the stress of poverty is felt veryintensely during the perinatal and earlychildhood periods, potentially influencinggene expression and setting the stage for

Figure 3Percentage of population over age 15 with each level of education

Source: US Census Bureau. Current Population Survey, Annual Social and Economic Supplement, 2007.

0%

5%

10%

15%

20%

25%

30%

35%

40%

Perc

enta

ge

Educational level

No highschool diploma

High schoolor equivilant

Some college, lessthan 4-yr degree

Bachelor’s degreeor higher

IndianaIowaMichiganWisconsinUSIllinoisMinnesota

8 Note that this is not aspurious effect of moretalented people suc-ceeding in school andbeing rewarded in thelabor market for this‘talent,’ independent ofeducation. Nor is it theresult of the fact thatindividuals facing ahigher earnings return toschooling should ration-ally choose more educa-tion. Estimates in the8-10 percent range arefrom studies that actu-ally take account of bothability and return biases.That is, if we randomlyselected someone fromthe population and sentthem back to school for ayear, we would expecttheir earnings to rise bythis amount.

9 In fact, a large share of sub-sidized child care is pro-vided by non-licensedfamily care providers.

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adult health problems.10 Again, it may bepossible to break the long-run ‘health-wealth’ cycle with policy interventions thateffectively target the very young.

Policy Options

As evidenced by welfare reform, politicalsupport is strongest for programs that sup-port low-resource working families. In 2000,Illinois finally adopted a state EITC to aug-ment the longstanding federal EITC (20 statetax systems currently offer the EITC). In2003, Illinois expanded its EITC by makingthe credit fully refundable, meaning thatthose with no tax liability receive a cash pay-ment. However, the Illinois EITC isextremely low, valued at just 5 percent of thefederal level; the lowest state EITC rateoffered. The Illinois credit would have to beraised to 20 percent (a policy advocated bythe Center for Tax and BudgetAccountability, the Center for EconomicProgress, Voices for Illinois Children and theShriver Center on Poverty Law) for example,in order to effectively exempt poor familiesfrom the state income tax. While minimumwage increases have been politically popularin Illinois, their anti-poverty impact is sim-ply not as effective as that of the EITC.11Whereas minimum wage workers are oftensecond earners or young people in families

with other earners, the EITC is tied to ahousehold’s adjusted gross income.

While there is a strong political preferencefor helping families with children, most poorindividuals are working-aged adults.“General Assistance” aimed at such individ-uals was once fairly widespread around thecountry, but over the course of the 1980s,many states ended their programs. Fornonelderly childless adults who have notbeen deemed ‘work disabled,’ Illinois offerslittle formal assistance. The GeneralAssistance program, administered by town-ships and counties, and the “TransitionalAssistance” program for Chicago residents,are meager programs that can pay as little asa maximum of $100 per month to individu-als who are indigent. The fact that these pro-grams are funded entirely by state and localgovernment (often through a special ear-marked local tax) may help explain their lim-ited nature. They are truly emergency aidprograms and are not intended as a solutionto the poverty problem. Nevertheless, theyare critical to the extremely needy individu-als who may be awaiting a change in livingarrangement, re-employment, a disabilityprogram determination, or who have simplyexhausted all other options such as friendsand relatives. The status of these programswithin the safety net should be systemati-

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Figure 4.Percentage of children in each poverty range with health insurance coverage

Source: US Census Bureau. Current Population Survey, Annual Social and Economic Supplement, 2007.

0%

5%

10%

15%

20%

25%

Perc

enta

ge

Income-to-Poverty Ratio

Overall Below 100% 100% to below 200% 200% and above

USIllinoisIndianaIowaMichiganMinnesotaWisconsin

African-Americanscomprise only12 percent of thenon-poor Illinoispopulation butmore than one-third of the poor,while whitesmake up 65percent of theIllinois popula-tion as a wholeand only 40percent of thepoor.

10 “Early-Life Conditions AndMechanisms ofPopulation HealthVulnerabilities,” by AliceFurumoto-Dawson,Sarah Gehlert, DanaSohmer, OlufunmilayoOlopade and Tina Sacks.Health Affairs. 2007. V 26.No 5. pp 1238-1248.

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cally evaluated and their funding require-ments and sources reassessed.

Lasting reductions in poverty in the popula-tion require intervention early in the lifecycle. Illinois is currently on track to be thefirst state to implement universal guaranteedavailability of (voluntary) preschool to every3- and 4-year-old child.12,13 Funding will sup-port 10 hours per week of preschool on a180-day (not year-round) school-year calen-dar. While formal staff training requirementsare clear, programs in a wide range of set-tings, from school districts to family home-care networks, may apply for funding. It isnot clear that limited-hours programs insuch diverse settings are all equally or highlyeffective.14 As the program goes forward,these parameters ought to be modified toensure that children, particularly those fromneedy families, are benefitting from bestpractices supported by rigorous evaluation.

The Nobel Laureate James Heckman hasargued that early interventions such as pre-school programs targeted to at-risk childrenare most effective at promoting long-run eco-nomic self-sufficiency when interventionsare repeatedly undertaken throughout child-hood and into young-adulthood. Thisrequires the consistent availability – geo-graphically and over time – of a variety ofdevelopmentally appropriate programs topromote both cognitive and noncognitiveskill development throughout early life.Illinois’ inequitable school funding system isan obvious obstacle to such a measured,long-run, and broad approach to education,as those in under-funded districts who couldbenefit most do without the resourcesneeded to support quality instruction andsupportive programs.

Conclusions

It is unreasonable to attribute the ‘fault’ forpoverty to the poor themselves for severalreasons. First, it is hard to argue that chil-dren, who comprise a substantial share ofthe poor, are responsible for both their

11 Of course, minimum wagepolicies are popularbecause they are notportrayed as a ‘tax.’ Eventhough they imposesocial costs similar tothose of taxes, thesecosts are obscure tovoters.

12 “Leadership Matters:Governor’s Pre-KProposals, Fiscal Year2007. May 2007 Reportby Pre-K Now.http://www.preknow.org/documents/LeadershipReport_May2006.pdf.

13 Since the 2001 welfarereform, Illinois hasoffered a child care sub-sidy program to workingfamilies. Over half ofthose using the programare poor.

14 While the Perry Preschoolprogram, for example,has been shown to be aneffective intervention is a10-hour-per-week, 7-months-per-year pro-gram, it provides manyadditional supports, suchas home visits, meals,social service referrals,ongoing monitoring ofstudents and teachers,and follow-ups(http://www.colorado.edu/cspv/publications/fact-sheets/blueprints/pdf/FS-BPP11.pdf).

Elizabeth T. Powers has been a pro-fessor at the University of Illinois atUrbana-Champaign since 1996. Shejoined IGPA in 2003. Her area ofexpertise is the analysis of socialpolicies, including social security,welfare and public health insurance.She is interested in policy design, theimpact of these policies on familiesand their financing. Professor Powersalso served as an economist with theFederal Reserve Bank of Clevelandand as a junior staff economist withPresident George H.W. Bush'sCouncil of Economic Advisers.

existence and their current economic situa-tion. Second, in Illinois, poverty is oftenworst in economically moribund areas. Atthe same time that policymakers bemoan theloss of the rural way of life, those left behindare likely to continue to face daunting eco-nomic challenges and high poverty rates.Third, individuals with low educationalattainment have greatly diminished earningscapacity and hence are likely to fall intopoverty many times during their lives. Infact, a fairly large share of Illinois’ popula-tion lacks a high school diploma, whichhelps to explain a poverty rate that is highrelative to the region. To the extent that loweducational attainment is due to lack of

opportunity rather than lack of effort, ‘self-help’ is not a realistic solution for such indi-viduals.

As discussed, there are two broad types ofanti-poverty policies that have either imme-diate or long-run impacts. Immediate reliefin the form of assistance explicitly targetedto the poor is quite limited in scope andscale, as evidenced by the relatively fewindividuals lifted from poverty by these pro-grams. Immediate relief from the socialinsurance (i.e., non-welfare) programs, onthe other hand, has been extremely effective,but only for the very narrow groups (chieflythe elderly but also the disabled) who do notbear the stigma associated with the working-age poor and their children.

Long-run policies are aimed at poverty pre-vention. Both policies to increase educationand preserve and enhance health are promis-ing, as education and health are stronglylinked to earnings. In both cases, however,the empirical evidence increasingly suggeststhat it is essential to intervene at very youngages in order to have a discernable impact.Implementing such policies requires a long-term and steady commitment to povertyreduction that focuses realistically on theconditions facing children born into low-resource families.

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The Illinois Report 2008

Emilie Bagby is a Ph.D. candidatein the Department of Economics atthe University of Illinois at Urbana-Champaign. Her research interestsinclude health and education pol-icy for children and youth, particu-larly in developing countries. Shereceived her B.S. in GeneralEngineering and B.A. in Economicsfrom the University. Emilie has vol-unteered with disadvantagedyouth in Chicago to enhance theirjob search skills after high schooland with street youth in Ecuador inan after-school program. She spentlast summer in Ecuador studyingQuichua, a local indigenous lan-guage, and exploring potential dis-sertation topics.