Poverty in America Janet Currie, Columbia University

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• Introduction
• Chapter 1 Welfare vs. Making Work Pay
• Chapter 2 In Sickness and in Health The
  Importance of Public Health Insurance
• Chapter 3 Feeding the Hungry
• Chapter 4 Home Sweet Home?
• Chapter 5 Whos Minding the Kids?
• Chapter 6 Defending and Mending the Safety Net

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Welfare reform in 1996 was accompanied by
predictions of disaster

• It would be a great moral and practical wrong
  for you to sign any welfare reform bill that
  will push millions of already poor children and
  families deeper into poverty.... (Marian Wright
  Edelman, Childrens Defense Fund).
• is not welfare reform, it is welfare repeal.
  It is the first step in dismantling the social
  contract that has been in place in the United
  States since at least the 1930s. (Senator Daniel
  Patrick Moynihan).

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But the expected increase in poverty did not
materialize.

• One reason is that most aid was already delivered
  in kind.
• And the EITC was becoming a more important source
  of cash assistance to low income families.
• Less than 16 of aid to poor families is in the
  form of welfare payments.

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Spending on Families and Children (Billions,
2002)
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In contrast to cash welfare, we know what
outcomes in-kind programs are expected to affect.

• Medical programs should affect health and access
  to care.
• Nutrition programs should affect hunger and
  nutrition.
• Housing programs should affect the quality of
  housing and related outcomes.
• Child care should affect developmental outcomes.

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Expenditures on Children

• The federal government spends about 198 billion
  on children under these programs.

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Spending on Families with Children as Federal
Total, 2006
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Despite Spending, Poverty Has Been Relatively
Stable Since the 70s
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Stability in the Poverty Numbers

• Leads people to believe that the War on Poverty
  has failed and the government is incapable of
  taking effective action.
• As Ronald Reagan said The government declared
  war on poverty, and poverty won.

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But the War on Poverty

• created an invisible safety net that has
  changed the nature of poverty.
• Poverty today is not the same as poverty 40 years
  ago.
• Real improvements have been made in living
  standards, though in-kind programs can be
  improved to make even more of a difference in
  future.

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Medicaid/SCHIP Public health insurance for poor
women and children.

• Originally available only to those on welfare.
• Expansions of eligibility to people of higher
  income over the late 80s and 90s made all poor
  children eligible. Pregnant women are eligible
  up to 200 of the poverty line or higher in many
  states.
• States started with different cutoffs and
  implemented expansions at different rates,
  allowing identification of effects.

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Among Infants

• Expansions of Medicaid eligibility for pregnant
  women and young children, have had a dramatic
  effect.
• Today most births are in hospitals, and 40 of
  are paid for by Medicaid. These children are
  automatically covered for one year.
• The result of better access to medical care has
  been a dramatic decline in infant deaths.

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Medicaid Eligibility for Pregnant Women and
Decline in Infant Mortality Rates
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Among Children, Expansions of Eligibility

• Increase access to preventive care (e.g. the
  probability that a child has had at least one
  doctor visit in the past year).
• Reduce preventable hospitalizations.
• But increase hospitalization overall.

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Threats to Medicaid/SCHIP

• The most important problem facing Medicaid is
  rising costs.
• These costs lead many states to try to trim the
  Medicaid rolls when budgets are tight.

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But Medicaid costs are mainly accounted for by
elderly/disabled

• 75 of most Medicaid enrollees, including most
  children, incur only 6 of the costs.
• 63 of the costs are incurred by 5 of the
  caseload.
• Cutting children from the rolls will not cut
  costs, but is likely to have a negative impact in
  terms of health.

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Low Take up a Persistent Problem

• Many eligible children are not enrolled.
• There is much churning on and off the rolls.
• Eligible but uncovered children may lack
  preventive care and get care only after a medical
  emergency.

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Nutrition Programs include Food Stamps, School
Nutrition Programs, WIC

• These programs were created in the 60s and 70s
  following reports such as Hunger in America by
  a team of physicians.
• Wherever we went and wherever we looked, whether
  it was the rural south, Appalachia, or an urban
  ghetto, we saw children in significant numbers
  who were hungry and sick, children for whom
  hunger was a daily fact of life and sickness in
  many forms, an inevitability. (report to
  Congress, 1968)

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Food and Nutrition Programs

• Have been subject to much negative publicity.
• E.g. stories of fraud and abuse in Food Stamps,
  WIC, School Nutrition programs.
• Complaints about poor quality of diet offered in
  School Nutrition programs and to a lesser extent
  WIC.

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But the amount of fraud is small in absolute
terms

• E.g. only .025 of every food stamp dollar is
  lost to fraud.
• In the late 1990s, the number of infants in WIC
  exceeded estimates of the number of eligible
  infants, but an NRC Panel concluded that official
  estimates of eligibles were much too low because
  they did not take into account children who were
  eligible because of their participation in the
  Medicaid program.

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Eligibles who are not enrolled greatly exceed
ineligibles who are enrolled

• Pilot studies of stricter verification procedures
  for School Lunch (e.g. requiring households to
  submit income documents, or randomly verifying
  income) increase administrative costs but have
  no effect on fraud because most families report
  accurately. Stricter requirements did discourage
  eligible families from applying.
• Similarly, a plan to fingerprint food stamp
  participants in CA was found to cost more than it
  saved in fraud deterred.

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Food and Nutrition Programs

• Vary widely in the extent to which participants
  are required to consume nutritious food.
• Food Stamps can be used to purchase virtually any
  foods (not hot foods or vitamins though).
• School lunches/breakfasts must conform to federal
  guidelines.
• WIC benefits may be used only for certain foods.

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Programs that constrain food choices are more
effective at improving nutrition.

• Should Food Stamps be used for junk food?
• All food in schools (not just that served under
  National School Lunch Program) should be held to
  high standards.
• Issue is the quality, not quantity of calories.
  Even obese children are often lacking specific
  nutrients.

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WIC is most restrictive

• WIC increases the consumption of the target
  nutrients included in WIC foods.
• WIC has positive effects on the consumption of
  protein, vitamin B6, vitamin E, folate, thiamin,
  riboflavin, niacin, iron, magnesium, and zinc.
• WIC has been credited with a dramatic decline in
  the incidence of anemia among young children that
  took place between 1975 and 1985 (from 7.8 to
  2.9)
• Improvements in nutrition affect childrens
  behavior and ability to learn. Children on WIC
  prenatally have higher scores on the Peabody
  Picture Vocabulary Test, a good predictor of
  future scholastic achievement.

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These programs have changed the meaning of
hunger. Today, hunger is defined as food
insecurity

• Since 1995 the U.S. Census Bureau has tracked
  food insecurity in the Current Population Survey
  by asking questions about
• anxiety that the household food budget is
  insufficient
• inadequacy in the quantity or quality of food
  eaten by adults and children in the household
• instances of missed meals for adults and for
  children.

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Food Insecurity

• Has many negative consequences
• E.g. it may even lead to higher rates of obesity
  by causing people to stock up on empty calories
• But it is not the same as starvation

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Housing Policy

• Federal housing policy has been successful in
  largely eliminating substandard housing.
• Even among very low income households (incomes lt
  30 of area median income) gt80 have physically
  adequate housing.
• But gt 70 of these households pay gt 30 of their
  income in rent and utilities (40 pay gt 50).

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Federal Housing Expenditures, Billions 2002
(total43)
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But public housing assistance is a lottery

• 43 of households served are above the poverty
  line. And only 30 of poor renters are served.
• Housing assistance provides huge subsidies to
  lucky households.
• A family paying gt50 of income for housing who
  joined the housing program would reduce their
  rental payments from 50 to 30 of their income.
  This subsidy would free up 20 of the family
  budget to be spent on other things.

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• Specifically, suppose that a poor family of four
  in Los Angeles earned 18,800 a year and was able
  to find a modest two bedroom apartment for 750
  per month.
• Their annual rental payments of 9,000 would eat
  up 48 percent of their earnings.
• If they got into Section 8, their rent would be
  capped at 30 percent of their income.
• This family would save 4,360 per year, which is
  greater than the maximum EITC credit of 4,204.

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Potential Reforms of Housing Policy

• More families could be served with existing
  resources.
• It costs 35 - 91 more to house a family through
  construction/rehab of housing vs. Section 8
  vouchers.
• Olson (2003) calculates that switching all
  project-based aid to vouchers would allow 900,000
  more families to be served.
• Evidence about the benefits of moving poor
  families to better neighborhoods (used to justify
  mixed income construction projects) is mixed.

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Early Intervention May Be the Most Effective
Anti-Poverty Strategy

• Government can intervene through nurse home
  visiting programs, which have been shown to be
  effective in randomized trials.
• Government already is a major player in the child
  care market, intervening through tax credits,
  regulation, subsidies, and direct provision.

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Direct provision is most important for poor
children because

• Tax credits dont benefit poor families.
• Subsidies are unevenly available, and more
  concerned with maternal employment than child
  care quality.
• Regulation is weak, and concerned only with
  minimum standards. Increasing regulation in the
  absence of direct provision is likely to drive
  poor families out of regulated care (Joe Hotz and
  I show this effect).

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Randomized trials prove that early intervention
through child care can be effective. E.g.
Carolina Abcedarian
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Direct Provision of Child Care- Can Government Do
A Good Job?

• The U.S. Head Start program is a preschool
  program for poor 3-5 year old children.
• Serves 800,000 children per year at a cost of
  6.2 billion.
• Local organizations apply to federal govt for
  matching funds on a 3-year cycle.
• Grantees must follow detailed performance
  guidelines.

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Head Start Regulations Cover

• Parent participation.
• Programming.
• Mental Health Services.
• Nutrition.
• Selection into the program.
• Facilities.
• Training and staffing.
• Family and community partnerships.

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But Does Head Start Work?

• Government is now funding a randomized trial, but
  it will follow children only to the first grade.
• If Head Start is an investment, then we need to
  know the longer-run return.

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Sibling studies

• Use existing national data sets.
• Compare children who attended Head Start to their
  own siblings who did not.
• Control for the fact that Head Start children are
  worse off than other children. In fact, Head
  Start centers are required to select the neediest
  children.

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Effect of Head Start on probability of attending
college, adults 18-30SourceGarces, Thomas, and
Currie using data from the PSID.
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Effect of Head Start on probability of being
booked or charged with a crime among 18-30 year
old adults. SourceGarces, Thomas, and Currie
using data from the PSID.
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The cup is either

• ½ Empty Head Start does not bring attendees up
  to the level of the average child.
• ½ Full Head Start has long lasting positive
  effects on schooling attainment and other
  outcomes. Among whites, Head Start closes about
  60 of the gap in the probability of high school
  completion, for example.

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Would spending more help?

• Currie and Neidell (2004) use national data
  matched to administrative data about Head Start
  budgets.
• We look at the test score gap between Head Start
  and non-Head Start children within a county and
  ask whether this gap is smaller where per capita
  Head Start spending is higher (controlling for
  characteristics of individuals, families, and
  counties, and for state).

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For each 1000. in per capita Head Start
spending, scores of Head Start children
increase (coefficients on interaction Head
Start and per capita spending).
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Conclusions about early intervention

• Quality child care/early education programs are
  one of the most effective known interventions for
  disadvantaged students.
• While Head Start has positive effects, it is not
  of the same quality as model preschool programs,
  and more spending might help.

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There are many effective programs

• Together these programs form a largely invisible,
  and often ignored, safety net.
• But it is haphazard and patchwork.
• Eligibility requirements vary from program to
  program and it is difficult for eligibles to know
  of and enroll in all of the available programs.
• Many children fall through the cracks.

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A proposal for reform

• Harmonize eligibility requirements across
  programs
• Make all children eligible
• Charge parents who use the program a sliding fee
• Administer the fee through the tax system (as the
  EITC is administered)
• Allow parents to opt out

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Conclusions

• Contrary to popular belief, there are many
  successful anti-poverty programs which form an
  effective, if largely invisible safety net.
• These programs have changed the nature of
  poverty.
• We need to continue to improve these programs,
  and to work to ensure that eligible children
  participate.