Overview
Purpose:
This segment examines some of the causes of differences in income, and also describes and analyzes some of the government policies which attempt to reduce poverty.
Objectives:
1. To make the viewer aware of the two basic types of government programs, those that seek to reduce the causes of poverty (such as training and education programs, antidiscrimination policies, the prevention of unemployment or disability, day care, and other programs), and those that reduce the symptoms of poverty (such as social security, insuring unemployment and disability, welfare, medicare, public housing, food stamps, etc.).
2. To show how the Social Security program is designed, how it developed from an insurance program to a transfer programs, and how it helped to reduce poverty.
3. To show the goals and problems of job training programs for the poor.
4. To show that in-kind benefits are not as economically efficient for the individual as cash benefits, but they promote the consumption of merit goods.
5. To show that programs that attempt to create a more equitable distribution of income often have harmful unintended effects because of hidden incentives and disincentives (e.g., breaking up families, high implicit marginal tax rates).
| Key Economic Concepts AFDC, transfer payments
discrimination means tests, investment in human capital, marginal tax rate, cash vs. in-kind transfers, social insurance programs, negative income tax, disincentives to work. |
| Contemporary Issues Is income inequality always bad? This question often generates fierce debates among those who give income equality a higher priority than economic growth and those who believe the opposite. However, such debates often confuse equality of opportunity with equality of outcomes. Few people would disagree that everyone should have the same opportunity to compete for colleges, jobs, etc. In other words, there should be no discrimination. However, even with equal opportunities, the outcome can be an unequal income distribution, because of different skill sets, levels of intelligence etc. What would happen if we forced both the equality of outcomes and opportunities? |
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