Chapter 10: Introduction
Poverty: The Persistent Economic Problem
Chapter 10 deals with the problem of poverty in the United States. It contains an unusually thorough integration of facts, analysis, institutional detail, and policy alternatives. The principal questions addressed are: (1) How many people are poor? (2) What is the shape of the long-run poverty trend? (3) How effective have real economic growth, investment in human capital, and government transfers been in reducing poverty? (4) What factors tend to increase poverty? (5) Do government transfers, in particular, increase poverty through their adverse effect on work effort and family composition? (6) What are the alternatives for dealing with poverty that are currently on the policy agenda?

Instructional Objectives
After completing this chapter, your students should know:

1. How poverty is measured.
2. How the official poverty rate has varied over the last 30 years.
3. That government transfers have been responsible for much of the reduction in poverty that has occurred, especially among the elderly.
4. That poverty has become concentrated more in families headed by females, blacks, and Hispanics.
5. That discrimination plays a role in generating and maintaining poverty.
6. That the increasing incidence of unemployment has had a disproportionate impact on the poor.
7. How government income-tested transfers can affect work effort and family composition.
8. That work effort and family composition do not appear to be greatly affected by government transfers.
9. The policy choices for dealing with the problem of the "working poor," and how they work.
10. The policy choices for offsetting the "feminization of poverty," and how they work.
11. How a negative income tax works, and compares with current income-tested transfers.

Key Terms
These terms are introduced in this chapter:

official poverty measure
official poverty line
money income
in-kind transfers
cash transfers
capital gains
feminization of poverty
employment discrimination
nonemployment discrimination
income-tested transfers
basic transfer break-even net income
transfer reduction rate
target efficiency
wage subsidy
adjusted gross income
negative income tax

Additional References
In addition to the references in the text, instructors may with to read or assign one or more of the following:

1. Committee on Ways and Means, U.S. House of Representatives, Background Material and Data on Programs within the Jurisdiction of the Committee on Ways and Means (Washington, D.C.: U.S. Government Printing Office). An annual publication that may be referenced in your library simply as The Green Book.
2. Thomas Corbett, "Child Poverty and Welfare Reform: Progress or Paralysis?' Institute Research on Poverty: Madison, Wisconsin Focus 15 (1) (Spring 1993).
3. David T. Ellwood, Poor Support: Poverty in the American Family (New York: Basic Books, 1988).
4. Bradley R. Schiller, The Economics of Poverty and Discrimination, 6th ed. (Englewood Cliffs, N.J.: Prentice Hall, 1994).
5. Michael Wiseman; "How Workfare Really Works," Public Interest (Fall 1987), pp. 36-47.
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