3.4 Providing a Safety Net

NCEE Standard 13:

Role of Resources in Determining Incomes

Objectives:

• Determining why incomes differ across households, and identify the main source of poverty in the United States.

• Describe government programs that provide a safety net for poor people.

Key Terms

Income• The amount of money or its equivalent

received during a period of time in exchange for labor or services, from the sale of goods or property, or as profit from financial investments.

• Median income: • The middle income when a group of

incomes is ranked from lowest to highest

• Social insurance: • Cash transfers for retirees, the

unemployed, and others with a work history and a record of contributions to the program.

• Income-assistance programs:• Government programs that provide money

and in-kind assistance to poor people.

• Resource markets: • Resource markets are when households

sell and businesses buy, therefore, an example of a resource market is labor. Land, capital and entrepreneurial ability are a few examples.

• Benchmark: • (poverty threshold)

• A standard by which something can be measured or judged

• Recession:

• a decline in the nation’s total production that lasts at least six months.

Overview

• The private sector does not assure a minimum level of income.

• Public assistance reflects society’s attempt to provide a social safety net.

• Public assistance could reduce incentives to work.

#1 p. 82. Read In the News, “Good News / Bad News for U.S. Kids

• What do the above statistics say about the social safety net in the United States?

• These findings indicate that the social safety net within the United States is stronger than ever. There is more protection now than in the past.

The Wall Street Journal, p. 88.

• What’s the relevance of the statement in The Wall Street Journal?

• These figures indicate the government’s priority is to provide safety nets, such as earned income tax credit and welfare, to single-parent families headed by mothers.

#3 p. 83. Main Idea: Role of Resources in Determining Income. What are the products of the two people shown in the photos?

Which one could earn more than the other, why?Which do you think should earn more than the other, and why?

Students will understand that income for most people is determined by the market value of the productive resources they sell. What workers earn depends, primarily, on the

market value of what they produce and how productive they are.

• #4. P. 84. Figure 3.4: Number and Percentage of U.S. Population in poverty: 1959-2001

• What happens to the number in poverty and the poverty rate during a recession?

• During a recession, the number in poverty and poverty rate increase

#5. Why does the poverty level differ in different countries?

• A person who earned $1,000 a year in the US would be regarded as living in deep poverty, while a person earning the same income in India would be reasonably well of. Ask students to explain why the same amount of income can support very different standards of living in different countries. What does this difference have to do with the prices charged for the basic necessities of life in these countries? How much of the meaning of poverty is a matter of social values and expectations?

#6. Why do incomes differ across households?

• Income s differ because of the number of indiviuals in the household who work and the age and education of these individuals.

#7. What is the main source of poverty in the U.S. economy?

• Families headed by females with no husband present are the number-one source of poverty in the US.

Pages 86-88:#8. What are the main government programs that

try to offer a safety net? Make a list and give a brief description of each.

• The main government programs that try to offer a safety net are • social insurance programs: • Social Security - retirement income• Medicare – Health insurance for short term medical care

(mostly 65+)• Unemployment insurance -• Workers compensation -• income-assistance or welfare programs (means tested programs)• TANF : Temporary Assistance for Needy Families (provides

cash for needy families)• SSI : Supplemental Security Incomer (Cash for elderly poor

and disable)• Medicaid - funds for medical care

#9. Copy and complete the Government Spending and Transfers as a Percent chart.

2011 Poverty GuidelinesPersons in

Family48

Contiguous States and

D.C

Alaska Hawaii

1 $10,890 $13,600 $12,540

2 14,710 18,380 16,930

3 18,530 23,160 21,320

4 22,350 27,940 25,710

5 26,170 32,720 30,100For each additional

person, add

3,820 4,780 4,390

Education Income

Per cent of U.S. students who finish high school

This graph shows the percentage of persons and households in each of the income groups shown

This graph shows the distribution of annual household income in the United States in 2010.

Income inequality in the U.S. has become greater than in any other large industrialized country.

measure of statistical dispersion intended to represent the income distribution of a nation's residents, and is the most

commonly used measure of inequality.