Poverty and Inequality in Illinois - Institute of Government & Public ...

Poverty and Inequality in IllinoisBy Elizabeth T. Powers and Emilie Bagby1US 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.2http://www.npr.org/programs/specials/poll/poverty/summary.html3http://brain.gallup.com/documents/questionaire.aspx?STUDY=P06080314The 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.5Presidential 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/).50In 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 substantiallyhigher than today’s rate. It is a stubbornfeature 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 in America” surveyby NPR, the Kaiser Family Foundationand the Kennedy School of Government atHarvard University 2 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 governmentto 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 Education 3 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 attributetheir success to their own effort and abilitiesrather 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 situation,as opposed to 43 percent of those whothought they were doing poorly.Given this strong belief by many Americansthat they control their own economic destinies,it is not surprising that poverty is perceivedin many quarters as a problem of‘self-help.’ Nearly 70 percent of respondentsin the “Poverty in America” 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 example,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

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 programsare part of the problem, not the solution.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 situationin 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 IllinoisThe 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 twoparent,two-child family. Every member of afamily is considered poor if the family’sannual 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 FactorsTable 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 characteristicto the share of non-poor with the characteristic.The latter is an indication of thedegree of over-representation of that characteristicin 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 percentand 1.6.The first rows of Table 1 indicate the age distributionsof the poor and non-poor inIllinois and the U.S. Children are disproportionatelyin poverty. The incidence ofpoverty steadily declines with age; thoseyounger than 25 are over-represented inpoverty, while those older than 25 are underrepresented.Part of this age pattern has todo with the typical life cycle of education,training, and work. For instance, college studentsare transitorily poor because their primaryactivity (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?51

The Illinois Report 2008Figure 1Illinois county typologies and poverty rates2004 Poverty Rate10.13%14.18%9.91%13.52%10.60%10.99%In the 2001“Poverty inAmerica” poll,86 percent ofthose reportinggood financialhealth claimeddirectresponsibilityfor the situation,as opposed to 43percent of thosewho thoughtthey were doingpoorly.2000 HealthUninsurance RatesAlexander 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 Ratesabove 14%Farming-dependent countiesMining-dependent countiesManufacturing-dependent countiesFederal and State GovernmentdependentcountiesService-dependent countiesNon specializedSource: USDA Economic Research ServiceAlexander 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%Sources: USDA. SAIPE, Census Population Estimates. Census 2000 Health Insurance54

The Illinois Report 20087For 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.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 systemto 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 noticeablenet poverty-reducing impact.Indirect PoliciesDespite 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 correlationof both income and earnings. 7 Thechildren of high earners have a strong tendencyto 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 toexplain the intransigency of poverty ratesover lengthy periods. Given this reality,long-run solutions to the poverty problemmust directly attack this link between generationsand break it down for those at thelow end of the income/earnings spectrum.Policies to increase human capital by focusingon 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 educationindicates 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.Table 2:Illinois 2004 poverty rates under alternative income definitionsIllinois Poverty Rate2004IllinoisAll 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 MeanstestedCash IncomeSources except FederalEITC(2)19.60%20.20%51.20%13.40%49.70%Second Column +Government Nonmeans-testedCashIncome Sources =Official Definition(3)12.30%18.10%47.60%10.60%8.80%Official Definition +Government MeanstestedNoncashBenefits (in-kindtransfers)(4)11.00%15.60%41.00%9.80%7.60%Official Definition +Government MeanstestedNoncash Benefits(in-kind transfers) +Taxes Deducted fromIncome and Federal EITC(5)11.10%13.40%35.50%10.20%10.70%56Source: US Census Bureau. Current Population Survey, Annual Social and Economic Supplement. 2005.

Institute of Government & Public Affairscally evaluated and their funding requirementsand sources reassessed.Lasting reductions in poverty in the populationrequire 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 support10 hours per week of preschool on a180-day (not year-round) school-year calendar.While formal staff training requirementsare clear, programs in a wide range of settings,from school districts to family homecarenetworks, 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 preschoolprograms targeted to at-risk childrenare most effective at promoting long-run economicself-sufficiency when interventionsare repeatedly undertaken throughout childhoodand into young-adulthood. Thisrequires the consistent availability – geographicallyand 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.ConclusionsIt is unreasonable to attribute the ‘fault’ forpoverty to the poor themselves for severalreasons. First, it is hard to argue that children,who comprise a substantial share ofthe poor, are responsible for both theirElizabeth T. Powers has been a professorat 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.11Of 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.13Since the 2001 welfarereform, Illinois hasoffered a child care subsidyprogram to workingfamilies. Over half ofthose using the programare poor.14While the Perry Preschoolprogram, for example,has been shown to be aneffective intervention is a10-hour-per-week, 7-months-per-year program,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/factsheets/blueprints/pdf/FS-BPP11.pdf).59

The Illinois Report 2008existence and their current economic situation.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 economicchallenges 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’ populationlacks 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 ofEmilie Bagby is a Ph.D. candidatein the Department of Economics atthe University of Illinois at Urbana-Champaign. Her research interestsinclude health and education policyfor children and youth, particularlyin developing countries. Shereceived her B.S. in GeneralEngineering and B.A. in Economicsfrom the University. Emilie has volunteeredwith 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 language,and exploring potential dissertationtopics.opportunity rather than lack of effort, ‘selfhelp’is not a realistic solution for such individuals.As discussed, there are two broad types ofanti-poverty policies that have either immediateor 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 programs.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 workingagepoor and their children.Long-run policies are aimed at poverty prevention.Both policies to increase educationand preserve and enhance health are promising,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 longtermand steady commitment to povertyreduction that focuses realistically on theconditions facing children born into lowresourcefamilies.60