slides_ch11
Chapter Overview
Title: Essentials of Economics by Paul Krugman and Robin Wells
Focus: The Economics of the Welfare State
Key Questions addressed:
Definition and societal benefits of the welfare state
Causes and consequences of poverty
Historical changes in income inequality in the U.S.
Impact of social insurance like Social Security on poverty and inequality
Debates regarding the welfare state's size
Concerns surrounding private health insurance and government interventions
Definition and Purpose of the Welfare State
Welfare State: A collection of government programs to alleviate economic hardship.
Most involve government transfers (payments to individuals/families).
Rationale Behind the Welfare State
Alleviating Income Inequality
Transfers from rich to poor provide more benefit than harm.
Poverty programs focus on helping low-income individuals and families.
Alleviating Economic Insecurity
Social insurance programs protect against financial distress, providing safety for all families.
Social Benefits
Programs that fight poverty and offer health care access can lower risks of unemployment, crime, and medical issues in disadvantaged populations.
Discussion Questions
Trade-offs in Taxation Strategies
Discuss the implications of taxing the wealthy to support low-income individuals. Consider potential harms to the wealthy vs. benefits to the poor.
Poverty Measurement
Poverty Threshold: Income below which families are officially poor.
Poverty Rate: Percentage of population below this threshold; adjusted using Supplemental Poverty Measure, which considers government aid.
Who Are the Poor?
Demographics (2018 Data)
38.1 million in poverty (11.8% of U.S. population)
41% Non-Hispanic Whites
28% Hispanics
23% African-Americans
5% Asians
Children: One-third of impoverished individuals.
Characteristics Leading to Poverty
Families led by females without spouses show higher poverty rates (24.9%).
Link between inadequate employment and poverty: many jobs in retail/service sectors offer low pay and no benefits.
Causes of Poverty
Factors contributing to poverty include:
Lack of education
Insufficient English proficiency
Racial and gender discrimination
Unforeseen adverse circumstances
Consequences of Poverty
Lack of health care access leading to severe health issues.
Affordable housing challenges disrupt family stability.
Children in poverty may suffer lifelong learning disabilities.
Segregated neighborhoods limit employment opportunities for impoverished youth.
Economic Inequality
Mean Income vs. Median Income:
Mean: Average income skewed by high earners.
Median: Middle income, considered more stable reflection of income distribution.
2018 U.S. data on household income illustrates significant disparities across quintiles.
Global Comparison of Inequality
Gini Coefficient: Assess income inequality (0 = perfect equality, 1 = perfect inequality).
Highest inequality in Africa and Latin America.
Europe exhibits more equal income distribution than the U.S.
The U.S. Welfare State
Programs include:
Means-tested programs: Aid for families under income thresholds.
In-kind benefits: Goods/services rather than direct payments.
Social Security: Non-means-tested program providing retirement/support for disabled citizens.
Unemployment Insurance: Temporary financial support for those out of work.
Debate on Welfare State Size
Tax Policies
Discussions on taxing wealthier segments to address income inequality raise concerns on economic incentives.
Considerations for means-testing benefits to focus resources efficiently.
Conclusion and Context
Economic context showcases ongoing debates about the size and effectiveness of welfare programs and health care systems in the U.S. and relative nations.