Standard Address
 12.1 Students understand common
terms & concepts and economics
reasoning.
1
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Objectives
LESSON 3.4
Providing a Safety Net
 Determine 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.
2
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Key Terms
LESSON 3.4
Providing a Safety Net
 median income
 social insurance
 income-assistance programs
3
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Income and Poverty
In a market economy, income depends
primarily on earnings, which depend on
the value of each person’s contribution to
production
4
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Why Household
Incomes Differ
The median income of households is
the middle income when incomes are
ranked from lowest to highest.
The main reason household incomes
differ is that the number of household
members who are working differs.
5
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Why Household
Incomes Differ
High-income households typically
consists of well-educated couples with
both spouses employed.
Low-income households typically are
headed by a single mother who is young,
poorly educated, and unemployed.
6
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Official Poverty Rate
The federal government determines the
official poverty level and adjusts this
benchmark over time to account for
inflation.
The U.S. official property level of income
is many times greater than the average
income for most of the world’s
population.
Poverty is a relative term.
7
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Number and Percentage of U.S.
Population in Poverty: 1959–2001
8
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Poverty and Marital Status
Poverty rates among female-headed families
are five to six times greater than rates among
married couples.
Poverty rates among female-headed families
are two to three times greater than those for
male-headed families.
9
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Poverty and Marital Status
Since the mid-1990s poverty rates have
trended down for all types of families, before
rising slightly in the recession year of 2001.
Births to single mothers make up the primary
source of poverty in the United States.
10
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
U.S. Poverty Rates and
Types of Households
11
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Checkpoint: pg 85
Why do incomes differ across household, and
what is the main source of poverty in the U.S.
economy?
 Incomes differ across households because of
the number of individuals in the household
who work and the age and education of these
individuals.
 Families headed by females with no husband
present are the number-one source of
poverty in the U.S..
12
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Programs to Help the Poor
Social insurance
Income-assistance programs
Earned-income tax credit
Welfare reform
13
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Social Insurance
Social insurance programs are designed
to help make up for the lost income of
people who worked but are now
 Retired
 Temporarily unemployed
 Unable to work because of disability or workrelated injury
The Social insurance system tends to
redistribute income from rich to poor and
from young to old.
14
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Social Insurance Programs
Social Security
Medicare
Unemployment insurance
Worker’s compensation
15
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Income-Assistance Programs
Income-assistance programs provide
money and in-kind assistance to poor
people.
Cash transfer programs
Temporary Assistance for Needy Families
(TANF)
Supplemental Security Income (SSI)
In-kind transfer programs
Medicaid
16
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Earned-income tax credit
The Earned-income tax credit
supplements wages of the working poor.
17
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Welfare Reform
Temporary Assistance for Needy
Families (TANF)
Welfare reform has reduced welfare rolls
and increased employment.
18
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Income Redistribution—
Composition of Federal Outlays
19
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Checkpoint: pg 88
What are the main government programs that
try to offer a safety net?
 The main government programs that try to
offer a safety net are social insurance
programs and income-assistance programs.
 The main social insurance programs are
Social Security and Medicare.
 The main income-assistance programs are
TANK, SSI and Medicaid.
20
CONTEMPORARY ECONOMICS: LESSON 3.4
© SOUTH-WESTERN
Assessment
Key Concepts
#1.
#2.
#3.
#4.
21
CONTEMPORARY ECONOMICS: LESSON 3.1
© SOUTH-WESTERN
Key Concepts
22
Assessment
CONTEMPORARY ECONOMICS: LESSON 3.1
© SOUTH-WESTERN
Assessment
Key Concepts
#5.
23
CONTEMPORARY ECONOMICS: LESSON 3.1
© SOUTH-WESTERN