U.S. Welfare System

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U.S. Welfare Framework. Help to Families with Ward Kids (AFDC) and Impermanent Help to Penniless Families (TANF) Moral Obligation and Work Opportunity Compromise Act (PRWORA) supplanted AFDC in 1996 with TANF Planned to "end welfare as we probably am aware it"

Presentation Transcript

Slide 1

U.S. Welfare System Aid to Families with Dependent Children (AFDC) and Temporary Assistance to Needy Families (TANF) Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) supplanted AFDC in 1996 with TANF Aimed to "end welfare as we probably am aware it" Under AFDC, qualification and advantage plan controlled by national government; under TANF, dictated by states Under AFDC, central government coordinated state AFDC spending dollar-for-dollar; under TANF, states get elected piece allows Under AFDC, anybody could apply for AFDC and all qualified got AFDC; under TANF, states can deny qualified individuals Recipients required to work in the wake of accepting TANF for a long time Recipients can't get TANF for over 5 years over life

Slide 2

Michigan TANF Family Independence Program (FIP) Monthly advantage = installment standard - countable wage Countable salary = 80% of earned pay over $200 + unmerited wage Ex.: Single mother of 2 with $500 earned, $100 unmerited pay Earned pay over $200 is $500 - $200 = $300, of which 80% ($300 x .80 = $240) is countable All $100 unmerited pay is Countable pay = $240 + $100 = $340 Payment standard for single parent of 2 in Ingham County is $489 Monthly advantage = $489 - $340 = $149

Slide 3

Michigan TANF Family Independence Program (FIP) Monthly advantage = installment standard - countable wage Countable pay = 80% of earned wage over $200 + unmerited wage Monthly advantages lessened by $1 for each $1 in unmerited pay "Benefit diminishment rate" of unmerited wage is 100% Monthly advantages decreased by 80 pennies for each $1 in earned wage increased over $200 "Benefit decrease rate" of earned wage over $200 is 80%

Slide 4

FIP Budget imperative for single parent of 2 in Ingham County with no unmerited pay, confronts the lowest pay permitted by law of $5.15/hr Without FIP, confronts basic spending limitation with zero utilization if zero work supply, incline of 5.15 Michigan TANF c slant = 5.15 0 T l (L=0)

Slide 5

FIP With FIP, single parent of two gets installment standard of $489 if work supply meets zero Leisure rises to T Since no nonlabor wage, utilization = $489 Michigan TANF c slant = 5.15 $489 0 T l (L=0)

Slide 6

FIP First $200 earned pay not in countable pay Recipient can gain an additional $200, keep unique $489 advantage, bring home $689 At $5.15/hr., beneficiary can work up to 39 hours before earned pay over $200 Since procuring wage has no advantage lessening, slant of spending imperative = 5.15 Michigan TANF c slant = 5.15 slant = 5.15 $689 $489 0 T-39 T l (L=39) (L=0)

Slide 7

FIP 80% of earned pay over $200 incorporated into countable pay, subtracted from FIP benefits Every dollar earned lessens FIP benefits by 80 pennies Every $5.15 earned from a hour's work cuts benefits by $5.15 x .80 = $4.12 Net worker wage = $5.15 - $4.12 = $1.03 Budget const. slant = 1.03 Michigan TANF c incline = 5.15 slant = 1.03 slant = 5.15 $689 $489 0 T-39 T l (L=39) (L=0)

Slide 8

FIP At 157 hours work at $5.15, earned pay = 157 x $5.15 = $811. Countable wage = (earned inc. - $200) x .8 = ($811 - $200) x .8 = $489 FIP benefits = paymt. sexually transmitted disease. - countable = $489 - $489 = 0 No more advantages to lose as pay builds, worker wage = $5.15 after $811 Michigan TANF c slant = 5.15 incline = 1.03 $811 slant = 5.15 $689 $489 0 T-157 T-39 T l (L=157) (L=39) (L=0)

Slide 9

Implications of FIP expands region inside spending limitation when month to month work supply is under 157 hours Increases accessible recreation utilization mixes Allows individuals to build relaxation and utilization, work less & devour more Negative wage impact on work supply Michigan TANF c slant = 5.15 slant = 1.03 $811 slant = 5.15 $689 $489 0 T-157 T-39 T l (L=157) (L=39) (L=0)

Slide 10

Implications of FIP lessens slant of spending requirement (representative wage) from 5.15 to 1.03 when month to month work supply in the vicinity of 39 and 153 hours Reduces additional utilization picked up from surrendering additional hour of relaxation Reduces motivation to surrender recreation for utilization by expanding work supply Negative substitution impact Michigan TANF c slant = 5.15 slant = 1.03 $811 slant = 5.15 $689 $489 0 T-157 T-39 T l (L=157) (L=39) (L=0)

Slide 11

Implications of FIP Since spending imperative slant decreased when work supply is in the vicinity of 39 and 157 hours, neg. substitution impact of FIP just influences working welfare beneficiaries Strongest disincentive to expand work supply, leave FIP on beneficiaries on skirt of leaving FIP Michigan TANF c slant = 5.15 incline = 1.03 $811 slant = 5.15 $689 $489 0 T-157 T-39 T l (L=157) (L=39) (L=0)

Slide 12

Michigan TANF Welfare to Work Requirements Most welfare beneficiaries required to take part in business related exercises including business, tutoring, as well as preparing Schooling alternative just accessible to adolescents completing secondary school Single guardians must take an interest 30 hours/week, 20 hours/week if kid is under age 6 Parents in two-parent families must take part 55 hours/week add up to Exemptions from necessity: age under 16 or more than 65; moms with kids under age 3 mos.; moms without kid mind; handicap; brief inadequacy; guardian for crippled; abusive behavior at home; nearby office tact Noncompliance with welfare to work prerequisites conveys punishment of lessening of advantages, conclusion of case

Slide 13

Reduce the advantage decrease rate Reduce sum by which advantages are diminished for every dollar of salary Reduce benefits beneficiaries lose as an outcome of working, acquiring wage Increase what beneficiaries "net" from working Increase representative wage of welfare beneficiaries Options for Reform c Tw slant = w slant = w(1 – brr) g T l

Slide 14

Reduce the advantage lessening rate Increases spending imperative slant to the individuals who were welfare beneficiaries before (those inside specked lines) Improves rate at which recreation can be traded for utilization by work Increases worker wage Positive substitution impact on qty. of work provided Options for Reform c Tw slant = w slant = w(1 – brr) g T l c, l of those on welfare before brr decrease

Slide 15

Reduce the advantage diminishment rate With advantages lessened less for every dollar earned, individuals with higher work supply, earnings get to be distinctly qualified for welfare benefits More individuals qualified for advantages = more ppl. losing benefits as a result of working, procuring pay Changes make back the initial investment point Options for Reform c Tw incline = w slant = w(1 – brr) g T l c, l of those not on welfare before brr diminishment, on welfare after

Slide 16

Reduce the advantage decrease rate Reduces limitation slant of lower-relaxation, higher-work individuals who didn't get welfare before however do now Reduces rate at which recreation can be traded for utilization by work Reduces representative wage Negative substitution impact on qty. of work provided Options for Reform c Tw incline = w slant = w(1 – brr) g T l c, l of those not on welfare before brr diminishment, on welfare after

Slide 17

Reduce the advantage decrease rate Positive substitution impact on qty. of work provided of individuals as of now on welfare Negative substitution impact on qty. of work provided of individuals brought into welfare framework therefore of drop in advantage decrease rate Negative wage impact for all (requirement farther) Options for Reform c Tw slant = w slant = w(1 – brr) g T l

Slide 18

Reduce the advantage diminishment rate, however don't change make back the initial investment go-to people lose less advantages as their salary increments But don't give higher-wage, higher-work supply individuals benefits and bring them into welfare framework Must lessen ensure Options for Reform c Tw slant = w incline = w(1 – brr) g T l

Slide 19

Reduce the advantage decrease rate, yet don't change equal the initial investment go-to people lose less advantages as they work progressively and acquire more pay in light of the fact that there are less advantages to decrease in any case Steeper spending limitation Higher rate at which recreation can be traded for utilization by working Options for Reform c Tw slant = w slant = w(1 – brr) g T l

Slide 20

Reduce the advantage decrease rate, yet don't change equal the initial investment point Higher representative wage Positive substitution impact on qty. of work provided Budget imperative is further in and to one side Positive pay impact on qty. of work provided Options for Reform c Tw incline = w slant = w(1 – brr) g T l

Slide 21

Reduce the advantage lessening rate, yet don't change earn back the original investment point Work motivating force, qty. of work provided of welfare beneficiaries more prominent when assurance, advantage decrease rate are diminished together So why not lessen both to 0 and dispense with welfare? Must think about more than work disincentives Options for Reform c Tw slant = w slant = w(1 – brr) g T l

Slide 22

Reduce the advantage diminishment rate, however don't change earn back the original investment point Welfare decreases neediness (see graph in Danziger) Reducing welfare by lessening ensure, brr builds work motivating forces additionally expands destitution Increasing welfare by expanding ensure, brr does the inverse Options for Reform c Tw slant = w slant = w(1 – brr) g T l

Slide 23

Reduce the advantage lessening rate, yet don't change equal the initial investment point Welfare approach regularly a tradeoff between diminishing work disincentives and lessening neediness Few "free snacks" Ultimately an esteem judgment: which of the two is more critical? Choices for Reform c Tw incline = w slant = w(1 – brr) g T l

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