Skip to main content

Full text of "Regional and residential impacts of the proposed Better jobs and income program"

See other formats


Historic, archived document 



Do not assume content reflects current 
scientific knowledge, policies, or practices. 



Oirfj ^ 



REGIONAL AND RESIDENTIAL 
IMPACTS OFTHE PROPOSED 
BETTER JOBS AND INCOME PROGRAM 



Shirley Pryor 



U.S. Department of Agriculture 
Economics, Statistics, and Cooperatives Service 
BSCS- 6 9 



BIBLJOGRAPHIC DATA 1. Report No. 2. 


3. Recipient's Accession No. 


4. Title and Subtitle 

REGIONAL AND RESIDENTIAL IMPACTS OF THE PROPOSED BETTER JOBS 
AND INCOME PROGRAM 


5. Report Dace 

AiipiiQf 1 Q 7Q 


6. 


7. Author(s) 

Shirley Pryor 


8. Performing Orzamzation Rept. 
ESCS-69 


9. Pertonning Organization Name and Address 

Economic Development Division 

Economics, Statistics, and Cooperatives Service 
U.S. Department of Agriculture 
Washington, D.C. 20250 


10. Projoct/Task/'yorK L'ni: No. 


n. Contract/Grant No. 


12. Sponsoring Organization Name and Address 


13. Type ot Report it PerioO 
CoTered 


u. 


15. Supplementary Notes 


16. Abstracts 

The Better Jobs and Income Program (BJIP) was proposed in September 1977 by the Adminis- 
tration. If it had been enacted, it would have lifted more families from poverty by 1981 
than the current welfare system. Based on analysis with a simulation model, BJIP would 
have also distributed benefits more equally among the four census regions and between 
metropolitan and nonmetropolitan areas. BJIP would have lowered the poverty rate more 
in nonmetropolitan areas than would the current system. BJIP would have cost more than 
the current welfare system. 



17. Key 'Vards and Document Analysis. I7a. Descriptors 

Distributing 
Economic analysis 
Income 
Legislation 
Rural areas 
Simulation 
Urban areas 



I7h. [ilentif iers/Open-Ended Terms 

Better Jobs and Income Program (BJIP) 
Jobs 

Metropolitan areas 
Nonmetropolitan areas 
Poverty 

Simulation model 
South 

17c. COSATl Field Group 02-B 05-C 



18. Arailahiluy Statement Available from: 

NATIONAL TECHNICAL INFORMATION SERVICE, 5285 Port 
Royal Road, Springfield, Virginia 22161. 


19.. Security Class (This 
Report) 

U^^CLASSIFIED 


21. No. Of Pages 


20. Security Class (This 
Page 

UNCLASSIFIED 


22. Price 



TO«M NTivaa '«ev. 10-73) ENDORSED 3Y ANSI AND UNESCO. THIS FORM MAY BE REPRODUCED uscomm-oc 8289->»-'4 



Welfare 

Welfare reform 



Washington, D.C. 20250 



August 1979 



ACKNOWLEDGMENTS 



The Urban Institute provided the data for this report from its Transfer Income 
Model (TRIM) at the request of the Economic Development Division of the Economics, 
Statistics, and Cooperatives Service. Richard Michel and Wayne Hoffman were respon- 
sible for the development of the data. Janet Coffin, Linda Ghelfi, and Linda Hatcher 
assisted in the preparation of the report. Thomas Carlin, Thomas Davis, William 
Hoagland, Donald Larson, and Paul Nelson offered useful suggestions. 

Editors' Note: The Better Jobs and Income Program (BJIP), proposed to the Congress by 
the Carter Administration in September 1977, was not put into legislation. 



Thomas A. Carlin, Gary Hendricks, and Faye F. Christian, Residential and Regional 

Distribution of Benefits Under the Allowance for Basic Living Expenses (ABLE) Welfare 
Reform Proposal . AER-374. Econ. Res. Serv., U.S. Dept. Agr., June 1977. 

Thomas A. Carlin, Impact of Earned Income Tax Credit; A Simulation of Tax Year 1976 . 
AER-336. Econ. Res. Serv., U.S. Dept. Agr., June 1976. 



OTHER RELATED REPORTS 



CONTENTS 



Pa£e 



Summary 



iv 



Introduction 



1 



Overview of Welfare Reform 

Components of Existing Welfare System... 
Problems with the Existing Welfare System 

The Better Jobs and Income Program 

Alternative Legislative Proposals 



1 
1 
2 
4 
6 



The Simulation Model 

Data Base 

Aging 

Tax and Transfer Components 
Labor Supply Effects 



7 
7 
7 
8 
8 



Impacts of Welfare Reform Through BJIP.. 
Distribution of Benefits and Eligibles 
Effectiveness of the Welfare Programs. 



9 
9 
11 



Conclusions 



17 



References 



19 



iii 



SUMMARY 



In September 1977, the Administration introduced a comprehensive welfare reform 
proposal, the "Better Jobs and Income Act" (BJIP), to Congress. It was not put into 
legislation, but it represents a prototype of comprehensive welfare reform legislation. 
Like past comprehensive welfare reform proposals, BJIP would have substantially 
affected families and unrelated individuals living in nonmetropolitan areas. 

It would have corrected two major sources of inequities in the current welfare 
system — the exclusion of particular family types from two of the major welfare programs 
and differences in benefit levels from State to State. Correcting them would have 
increased the estimated number of eligibles and amount of benefits going to both 
metropolitan and nonmetropolitan areas of all regions of the United States. 

The percentage of benefits that would have gone to nonmetropolitan areas would 
have increased, but the percentage of the eligible population residing in nonmetropoli- 
tan areas would have decreased under BJIP relative to the current welfare system. At 
the same time, the percentage of eligibles in nonmetropolitan areas would have become 
closer to the percentage of families and unrelated individuals in poverty in nonmetro- 
politan areas; thus, BJIP would have assured a more equitable distribution of eligibles 
by residence. 

BJIP would not only have reduced poverty more than the current system, but it also 
would have reduced poverty more in nonmetropolitan areas than metropolitan areas. 
Average benefits also would have become more equal by region and metropolitan-nonmetro- 
politan residence. Before any taxes or welfare, the metropolitan poor would have lower 
average incomes than the poor in nonmetropolitan areas. Both the current welfare 
system and BJIP would have corrected that inequity, and BJIP would have continued to 
raise average incomes of the poor. 

At the same time, BJIP would have cost more than the current welfare system 
because of expanded population coverage and improved benefit levels in many States. 
There are alternatives to comprehensive welfare reform which would achieve some of the 
objectives of BJIP but at a lower cost. 

This study focuses on families eligible to participate in the current welfare 
system and those families eligible to participate in BJIP. The distributions of 
eligible families and benefits under each program are analyzed using calendar year 1981 
data developed by a computer simulation model. 



iv 



REGIONAL AND RESIDENTIAL U^IPACTS 
OF THE PROPOSED BETTER JOBS AND INCOME PROGRAM 



Shirley Pryor"^ 



INTRODUCTION 

The Better Jobs and Income Act (BJIP) was proposed to the Congress by the Adminis- 
tration on September 12, 1977. It was not put into legislation and is not the Adminis- 
tration's current policy, but it is a prototype of comprehensive welfare reform. BJIP 
would have replaced the existing welfare system, consisting of Aid to Families with 
Dependent Children (AFDC), Supplemental Security Income (SSI), and the Food Stamp 
Program, with a comprehensive cash supplement and jobs program (17 ) . _1/ BJIP would 
have also expanded the Earned Income Tax Credit (EITC). This report evaluates the 
regional and residential distribution of benefits and the eligible population for both 
the existing welfare system and BJIP. The Urban Institute's Transfer Income Model 
(TRIM) was used to project benefits and the number of eligibles of both BJIP and the 
existing welfare system to 1981. _2/ This year was selected because it is the first 
year BJIP would be in effect. 



OVERVIEW OF WELFARE REFORM 

The current welfare system is a diverse assortment of programs directed towards 
specific low- income populations. 3^/ AFDC is primarily for female-headed families. SSI 
is for the aged, the blind, and the disabled. The Food Stamp Program is the only 
Federal program with universal coverage for the poverty population. 



Components of Existing Welfare System 

AFDC, established in 1935, is an income supplement program for children deprived 
of at least one parent. Currently, about half the States also provide benefits to some 
families where both the husband and wife are present, and the husband is either 
unemployed or incapacitated ( 10 , p. 140). States establish the eligibility standards 
and benefit levels and pay from 17 to 50 percent of the benefit costs. The Federal 
Government funds the remainder. Its portion depends on the per capita income of the 



*The author was an economist with the Economic Development Division, ESCS, and is 
presently an economist with the International Economics Division, ESCS. 

_1/ Underscored numbers in parentheses refer to items in References at the end of this 
report. 

_2/ See page 7 for an explanation of the research procedures. 

_3/ For a detailed discussion of the current welfare system, see (9^, 10) . 



1 



State relative to the per capita income of the United States. Some States require 
local governments to help fund the State's share of the costs. 

SSI is a program for the aged, the blind, and the partially or totally disabled 
(10, p. 113). It was enacted in 1972 to replace the State-administered and partially 
federally reimbursed programs which were providing aid to these groups separately. The 
Federal Government established national minimum benefit levels for SSI recipients. It 
required States to supplement this Federal benefit when pre-SSI benefits exceeded the 
Federal minimum so that no one would be worse off as a result of the new program. 
Optional State supplementation of the Federal benefit is also permitted. 

The Food Stamp Program was enacted in 1964 to improve nutrition of recipients as 
well as expand demand for domestically produced food ( 10 , p. 277). Its primary objec- 
tive now is to enable low-income people to purchase foods that will provide a nutri- 
tionally adequate diet. The Federal Government finances benefits completely, although 
States pay one-half the cost of administration. Unlike the other programs, the Food 
Stamp Program covers all family types, including those with a working family member and 
single unrelated individuals. 

Earned Income Tax Credit provides a tax refund or direct payment for low-income 
families with children. Families with incomes below $8,000 receive either a refund or 
a payment for the difference between the tax credit and the tax liability. As of 
summer 1978, the tax credit was 10 percent of the first $4,000 of earned income. If 
earned income was between $4,000 and $8,000, 10 cents for every dollar earned above 
$4,000 was subtracted from the $400 credit on the first $4,000 earned (9_, p. 15). 4_/ 

Problems With the Existing Welfare System 

With the declaration of the "Great Society" and the passage of "The Economic 
Opportunity Act" in 1964, the United States declared its intentions to wipe out 
poverty. Between 1966 and 1976, the absolute number of people in poverty decreased 12 
percent ( 13 , p. 15). However, certain problems have arisen. 

Costs 

Total Federal, State, and local costs (excluding administrative costs) for welfare 
programs increased sixfold in that same time period (9_, pp. 22-23). Some have argued 
that Federal welfare expenditures are out of control. However, according to one 
analyst, the Federal expenditure increases are not out of control because they are a 
result of conscious policy choices and one-time changes (6_, pp. 21-31). 

State and local expenditures cause more of a problem because they result from 
factors outside State and local control." 

The states can neither limit the massive migration that has concentrated 
a substantial portion of the welfare population in the urban areas of the 
Northeast and West, nor alter the economic policies that help determine 
the size of that population or the degree of its need. Yet the states 
and localities are called upon to foot a substantial share of the bill 
(1, p. 38). 



4/ The Revenue Act of 1978 modified EITC so that the tax credit is 10 percent of the 
first $5,000 of earned income. For earned income between $6,000 and $10,000, 12-1/2 
cents for every dollar above $6,000 is subtracted from the $500 credit on the first 
$6,000 earned. 



2 



Persistent Poverty 



According to Congressional Budget Office (CBO) estimates, even with the existing 
programs, substantial numbers of families lived below the poverty level in 1976. Using 
data from the 1975 Current Population Survey (calendar year 1974 income) and adjusting 
(or aging) the data base to reflect conditions likely in fiscal year 1976, CBO deter- 
mined that even if in-kind transfers were included in the income measure, _5/ 11.5 
percent of all U.S. families and unrelated people would have remained in poverty in 
1976 (9., p. 20). 6./ 

Disincentives for Work and Family Stability 

The incentive exists, because of the AFDC program's structure, to break up fami- 
lies. Approximately half the States do not provide benefits to a male-headed family, 
but do provide them to the same family if the male is absent. 

Most welfare programs have a work incentive, either by requiring work or by taper- 
ing off, rather than eliminating welfare benefits, if the person finds employment (7^, 
p. 16). With AFDC, the disregard of work expenses, plus the first $30 and one- third of 
additional earnings when benefits are calculated, is designed to assure gains from 
employment, and thus to encourage it. Food Stamp benefits available to low-income 
families, whether employed or not, include a work requirement as well as the set of 
deductions from income described above before bonuses are calculated. 

When a family is receiving benefits from more than one program, the cumulative 
effect is more complicated and it varies by State. Welfare payments may be reduced as 
much as 85 cents for every dollar earned (_7, p. 17). Furthermore, there is a built-in 
incentive in some States not to seek employment. In 1976, in 22 States, the combined 
benefits from AFDC and Food Stamps exceeded what a person would receive if employed at 
the minimum wage ( 16 ) . 'T_l 

Horizontal Inequity 

Inconsistent treatment of people in the same situation or with the same needs 
represents horizontal inequity. With the existing welfare system, horizontal inequity 
takes on two forms. First, recipient benefits vary greatly from State to State. 
According to data provided by the U.S. Department of Health, Education, and Welfare for 
1976, AFDC benefits to a Mississippi family of four were 14 percent of the benefits to 
a similar family in New York (16) . 8^/ 

These disparities result from program structure as well as States' decisions on 
the amount of supplementation they will provide. Second, three types of families 
cannot receive benefits under two of the programs BJIP would replace, AFDC and SSI. 
Types excluded are nonelderly childless couples, nonelderly unrelated persons, and 
nonelderly families with children headed by working males. 



5_/ AFDC, SSI, Veterans' Pensions, Emergency Assistance, General Assistance, and 
Earned Income Credit provide cash assistance to recipients, and their benefits are 
included in income. Food Stamps, Child Nutrition Programs, Housing Assistance, and 
some Emergency Assistance provide benefits in-kind, and these benefits are not included 
in most measures of money income. 

_6/ Poverty is defined here and throughout this report as the official poverty level 
(15). 

l_l $4,784 per year ($2 . 30/hour ) , effective January 1, 1976. 

8^/ Differences by State in living costs are not accounted for in this report because 
such data are not available. 



3 



Residential Issues 



Both aspects of horizontal inequity, the distribution of benefits and eligibles by 
States and by family types, influence the distribution of benefits and eligibles 
between metropolitan and nonmetropolitan areas. 

First, in many States with a large percentage of their nonmetropolitan population 
in poverty, welfare recipients receive smaller benefits than in the other States. In 
1975, in all States where the nonmetropolitan population in poverty exceeded the 
national average (14.3 percent), 9_/ the average monthly cash benefit per participant 
for AFDC was $38. 70 (18, p. 188). For SSI, it was $89.55 (18_, p. 174). JLO/ In all 
other States, those where the percentage of nonmetropolitan population in poverty was 
below the national average, the average monthly benefit for AFDC was $81.43, and for 
SSI, it was $127.59. 

Second, nonmetropolitan areas have a higher concentration of one family type (the 
nonaged with employed male head) which is excluded from the AFDC program and SSI 
programs. In 1975, although 32.3 percent of all families lived in nonmetropolitan 
areas, 52.5 percent of nonaged, employed, male-headed families lived in those 
areas. Any welfare reform which expanded benefits to this group would increase 

benefits to nonmetropolitan areas. 

The Better Jobs and Income Program 

The Better Jobs and Income Program (BJIP) represents a prototype of a comprehen- 
sive reform of the current welfare system (8^, 17) . This proposed legislation would 
have replaced SSI, AFDC, and Food Stamps with a single program providing a national 
minimum-benefit level for those not expected to work and jobs and cash assistance for 
those expected to work. The coverage would have been extended to groups previously 
excluded under AFDC and SSI. 

Benefits would have varied according to work requirement and family composition 
(table 1). For a family of four not required to work, the basic cash benefit would 
have been $4,200 (1978 dollars), approximately 65 percent of the nonfarm poverty 
level. 12 / The basic cash benefit would have been reduced by 50 cents per dollar 
earned. For aged, blind, or disabled people, the minimum benefit would have been 
$2,500; for a couple, $3,750. 

The proposal would have authorized the creation of 1.4 million public service jobs 
by fiscal year 1981. Those required to work would have been single people and single 
parents with children of school age and above (part-time work if youngest child is 
between 7 and 13); and principal wage earners in two-parent families and childless 
couples ( 17 , pp. 6-9). 



9_/ These poverty incidence data are from unpublished tabulations from the Survey of 
Income and Education conducted for the U.S. Department of Health, Education, and 
Welfare by the Bureau of Census. The States where the nonmetropolitan population in 
poverty was more than the national average were Alabama, Arizona, Arkansas, Florida, 
Georgia, Kentucky, Louisiana, Mississippi, Missouri, New Mexico, North Carolina, 
Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia. 

10 / SSI does have a national minimum benefit level, unlike AFDC. The State differ- 
ences in SSI benefits result from State supplementation. 

11 / This information is from special tabulations from the 1975 Current Population 
Survey. 

12 / Unlike the poverty level, the benefits from BJIP would not vary according to 
farm-nonfarm residence. 



4 



Table 1 — ^National basic payments under the 
Better Jobs and Income Program, by family type _1/ 







Basic payments for people— 






: Not expected 


ILApcL-LcU. UU 


work 


to work or for 
: which no job 
: is available 


job search 


Benefits if 
job refused 








U \J J^JLCL L O 




Two parents: 










Adult head 


: 1,900 




0 


0 


Other adult 


5 1,100 




1,100 


1,100 


Each child regardless 










of age; maximum of 7 










people per family 


: 600 




600 


600 


Single parent (with 










youngest child aged 14 










or over) : 










Head of household 


: 1,900 




0 


0 


First child 


: 1,100 




1,100 


1,100 


Each additional child; 










maximum of 7 people 










per family 


: 600 




600 


600 


Single parent (with 










youngest child under 










14): 2/ 










HaaH of HniiQpliold 


1 Qon 




1,900 


0 


First child 


: 1,100 




1,100 


1,100 


Each additional child; 










maximum of 7 people 










per family 


: 600 




600 


600 


Aged, blind, and 










disabled: 3/ 










^UUp J. c 


: 3,750 








Single individual 


: 2,500 








Childless couple: 










Each adult 


! 1,100 




1, 100 


0 


Single people 


: 1,100 




1,100 


0 



W The basic payment is the payment to a recipient when no other income is 
available. No State supplementation is assumed. 

2^/ Heads of single-parent families with youngest child under 7 are not expected 
to work. 

_3/ The aged, blind, and disabled are not expected to work. 



Source: U.S. Department of Health, Education, and Welfare, HEW News , August 
6, 1977. 



5 



The jobs program would have required an 8-week job search during which, for a two- 
parent family of four, the spouse not looking for work would receive $1,100 and each 
child $600 for a total of $2,300. For a single-parent family with the youngest child 
under 14 and childless couples and single people, the person expected to work would 
have also received benefits during the 8-week job search. A limited number of public 
service jobs at the minimum wage would have been created for those primary workers not 
able to find a private sector job during the job search. Benefits would not have been 
reduced for the first $3,800 of job earnings, but the $2,300 cash supplement is reduced 
50 cents for each additional dollar of earned income above $3,800. (The same would 
have applied to a single-parent family with all children over 14.) If no job could be 
found or created, the two-parent family of four would have received the $2,300 they 
received during the job search plus an additional $1,900 ($1,100 for the family head 
and $800 for the household) for a total of $4,200. 

The Earned Income Tax Credit (EITC) would have been available to anyone not in the 
public service jobs program of BJIP. The maximum credit allowed would have depended on 
the number of tax exemptions claimed (8_, pp. 18-19). For a family of four with two 
adults, a credit of 10 percent would have been allowed on the first $4,000 of earned 
income. A credit of 5 percent would have been allowed on additional earned income up 
to $9, 100 for a maximum credit of $665. The maximum credit would have been reduced by 
10 percent of any additional income (both earned and unearned) over $9, 100, and it 
would have finally been decreased to zero at $15,650 of earned income. 

If the primary worker in an eligible family of four should earn $5,512 — annual 
earnings at the 1978 minimum hourly wage rate of $2.65 — the family (with no other 
countable income) would have received an income supplement of $1,444. This is the 
$2,300 income supplement reduced by 50 cents for every dollar earned over $3,800. If 
the wages had not been earned in a BJIP job, the family would have had a tax credit of 
$475.60. Thus, earnings ($5,512) plus income supplement ($1,444) plus EITC ($475.60) 
would have produced a total income of $7,432 if earnings had not been from BJIP employ- 
ment, and $6,956 for a BJIP job. 



Alternative Legislative Proposals 

The introduction of the Administration's welfare reform bill to the Congress 
resulted in several counter proposals. First, a Special House Subcommittee on Welfare, 
headed by Rep. James C. Gorman, was established to consider the Administration's 
proposal. After public hearings, the subcommittee voted out a bill similar to the 
Administration's bill (5_) . Two other proposals, one by Rep. Ullman and the other by 
Sens. Howard Baker, Henry Bellmon, Abraham Ribicoff, and John Danforth, were essen- 
tially incremental reform packages (5^) • 

Unlike the Administration's and subcommittee's bills, the incremental reform 
proposals would have left the basic structure of the current welfare programs intact, 
but they would have modified program rules to overcome many of the problems discussed 
earlier. The incremental reforms proposed would have been less expensive than the more 
comprehensive reform bills (_5 ) . The additional expense of the comprehensive reform 
bills would have resulted from the jobs programs and the extension of coverage to non- 
aged, low-income, single people and childless couples. 

There were certain similarities among all four proposals (5_, p. A-11). Each bill 
would have: 

(1) established a national minimum benefit level for single-parent families 
with children, (2) required all States to provide cash assistance to low- 
income, two-parent families with children, (3) created a number of public 
service jobs directed primarily at low-income, two-parent families, (4) 



6 



expanded the Earned Income Tax Credit, (5) instituted a number of proce- 
dures to improve current administrative practices, and (6) promised State 
and local governments some measure of relief from current welfare costs. 

Senators Moynihan and Cranston proposed legislation (July 1978) which, through the 
tax system, would have provided jobs and cash to low- income families (_3 ) . The major 
provisions of their bill were (1) an increased Earned Income Tax Credit for the working 
poor, (2) tax incentives for businesses to encourage them to employ welfare recipients, 
and (3) $2.5 billion in fiscal relief to the States. The tax incentive for businesses 
would have liberalized the current Work Incentive Program (WIN) expanding the relief to 
businesses from 20 percent of the wages paid out to 50 percent and raising the maximum 
subsidy per employee from $1,000 to $3,000. 



THE SIMULATION MODEL 13_/ 

The Urban Institute's Transfer Income Model (TRIM) was used in the study reported 
on here. TRIM is a simulation model designed to estimate case by case the benefits for 
which families and households are eligible under alternative tax and transfer programs. 
The data base used in TRIM simulations is from the 1976 Current Population Survey (CPS) 
conducted by the Bureau of the Census which contains 1976 demographic information and 
1975 income information for households, families, and people. 

The demographic and economic information from the 1976 CPS data base were aged to 
1981. Program rules and regulations were applied to the sampled family units to deter- 
mine the number of eligibles and amount of benefits under each program. The projec- 
tions of eligibles and benefits were also distributed by the four Census regions and by 
place of residence (metropolitan-nonmetropolitan) . 

Data Base 

The CPS file contains approximately 55,000 households selected from 461 sample 
areas across the United States. The sample, including 135,000 people, is weighted to 
reflect estimates of the civilian noninstitutional population of the United States. 
The estimates are subject to sampling variability; that is, variations which occur 
because a sample rather than the total population was surveyed. In addition, the 
survey results are subject to errors of response and nonreporting. The simulation 
model would reflect these problems resulting from the sampling procedure. 



Aging 

Estimates presented here reflect expected conditions in 1981. The 1976 CPS was 
aged to reflect population and economic conditions in 1981, based on information 
collected from other sources to estimate how various economic factors, as well as 
social factors, such as birth and death rates, might change by 1981 (4_, p. 69). The 
economic estimates (income and CPI) in the TRIM projections were from Data Resources 
Incorporated (September 1, 1977) with a 5-percent unemployment rate assumed. 



13 / This section summarizes the process of generating the data used in the study. A 
more detailed description of the model and its assumptions is available from the 
author. 



7 



Tax and Transfer Components 



Once the 1976 CPS was aged to 1981, the tax and transfer program rules were 
applied to the relevant household units to determine the total amount of benefits and 
number of eligibles for the various programs. 

Because the CPS does not have all the information necessary to determine eligibil- 
ity for programs, assumptions must be made about the family and household structure to 
align the eligibility criteria for the programs with the data from the CPS. For 
example, the CPS contains little information about the handicapped status of people, 
but both SSI and BJIP provide differential benefits to handicapped individuals. In 
addition, the CPS has no asset information, but all the programs have asset tests. 
Thus, assets are imputed from nonfarm property income, dividends, rent, and interest, 
with a 6-percent return to capital assumed. Farm assets were estimated with a special 
procedure • 

The Food Stamp (P.L. 95-113) Program presents special problems because of the way 
eligibility is determined. Shelter costs and child care may be deducted from gross 
income to determine the income on which eligibility is based (12 ) . This information is 
not collected in the CPS by the Bureau of the Census. USDA's Food and Nutrition 
Service collects information on the types of deductions used by various types of house- 
holds (11 ) . This information was used to estimate statistically which deductions might 
be used by eligible households. 

No effort was made in the study reported on here to estimate the participation 
rate in any of the welfare programs. All households eligible for program benefits were 
assumed to participate. The number of families eligible for food stamps has been used 
to represent the total number of families eligible for food stamps and AFDC, as well as 
SSI. With the new food stamp legislation, all families receiving welfare assistance 
will no longer be categorically eligible for food stamps. Thus, the food stamp 
eligibility count would not represent everyone eligible for all welfare programs. 
Approximately 4.5 percent more people would be eligible for all programs than the food 
stamp count represents. 14 / 

With one exception, BJIP benefits include only the Federal contribution. State 
supplementation of benefits was not included in the model except where grandfathering 
of benefits was required. There is no clear basis on which to predict State supple- 
mentation. Grandfathering of benefits (Hold Harmless) insures that no participant 
loses benefits because of changes in that program. 



Labor Supply Effects 

Recent experiments have indicated that a broad-based welfare program may result in 
some participants reducing work effort. This analysis does not take into account these 
responses to welfare payments. The labor supply effect differs according to socioecon- 
omic characteristics, but as yet there is not enough evidence to quantify what this 
effect may be, if any, by metropolitan and nonmetropolitan residence. Therefore, the 
exclusion of the labor supply effect, although it underestimates the costs of the 
program as well as the number of participants, does not greatly affect the analysis nor 
the relative impact of the program by residence. 



14 / This estimate is based on information provided by the Food and Nutrition Service, 
U.S. Department of Agriculture, April 1978. 



8 



IMPACTS OF WELFARE REFORM THROUGH BJIP 



Because of the expansion of coverage to a larger proportion of the population, 
grandfathering of payments, and increased minimum benefit levels for many States, 
replacing the existing welfare system with BJIP would have increased both the estimated 
number of eligible families and unrelated individuals and the total benefits (table 2). 15 / 



Distribution of Benefits and Eligibles 

The number of eligibles would have increased 6.4 million, 49.6 percent. The 
benefits would have increased $13.2 billion, 39.4 percent higher than the 1981 benefits 
estimated to be paid under the existing system. 16 / 

Residential 

In both metropolitan and nonmetropolitan areas, the estimated number of eligibles 
and amount of benefits would have increased. Thirty-six percent of the $1 3. 2-billion 
increase would have gone to nonmetropolitan areas, but only 30 percent of the new 
eligibles would have resided there. This would have increased the percentage of total 
benefits that go to nonmetropolitan areas from 32 percent under the current system to 
33 percent under BJIP. The percentage of total eligibles in nonmetropolitan areas 
would have decreased from 41 under the current system to 3 7 percent with BJIP. Thus, 
nonmetropolitan areas would have had a larger proportion of the benefits under BJIP and 
a smaller proportion of the eligibles. 

The nationalization of the benefit levels would have increased the benefit levels 
for many States with a large nonmetropolitan population, which would tend to increase 
the proportion of benefits that go to nonmetropolitan areas. The decreased proportion 
of eligibles that reside in nonmetropolitan areas would have had the opposite effect. 
The proportion of benefits that would have gone to nonmetropolitan areas would have 
decreased if benefit levels had not changed, but the increase in average benefits would 
have offset this decline. The net result would have been an increase in the proportion 
of benefits that would have gone to nonmetropolitan areas. 

One-quarter of the estimated total benefits from BJIP would have stemmed from the 
public service job portion of the program; the remainder would have been cash supple- 
mentation (table 2). Metropolitan areas and nonmetropolitan areas would have differed 
little in the proportion of total BJIP benefits from public service jobs. In metro- 
politan areas, 25.2 percent of BJIP benefits would have been from public service jobs, 
while in nonmetropolitan areas, 24.5 percent would have been from that source. Approx- 
imately 35 percent of the families and unrelated persons eligible for the jobs portion 
of BJIP would have lived in nonmetropolitan areas (1.2 million). Half the population 
eligible for jobs in nonmetropolitan areas would have resided in the South. Such a 
heavy concentration of jobs could have created administrative difficulties, as it is 
doubtful that the public sector in nonmetropolitan areas of high unemployment would 
have been able to absorb all persons eligible for jobs under the program. 



15 / Benefits include all payments to families and unrelated people in both the 
cash and jobs program. Costs of administering the program are not included in the 
estimates. 

16 / The Administration's estimates, made with the HEW Microsimulation Model, are the 
only "official" estimates for FY 1981 (2_, p. 198). They indicate that $14.4 billion in 
cash and jobs benefits would have been expended in FY 1981. The difference is due to 
three factors: (1) the Administration budget assumes only partial implementation in FY 
1981, (2) there are methodological differences between TRIM and HEW's model, and (3) 
assumptions about State supplementation differ. 



9 











ts 












•H 








— 




MH 
0) 








— ii 




C 












CU 








p2 




PQ 








cd 
















































Q 












CU 








r; 




o 








4J 


00 




(U 


cd T3 






o> 


4_j 


rH 


cu 








(U 


X3 


CO -u 




o 




C3 


•H 


0) Cd 


CU 








GC -H ^ 


Q 




CO 




•H 


rH 0) 


<U 




cd 




rH 


•H >-i 


CU 




<u 






e c 




CO 


j_( 






Cd s 






cd 






UH 




























D 


cd 












jj 










aj 


■H 










n 


^ 






CO 






Q 






4-1 






CU 






•H 






o 






4H 




cfl 








0) 






■u 


«^ 




13 




CO 


CU 


1 

'"'I 




0) 




C 








PQ 




o 












CO 


0 


Cd 








M 


c 


4_) 








0) 














, { 










c 


Q 




^3 






cd 


CU 




C 




(1) 




o 




cd T3 




■t-> 


c 




rH 


<U 


(U 


CO 


cd 




rQ 


CO 4J 




-H 






•H 


<u cd 


'a 


CU 


■H 




W} *H r-l 


o 




tH 




•H 


rH (U 






O 




rH 


•H U 


CU 




a 




w 


e c 






o 






cd p 




•T3 


u 






UH 






4-) 










CO 


CU 










CO 


s 










0) 












•H 








CO 




rH 








u 




•H 








•H 




S 








MH 




Cd 


l-l 






OJ 




U-l 


'-3 






c 






PQ 






0) 




0) 








PQ 




iH 












XI 












•H 












tJO 




cd 








•H 


S 










.H 


0) 






13 




CU 


jj 












CO 




q; 


cd 13 




13 






rH 


CU 


CU 


(U 


CO 






CO u 


.H 








•H 


<D Cd 




Cd 


Q) 






•H rH 


Q 


Q 


U 




•H 


rH QJ 




•H 


Cd 




rH 


•H »-i 




J_l 


M-l 




W 






CO 


rH 






Cd 3 




f 

1 








MH 














CSI 


■P 












C 










CU 


a; 










iH 


u 












u 










Cd 


a 










H 


u 
















(U 


CO 

1 










u 












cd 


>-l 










MH 












rH 


o 












M 










:^ 


CU 





PQ 









-H 






O 


r» 


CO 


Q 








CN 








CO 


nH 






•H 






PQ 







CO rH <t 



^ ^ ^ 
+ 



m rH 



2 ? 





00 




O 


m 






in 


CO 


•vl- 


rH 


fO 

















C7^ 


CO 


CO 


CO 




i\ 














CN 


C7^ 


CO 































CO 


































4-) 


V-i 










c 












CU 


o 










iH 


u 








0) 


M 


CU 








u 








C0| 




c 


U 


4J 








CU 


1 


c 




CO 




Jh 


a< 


(U 






CO 


0) 


M 




CU, 


0 


cd 


MH 


•-J 


M 


1— 1 


I-) 


o 


MH 


PQ 




^-3 






•H 




u 


fQ 






Q 





MH 


rH 






O 


od 






>-> 


o 




13 


4-) 


>H 




CJ 


•H 


4-t 




cd 


CJ 


CU 
0 






CU 






0) 








B 


o 


nd 




CO 


4H 


Cd 




c 


CO 


rH 




M 


Cd 








Q) 


c 






rH 




• 


it 


4H 




1 — 1 


u 


Cd 


(U 


cd 


3 




IZ 




o 


(3 




13 


(U 


•H 


C 


•H 


CO 


cd 


M 


CO 




4-1 




(U 


rH 


c 




M 


cd 


o 






+J 


o 


CD 


CU 






O 


J3 


CU 




O 


4-) 


§ 


a 








•H 




CO 


rH 


3 


uO 


•H 


dd 




4-1 


Cd 




CO 


CO 


CU 




D 


cd 


u 




•H 


0) 


Cd 




4H 


rH 




C 






i3 


<u 


§ 


4J 


Cd 


M 


O 


Cd 


4H 


X) 


o 


MH 


li 


il 


CO 


o 


o 


s: 


13 




CU o 


o 




o 





rH 3 

Cd 00 



u cd 

C rH 

O 3 
a CU 
o 
a 

o 

O 13 

cd CU 0) 

3 C 

U O "H 

O M X5 

C 00 S 
O 

M O 
cd O 

e Cd 
>^ 

CO 4J 
u c: -u 

M 3 -H 

cd o 5 



MH a <1 



cu 



CU 


o 


CO 


MH 


cd 


<u 


o 




•H 




CO 


4J 


0 


•H 


•H 


3 




CJ 


CO 








< 


3 






•H 


00 






C 




4J 


•H 


N — y 




13 




u 


C 


Cd 


o 


3 


CU 




O 


M 




U 


cd 


(U 






M 


MH 


C 


O 


O 


cd 


B 




4H 




CU 


*H 


u 


CO 


rH 


o 


3 


o 




Cd 


a 


a; 


a 


0 


rH 


a; 


u 


CU 


PQ 


u 


o 



3 

3 -H 

O rH 
O -H 

B 

C cd 
Cd 

4-> O 
4J 

M 

(U 13 

^ -rj 

U MH 

o 







sh. 




13 




ca 




3 








cd 


CO 

cd 


>^ 




CO 


a 


>H 




(U 




O 




•H 


<D 


00 




rH 




OJ 




•H 


4J 


4-) 




S 




cd 




Cd 


0) 


CJ 




MH 


13 








3 


(U 




(U 


iH 






rH 


U 


4-1 






c 






•H 


•H 


3 




00 




•H 




•H 


4-t 






rH 


O 






0) 


3 


0) 








13 




CU 


O 


3 




0 


^3 


rH 




O 




a 




CO 


CO 








iJ 


•H 




0) 


•H 






CO 


MH 


(U 




3 


(U 






cd 


3 


Cd 




u 


<D 






0) 


rC3 


CO 








4-1 


• 




0 


•H 


rH 


CO 


cd 


MH 




CU 


V-i 


CU 


13 


rH 


00 


3 






o 


(U 


£ 


•H 


u 


rQ 




00 


a 




CU 


•H 




-3 


0 


rH 


CO 


CO 


o 


<U 




cd 


o 




o 


CJ 


3 


rH 


•>-) 




M 


cd 




rH 




4-) 


(U 


rj 


M 




< 


;fe 


o 




• 


§ 


4-) 












cd 


M 


CU 


CO 


M 


H 


3 


cd 


r? 






a 


O 


CO 


13 




|h 




13 


13 


CXi 


''cu 


cd 


3 




4-) 




cd 


CO 


3 


4H 






4J 


o 


CO 


o 


•H 


3 




•1-) 


4-» 




o 




CO 


O 






d 


13 




^ 


M 






4-> 




CO 


4J 




3 




o 


3 


Cd 


O 


rQ 


•H 




•r-) 






U 




K 


(U 


t3 


13 


O 


rH 




3 


MH 


CU 


QJ 


Cd 




O 


rC 




0) 


<U 


4J 




rH 


a 




CO 






s 


cd 


-H 


0 




CJ 


00 


4H 


IH 




•H 




MH 


x: 


rH 


o 




4-> 


(U 


00 


CO 


o 










(U 


13 


o 






rH 


•H 


V-I 


Cd 


3 


4J 


o 






cd 


MH 


(U 


S 


rH 








3 


CO 


CU rC 




(U 


o 


u 


cd 


rH 


(U 


•H 


H 



0 CU 

(U <3 o 

4-1 O 

o o 



3 

CO (U 

cd >H 

(U u 

U 3 

Cd CLJ) 

cd cn| 



CO X CU ^ 
CU -H ^ 

0 00 13 
Cd vH OJ CO 



w Cd 

rH 

13 <U 
O co| M 
O 3 

fe 3 



10 



Regional 



Estimated benefits and eligibles would have increased in all regions under BJIP 
(table 3). The South would have had 28.5 percent of the new eligibles, although its 
percentage of total eligibles would have decreased from 42.6 percent under the current 
system to 3 7.9 percent under BJIP. The South would have received 41.7 percent of addi- 
tional benefits from BJIP, making its total benefits 34.5 percent, compared with 31.6 
under the current system. The increase results from the nationalization of the benefit 
levels under BJIP, which would have tended to increase average benefits in the South. 

While the distribution of benefits and eligibles among regions would have changed 
somewhat with BJIP, the ranking of the regions would have changed little. The South, 
followed by the Northeast, would have received the largest total amount of benefits 
with either the existing system or BJIP. With the existing system, the West would have 
received the fewest benefits, and with BJIP, the North Central region would have 
received the fewest. The South would have had the largest eligible population, 
followed by the North Central, Northeast, and West — with either the current welfare 
system or BJIP (table 3). 

Cash and Job Split 

For all regions and in both metropolitan and nonmetropolitan areas, about 25 
percent of the estimated BJIP benefits would have stemmed from the public service jobs 
program (table 4). The North Central metropolitan areas would have received the lowest 
share (21.0 percent) and the West's nonmetropolitan areas would have received the 
highest (31.2 percent). 



Effectiveness of the Welfare Programs 

Eliminating Poverty 

The population below the poverty level is used here as a proxy for the needy pop- 
ulation, the population that the programs should cover. Neither the current welfare 
programs nor BJIP covers exactly the poverty population. 

Overall, BJIP would have eliminated more poverty than the current welfare system. 
In 1981, 13 percent or 1,122,000 fewer people would have been in poverty with BJIP than 
the current system. An estimated 4.2 million fewer people would have been in poverty 
with BJIP than with no welfare system (table 5), down 36 percent. 

In all regions and types of residence, BJIP would have lowered the rate of 
poverty 17 / compared with the current welfare system. BJIP would have reduced the 
poverty rate in metropolitan areas from 12.7 without any welfare to 9.1 with the 
current system to 8.0. In nonmetropolitan areas, poverty would have been reduced from 
17.1 without welfare to 13.1 with the current program to 11.4 with BJIP. The largest 
percent reduction between the current system and BJIP, 2.5 percent, would have been in 
the nonmetropolitan South, even though 14.6 percent of the families and unrelated 
people would have remained in poverty. 

The poverty rate indicates the percentage of families and unrelated people in 
poverty, but it gives no information about how far they are below the poverty level. 
The average poverty gap, the amount of money needed per family and unrelated individ- 
uals to bring them up to the poverty level, more clearly demonstrates these needs. It 

17 / The rate of poverty is the number of families and unrelated individuals below the 
official poverty level divided by the total number of families and unrelated individ- 
uals in the same specific geographic area. 



11 



T3 

(U CO 0) 

r-i O 4J 0) 

^ "H CO 

•H ,H rH a 

GO C 0) O 

•H g CO »-i 0) 

.H CO 0 Cu 



col 

3 

O 



0) 



CO 



cu w 

I— I 0) 

^ -H 

•H r-l 13 iH a 
60 C <U O 
•H B CO M QJ 
-H CO C O, 

W 4-1 3 



^1 



d) CO (U 

rH (U JJ 0) 

^ -H CO ,H 

•H rH .H a 

60 C 0) O 

•H S CO ^-1 <U 

r-i CO c a 

W 4-1 3 



-^1 

CO 
CO 

a) 



<U CO 

^ tH 

•H rH T3 

60 -H C 

•H 0 CO 

iH to 

W 4-t 



a) 

4-1 (U 

CO ,H 

0) o 

U CU 

c a- 



a) CO (U 

.HO) 4J <D 

XJ 'H 73 CO 

60 CO 0) O 

•H 0 MO) 

iH CO c a 



M (0 

to U 

4-1 60 

rH O 

CD U 

:2 CX 



r-l 


















































4-) 




* 3 


(—1 


CNJ 1— 1 


ON 














0 




c c 




*H tO 
























0 cO 




Pi 




o 












(—1 


1— H 


CM 




a 




Pi ft 






+ 












CM 






c * 




•H 3 




















+ 




fl) CO 




CO 0 
























^ 4-1 




CO 4J 
























n 




•H 60 
























-o ^ 




CO 3 
























3 cO 




CO •H 
























cO Q 




^ ^ 


































* 


















* f3 








1—1 CO 












«^ 


00 


vD 














-1- 










1—1 




CM 




"c 3 
























+ 




cO 0 




c! •> 
























iH cy2 




























CO 

1— 1 •> 




to 
























Q 






,—1 






















^ T-l 




ctl 


Q 


























S 




vO -H 


UO 












m 










^ 3 
















* 












•> 0 




O 


lA 






















to 60 




1—1 1—1 


+ 










CO 


CO 






CO 




3 ^ 


•H 


















+ 




*> 4J 




CO U 


PQ 






















CO 0 




•H 0 
























•H 




CO * 
























3 to 




3 CO •> 
























CO Q 




0 1-1 0 




























3 CJ 




LT) fO 


00 










LO 


















* 


















^ 4-1 




•> 60 




LP) 
















00 




CO M 




^ M D 


















CO 






3 0 




pi 'H S 




















+ 




3 S 




CJ J> 
























D 




3 U 
























P-i 




W 4-* 4) 
























CO 




3 CO S 
























*> ^ 






,_| 






















^ CO 






Q 






















U CO 




CO 




CO 00 














0^ 


CM 




0 M 




* 13 'd 




* _? 
























CO 3 to 
















. 




00 








*H CO > 






+ 












CM 










60 <U 




















+ 








U s 


PQ 






















Z •> 




0 cO 






















•H 




























M M 




0 is CO 












}_| 












>~> 3 




•H 3 






















CO 


0 




•> 60 cO 




o> CO 














CM 


CM 




CO CO 




cO (-4 4-1 






* 














CO 


V4 CO 




tH 3 
















CM 


CM 


r- ( 


4J 


03 'r-l 




•H £> 0 
















CM 


CM 










2 




















+ 


4J 






0 * 
























** 7 




rH CO «^ 






















Q 


fl) CO 




pt| cO 0 






















4J 


































»« D CO 






















^3 






cO E-i 13 


o 


























•H H- 1 


Q 


00 












1—1 


1— ( 


CM 


CO 


M 3 










* 


















•H 3 




S <U *> 




00 o 












LO 


CO 


00 


4J 






3 0^ tH 






+ 










CM 


CM 




Q 


CO £ 




1— 1 CO •H 




























0 CO CO 
























0 




0 <U ? 
























CO 3 




3 cO 






















CO 


33 CO 




4-1 3 PC 






















B 


60 




0 QJ 






















^ tH 








\0 1— 1 












0 


CO 


1 — 


CO 






W O 






















4J 


Z CJ 




CJ * "d 




csl <3" 














r—t 


CO 


j_l 






mH CO CO 
















CM 


CM 




CO 






>-i 3 M 




















+ 


Pi 


CO 




4J tH 0 
























4-1 •> 




CO 1— 1 f— 1 






















4-1 


4-> CO 




•H 0 0 
























0) CO 




Q M C3 


• 

,_| 




















a 


CO CO 
3 3 




CO 

•> 0 •> 


Q 






















r; (H 




4) CO 


M 


LT) 00 


CM 














0 


CO 


CJ ^ 




>-i X3 
























CO 




cO 4-' 3 




CO ^ 


CO 














0 




CO *> 




[5 3 M 


r-l 


CO 
















0 


6£ 


CO CO 




cO 0 0 
























CO & 




1— 1 CO 4-1 


PQ 






















X 0 






























Q •> <— 1 




























CO cO 




























"SO 
























3 cO 




CO 0 




CO 
















0 




•r-t d 








. . 
























CO tO tO 




















0 


4-t 


S -H 




3 I— 1 3 




^ 1—1 


+ 














0 




■d 




cri y n 


















1— ( 






K 3 




0 N 
























4_) |_| 




H *'"' 






















CO 






M 




























CO 






















to 


'H CO 




•> 3 




















(J 


4J 'r-l 




to 1-1 *> 




















<u 


CJ 0 




S 1— 1 cO 




CO 












CO 




QJ ^ 


PQ 


3 










(J 




4J 






i 




CJ 4-* 


3 tH 




0 Lj ff> 




1 




1 












C 1 C 




3 r-H 








4-1 U 






di 






u 




Q) PL, ^ 




0 I— 1 


CO 


iH 0 iH 




C 60 




|_| 


u 










^ |_| }^ 


Q) 


0 t— 1 




<3 •< 




O 






>^ 










D M 


4J 




0 






M M P-i 


M-l 










u 




4-1 PQ 3 






(J 


— 4-> ^ 




>-i Cli M 


4-1 










a M 


4-1 (J 




CO 


col U <t-\ 




3 


>H 




















0 




O PQ 


Q 








0 




PQ 


Q 






IS 





12 



Table 4 — ^Estimated BJIP benefits, 
job and cash programs, by region, 1981 



Residence 
and 
region 


: Job : 
: program : 


Cash 
program 


Percentage of 

dollars in 
jobs program 




^Billions- 




Percent 


Northeast 


: 2. 45 


8. 36 


22. 7 


North Central 


: 2.10 


7.66 


21.5 


South 


: 4.22 


11.89 


26.2 


West 


! 2.97 


7.11 


29.5 


Total 


: 11.74 


35.02 


25.1 


Metropolitan: 








Northeast 


: 2. 07 


7. 04 


22. 7 


North Central 


: 1.37 


5.16 


21.0 


South 


5 2.22 


5.55 


28.6 


West 


: 2.29 


5.61 


29.0 


Total 


: 7.95 


23.36 


25.4 


Nonme tr opo 1 i t an : 








Northeast 


.39 


1.32 


22.8 


North Central 


.73 


2.50 


22.6 


South 


2.00 


6.34 


24.0 


West 


: .68 


1.50 


31.2 


Total 


: 3.79 


11.66 


24.5 



Note: Because of rounding, sum of parts may not add to totals. 
Source: Tabulations from the Urban Institute's Transfer Income Model. 



is an approximation of the underlying income distribution of families and unrelated 
individuals below the poverty level. 

Before Federal taxes and any welfare programs are considered, poor people in 
metropolitan areas would have lower incomes than those in nonmetropolitan areas (table 
6). This difference likely results from the higher proportion of poor families with 
working heads in nonmetropolitan areas than in metropolitan areas and, therefore, a 
higher proportion of poor people in nonmetropolitan areas with some source of income. 

The current welfare system would tend to equalize the average poverty gap between 
metropolitan and nonmetropolitan areas because of the targeting of funds through the 
AFDC programs to the particularly needy people concentrated in metropolitan areas. 
With BJIP, the average poverty gap would, after decreasing in both metropolitan and 
nonmetropolitan areas, have remained relatively equal between them. 

Achieving Equity 

Horizontal equity is the consistent treatment of people with similar needs. For a 
welfare program, it means treating families of the same size, composition, and income 
level equally under program rules (j^, p. iii) as well as including all needy people in 
the programs. BJIP would have increased horizontal equity by (1) including all needy 
people in the program regardless of family type and (2) instituting a national minimum- 



13 



Table 5 — ^Estimated families and unrelated people 
below the poverty level, by region and residence, 
with and without current welfare system and BJIP, 1981 



Families and unrelated 
people and region 


Total 


Metropolitan 


: Nonmetropolitan 


Families and unrelated 








people below poverty line: 




Thousands 




With no Federal taxes 








or welfare — \_l 








Northeast _2/ 


2,468 


2,019 


449 


North Central 


2,675 


1,571 


1,104 


South 


4, 504 


2, 061 


O III 

2, 444 


West 


2,217 


1,666 


552 


Total 


11,864 


7,317 


4,549 


With taxes and current 








welfare benefits — 3_/ 








Northeast 


: 1,662 


1,334 


328 


North Central 


: 1,991 


1 1 f7 
1,10/ 




South 


: 3,732 


1,762 


1,970 


West 


: 1,372 


1,004 


369 


Total 


: 8,757 


5,267 


3,491 


With taxes and BJIP — 








Northeast 


: 1,438 


1,147 


291 


North Central 


: 1,767 


1,017 


750 


South 


: 3,215 


1,533 


1,681 


West 


: 1 , z 13 


yuu 




Total 


: 7,635 


4,597 


3,037 


All families and unrelated 








people above and below 








the poverty level: 








Northeast 


: 18,846 


14,905 


3,941 


North Central 


: 22,165 


14,478 


7,687 


South 


: 26,897 


15,382 


11,515 


West 


: 16,364 


12,846 


3,518 


Total 


: 84,272 


57,611 


26,661 



Note: Because of rounding, sum of parts may not add to totals. 
JL^/ Includes Social Security, Government pensions. Worker's Compensation, 
Veterans Benefits, and Unemployment Compensation. 
2_/ See table 3 for definition of regions. 

3_/ AFDC, SSI, Food Stamp Program, Earned Income Tax Credit, FICA tax, and 
income tax. 

Source: Tabulations from the Urban Institute's Transfer Income Model. 



14 



Table 6 — Estimated average poverty gap by region and place of 
residence with and without current welfare system and BJIP, 1981 



Poverty gap 
per family and 
unrelated person 
and region 


: Total 


: Metropolitan 


Nonmetropolitan 






Dollars 




Without taxes and welfare: 








Northeast 


: 3,317 


3,428 


2, 818 


North Central 


: 2,981 


3,240 


2,612 


South 


: 2,906 


3,017 


2,812 


West 


: 2,944 


2,982 


2,823 


Total 


: 3,015 


3,171 


2,766 


With taxes and current 








welfare benefits: 








Northeast 


: 1,529 


1, 551 


1, 438 


North Central 


: 1,577 


1,493 


1,695 


South 


: 1,509 


1,587 


1,440 


West 


: 1,716 


1,682 


1,802 


Total 


: 1,560 


1,575 


1,538 


With taxes and BJIP: 








Northeast 


: 1,272 


1,278 


1,249 


North Central 


: 1,369 


1,253 


1,527 


South 


: 1,194 


1,235 


1,158 


West 


: 1,540 


1,484 


1,697 


Total 


: 1,304 


1,298 


1,314 



Source: Tabulations from the Urban Institute's Transfer Income Model. 



benefit level so that, regardless of region or place of residence, family types of the 
same size and income would receive similar benefits. 

Increased equity between regions and places of residence can be seen by the 
changes in average benefits. The average benefit per year per eligible unit without 
State supplementation (except for Hold Harmless) would have changed considerably if the 
current system were replaced with BJIP (table 7). 18 / The estimated average benefit 
for all eligible families would have decreased $181, varying by region and residence. 

Under BJIP, the estimated average benefit in nonmetropolitan areas would have 
increased $128, while in metropolitan areas, it would have decreased $430. The South 
is the only region where the average benefit would have increased, in both metropolitan 
and nonmetropolitan areas. Nonmetropolitan areas in the North Central region are the 
only other areas where the average benefit would have increased. 

The grandfathering of benefits would have insured that no one would be worse off 
under BJIP than under the current system. The change in average benefits by region and 
place of residence is a result of differential changes in the number of eligibles by 
region and places of residence as well as changes in the benefits to recipients. 

Comparing distributions of the needy and the eligible populations by region and 
place of residence also indicates equity (table 8). The distributions should be 



18 / The BJIP average benefit level includes both cash and job payments. 



15 



Table 7 — ^Estimated average benefit per year with current 
welfare program J^/ and BJIP, by residence and region, 1981 



Welfare programs 
and residence 


Northeast 
' : 


North 
Central 


: South : 


West 


To tal 








Dollars 






Metropolitan: 












Current programs 


: 3,451 


2, 956 


2, 023 


4, 197 


3, 012 


BJIP 


2, 747 


2, 509 


2, 230 


2, 905 


2, 583 


Difference 


: -704 


-448 


+207 


-1, 292 


-430 


(BJIP-current) 












No nme t r op o 1 i t an : 












Current programs 


: 2,514 


1, 906 


1,866 


2, 750 


2, 029 


BJIP 


2, 175 


1, 929 


2, 183 


2,455 


2, 157 


Difference 


: -339 


+23 


+317 


-295 


+128 


(BJIP-current) 












Total : 












Current programs 


: 3,262 


2,521 


1,935 


3,781 


2,606 


BJIP 


2,639 


2,283 


2,206 


2,794 


2,425 


Difference 


-623 


-238 


+2 70 


-987 


-181 


(BJI P-current) 













l_/ AFDC, SSI, and Food Stamp Program. 

1_/ See table 3 for definition of regions. 



Source: Tabulations from the Urban Institute's Transfer Income Model. 

similar. With the current welfare system, the eligible population is overrepresented 
in nonmetropolitan areas. BJIP would have tended to equalize these distributions. 

Targeting Efficiency 

Such comparison is a useful but insufficient measure of the equity of the welfare 
programs. The target efficiency of the programs across regions and places of residence 
was also tested by comparing the poverty rates by region and place of residence with 
and without the two welfare programs (table 5). BJIP would have lowered the differ- 
ences in the poverty rates in all cases. Although the poverty rates would have dropped 
more in nonmetropolitan areas than in metropolitan areas, 11.4 percent of nonmetropoli- 
tan families and unrelated people would have remained in poverty with BJIP, and 8 
percent of metropolitan residents would. Evaluation of targeting effectiveness can 
also be measured by answering two questions: 

(1) To what extent is poverty eliminated by the existing welfare system and by BJIP^ 

(2) What percentage of benefits go to families and people not in poverty? 

The first question has been answered. BJIP would have been more effective in 
eliminating poverty than the current welfare system (table 5). Yet, more benefits 
would have gone to families and unrelated people above the poverty level (table 9). 
Before Federal taxes and income transfers are considered, no families and unrelated 
people with incomes of $15,000 or more can be classified as below the poverty level in 
1981. But 8 percent of the benefits under the current welfare system would have gone 
to that group, and 12.3 percent would have gone to that group under BJIP. 



16 



Table 8 — Estimated distribution of families and unrelated people 
below the poverty level and distribution of eligibles for the 
current welfare system and BJIP, by residence and region, 1981 



Re s i d enc e 
and 
region 


Families and [ 
unrelated people [ 
below the * 
poverty level 1 / 


Eligibles 

Current welfare 
system 2 / 


BJIP 3_/ 






Percent 




United States: 


100.0 


100.0 


100.0 


Metropolitan 


61.7 


58. 7 


62.9 


N o nni p t T OT) o 1 i t an 


38. 3 


41. 3 


37. 2 


Northeast: 


20.8 


20.0 


21.3 


Metropolitan 


17.0 


16.0 


17.2 


NonTiip t"T ono 1 i tan 


3. 8 


4.0 


4. 1 


North Central: 


22.5 


22.7 


22.2 


Metropolitan 


13.2 


13.3 


13.5 


NnnTTiP t*Tnnn 1 it"fln 

11 llillw wL/W^^l* C&ll 


; 9. 3 


9. 4 


8. 7 


South: 


: 38.0 


42.5 


37.9 




17.4 


18.9 


18. 1 


Nonmetropolitan 


20.6 


23.6 


19.8 


West: 


18.7 


14.7 


18.7 


Metropolitan 


: 14.0 


10.5 


14.1 


Nonmetropolitan 


: 4.7 


4.2 


4.6 



Note: Because of rounding, sum of parts may not add to totals. 

l_/ Income is before taxes and welfare. Income includes Social Security, 
Government pensions. Worker's Compensation, Veterans Benefits, and Unemplojrment 
Compensation. 

2_/ AFDC, SSI, and Food Stamp Program. 

3_/ Includes both cash and jobs. 

Source: Tabulations from the Urban Institute's Transfer Income Model. 



Two reasons may account for these differences. First, to encourage people to 
work, BJIP would have provided benefits to people who are in the jobs program even 
though their total income would have placed them above the poverty level. Second, 
there may also be people who are poor and eligible to receive benefits but reside with 
a family that is not poor. These people are not separately identified in the data but 
are a part of the family, the primary unit of observation. The data do not differen- 
tiate between such situations and situations where no people are below the poverty 
level in a family but still receive benefits. 



CONCLUSIONS 

Two major sources of inequities in the current welfare system are the exclusion of 
particular family types from two of the major welfare programs, AFDC and SSI; and the 
differences by State in benefit levels. In attempting to correct both inequities, BJIP 



17 



Table 9 — Estimated percentage of families and unrelated 
people below the poverty level and distribution of benefits 
of current welfare system and BJIP, by income levels, 1981 



Income 


Families and 
1 unrelated people 
[ below poverty 
level without 
taxes and 
welfare 1 / 


Benefits from 
; current welfare 
system. Food 
Stamp Program, 
: SSI, and AFDC 


Benefits 
: from BJIP, 
: cash and jobs 






Percent 




$0-1,999 : 


41.1 


47.4 


40.9 


2,000-3,999 : 


38. 1 


17.2 


15.0 


4,000-5,999 : 


12.7 


9.7 


9.0 


6,000-6,999 : 


3.0 


3.8 


3.9 


7,000-7,999 J 


2.2 


3.2 


3.3 


8,000-8,999 : 


1. 1 


2.6 


2.9 


9,000-9,999 : 


.9 


2.0 


2.6 


10,000-10,999 : 


.4 


1.6 


2.3 


11,000-11,999 : 


.3 


1.5 


2.3 


12,000-14,999 : 


.2 


3.1 


5.4 


15,000 and over 


0.0 


8.0 


12.3 


Total 


100.0 


100.0 


100.0 



Note: Because of rounding, sum of parts may not add to totals. 
l_/ Includes Social Security, Government pensions. Worker's Compensation, 
Veterans Benefits, and Unemployment Compensation. 

Source: Tabulations from the Urban Institute's Transfer Income Model. 



would have increased the percentage of benefits to nonmetropolitan areas but would have 
decreased the percentage of the eligible population living there. Yet, BJIP would have 
narrowed the gap between the percentage of eligibles in nonmetropolitan areas and the 
percentage of families and unrelated people in poverty in nonmetropolitan areas. Thus, 
it would have more equitably distributed eligibles by residence. 

BJIP would not only have reduced poverty more than the current system, but it 
would also have reduced poverty more in nonmetropolitan areas than metropolitan areas. 
The rates of poverty in metropolitan areas and nonmetropolitan areas would have been 
lower and more similar with BJIP than without any welfare program or with the current 
welfare system. Average benefits would have also become more equal. Before any taxes 
or welfare are considered, the metropolitan poor would have lower average incomes than 
the poor in nonmetropolitan areas. Both the current welfare system and BJIP would have 
corrected that inequity, and BJIP would also have continued to raise average incomes of 
the poor. 

At the same time, BJIP would have cost more than the current welfare system 
because of expanded population coverage and improved benefit levels in many States. 
There are alternatives to comprehensive welfare reform which would achieve some of the 
objectives of BJIP but at a lower cost. Decisions must be made about which objectives 
of welfare reform are most important. 



18 



REFERENCES 



[1] Carlin, Thomas A; Hendricks, Gary; and Christian, Faye F. 

Residential and Regional Distribution of Benefits Under the Allowance for Basic 
Living Expenses (ABLE) Welfare Reform Proposal . Agr. Econ. Rpt. 374. Econ. 
Res. Serv., U.S. Dept. Agr., June 1977. 

[2] Executive Office of the President, Office of Management and Budget. 

The Budget of the United States Government, Fiscal Year 1979 . 1978. 

[3] Food Research and Action Center. 

Welfare Reform Mailing #15, July 7, 1978. 

[4] General Accounting Office. 

An Evaluation of the Use of the Transfer Income Model — TRIM — to Analyze Welfare 
Programs . Nov. 25, 1977. 

[5] Levy, Frank; and Storey, James R. 

"The Chances for Welfare Reform," The Washington Post . June 3, 1978, p. A-11. 

[6] Salamon, Lester M. 

Toward Income Opportunity: Current Thinking on Welfare Reform . Welfare Policy 
Project, The Inst. Policy Sci. and Public Affairs, Duke Univ., The Ford Founda- 
tion, Spring 1977. 

[7] Storey, James R. ; Harris, Robert; Levy, Frank; Fechter, Alan; and Michel, 
Richard C. 

The Better Jobs and Income Plan: A Guide to President Carter^'s Welfare Reform 
Proposal and Ma.jor Issues . Washington, D.C., The Urban Institute, Jan. 1978. 

[8] U.S. Congress, Congressional Budget Office. 

The Administration's Welfare Reform Proposal: An Analysis of the Program for 
Better Jobs and Income . April 1978. 

[9] 

Welfare Reform: Issues, Objectives and Approaches . July 1977. 

[10] , Joint Economic Committee. 

Handbook of Public Income Transfer Programs, 1975 . Paper No. 20. Joint Econ. 
Comm. Print, 1974. 

[11] U.S. Department of Agriculture, Food and Nutrition Service. 

Characteristics of Food Stamp Households, 1975 . Food and Nutr. Serv. 160. May 
1976. 



[12] . 

Food and Nutrition . Vol. VII, No. 5, Oct. 1977. 

[13] U.S. Department of Commerce, Bureau of the Census. 

Characteristics of the Population Below the Poverty Level: 1976 . Curr. Pop. 
Rpt., Series P-60, No. 115. 1978. 

[14] U.S. Department of Health, Education, and Welfare. 
HEW News . Aug. 6, 1977. 

[15] . 

The Measure of Poverty: A Report to Congress as Mandated by the Education 
Amendments of 1976 . April 1976. 



19 

*U.S. GOVERKMENT PRINTING OFFICE: 1979 0-280-931/ESCS-157 



UNITED STATES DEPARTMENT OF AGRICULTURE 
WASHINGTON, D C. 20250 



POSTAGE AND FEES PA!D 
U.S. DEPARTMENT OF 
AGRICULTURE 
AGR 101 

THIRD CLASS 



aS.MAIL 



] 



H0kf£OU909AlX2 12016 OQHl 
fijREoTR)f oCl£NC£S LAB f6 USQA 
JUNtAU AK 99802 



[16] , Assistant Secretary for Planning and Evaluation. 

AFDC and Food Stamp Benefits; Four Person Families * (Mimeographed) , July 1976. 

[17] , Office of the Secretary. 

Better Jobs and Income Act, H.R. 9030; A Summary and Sectional Explanation . 
Sept. 13, 1977. 



[18] , Social Security Administration. 

Social Security Bulletin. Annual Statistical Supplement. 1975 . No. SSA, 



77-11700.