A PRINCETON UNIVERSITY PRESS E-BOOK Poverty andDiscrimination Kevin Lang Poverty and Discrimination This page intentionally left blank Poverty and Discrimination KEVIN LANG PRINCETON UNIVERSITY PRESS Princeton and Oxford Copyright © 2007 by Princeton University Press Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540 In the United Kingdom: Princeton University Press, 3 Market Place, Woodstock, Oxfordshire OX20 1SY All Rights Reserved Library of Congress Cataloging-in-Publication Data Lang, Kevin. Poverty and discrimination / Kevin Lang. p. cm. Includes bibliographical references and index. ISBN-13: 978-0-691-11954-0 (cloth : alk. paper) ISBN-10: 0-691-11954-6 (cloth : alk. paper) 1. Poverty—United States. 2. Economic policy—United States. 3. Social policy— United States. 4. Public welfare—United States. 5. Discrimination—United States. I. Title. HC110.P6L36 2007 362.5′5610973—dc22 2006020888 British Library Cataloging-in-Publication Data is available This book has been composed in Adobe Garamond, Scala Sans, ITC Stone Sans, and ITC Stone Serif by Princeton Editorial Associates, Inc., Scottsdale, Arizona Printed on acid-free paper. ∞ pup.princeton.edu Printed in the United States of America 10987654321 contents Acknowledgments xi Chapter 1 Introduction 1 1. The Content of This Book 2 2. Recent Developments in the Study of Poverty and Discrimination 4 3. The Object of This Book 8 4. Why Do Policy Analysts Disagree? The Limits of Statistical Arguments 10 5. Why Do Policy Analysts Disagree? The Role of Values 12 6. A Case Study: Retention in Grade 13 7. Concluding Remarks 17 8. Further Reading 18 9. Questions for Discussion 18 10. Appendix: A Quick Guide to Statistics 19 Part 1 POVERTY Chapter 2 Who Is Poor? 31 1. Evidence on the Importance of Relative Income 36 2. How the Government Measures Poverty 37 3. Valuing Nonmonetary Income 39 4. Over What Time Period Should We Measure Poverty? 40 5. Other Problems with the Official Measure 41 6. The National Academy of Sciences Report 42 7. Gathering the Data 42 8. Who Is Poor (By the Official Measure)? 43 9. Extreme Poverty 45 10. Homelessness 45 11. Hunger and Food Insecurity 48 12. Alternative Measures of Poverty 51 13. The Dynamics of Poverty 53 14. Why Does Poverty Last So Long for Some People? 56 15. Concluding Remarks 58 16. Further Reading 58 17. Questions for Discussion 59 18. Appendix: A Brief Note on Data 61 Chapter 3 The Evolution of Poverty Policy 63 1. Federal Poverty Programs, 1970–2000 63 2. Incentives under AFDC 66 3. The Earned Income Tax Credit 69 4. Cash or In-Kind Transfer: Which Is Better? 78 5. Concluding Remarks 81 6. Further Reading 81 7. Questions for Discussion 82 Chapter 4 Trends in Poverty 83 1. Trends Using the Official Measure 83 2. Trends in Poverty under Alternate Measures 86 3. Accounting for Trends 87 4. Concluding Remarks 102 5. Further Reading 103 6. Questions for Discussion 104 7. Appendix: Multivariate Analysis 104 Chapter 5 Labor Market Policies 108 1. Understanding Wage Inequality 108 2. Minimum Wage Laws 115 3. Living Wage Laws 120 4. Job Training Programs 121 5. Can Job Training Programs Reduce Poverty? 123 6. Evaluating the JTPA 125 7. Evaluating the Job Corps and Other Youth Programs 129 8. Training Programs and Tagging 133 9. Welfare to Work: Work First 134 10. Employer-Based Subsidies 136 11. Concluding Remarks 140 12. Further Reading 140 13. Questions for Discussion 140 14. Appendix: Adjusting for Program Nonparticipation 141 Chapter 6 Family Composition 143 1. Births to Single Mothers 144 2. Declining Marriage 146 3. Changing Social Attitudes 150 vi Contents 4. The Role of Welfare 156 5. Features of Welfare 158 6. Teenage Childbearing 161 7. Effects of Growing Up with a Single Parent 168 8. Intergenerational Transmission of Poverty 172 9. Policies Aimed at Infants and Toddlers 174 10. Preschool Programs 177 11. Programs for School-Age Children 182 12. Medicaid and SCHIP 190 13. Concluding Remarks 192 14. Further Reading 194 15. Questions for Discussion 196 Chapter 7 Concentrated Poverty 197 1. Life in High-Poverty Neighborhoods 198 2. Do Neighborhoods Matter? 198 3. The Gautreaux Program 201 4. Moving to Opportunity 202 5. Public Housing 203 6. Gangs 205 7. Community Development 206 8. Concluding Remarks 208 9. Further Reading 209 10. Questions for Discussion 210 Chapter 8 Education and Education Reform 211 1. Education and Earnings 212 2. Testing 213 3. Decentralization and School Quality 221 4. Using Tests to Increase School and District Accountability 236 5. Concluding Remarks 239 6. Further Reading 240 7. Questions for Discussion 241 Chapter 9 Welfare Reform 243 1. The Case for Reform 243 2. The Welfare Reform Act of 1996 245 3. Assessing the Effects of Welfare Reform 251 4. Effect on Welfare Receipt 252 5. Welfare Reform and Well-Being 254 6. Living Arrangements 258 7. Effects on Children and Adolescents 259 8. Concluding Thoughts 259 9. Further Reading 260 10. Questions for Discussion 261 Contents vii Part 2 DISCRIMINATION Chapter 10 Discrimination: Theory 265 1. What Is Discrimination? 265 2. Theories of Discrimination: Prejudice 269 3. Prejudice in Imperfect Labor Markets 272 4. Transaction Costs Models 273 5. Statistical Discrimination 274 6. Self-Confirming Expectations 277 7. Concluding Remarks 280 8. Further Reading 281 9. Questions for Discussion 282 Chapter 11 Race Discrimination in the Labor Market 283 1. Trends in Black-White Earnings Differentials 283 2. Explaining the Decline in the Wage Gap 287 3. Evidence on Current Discrimination 293 4. Testing for Discrimination: Legal Perspectives 307 5. Affirmative Action in Employment 311 6. Affirmative Action in Public Employment 313 7. Concluding Remarks 314 8. Further Reading 315 9. Questions for Discussion 316 Chapter 12 Race Discrimination and Education 317 1. The Black-White Test Score Gap 317 2. Discrimination in Education 325 3. Affirmative Action in Education 330 4. Concluding Remarks 332 5. Further Reading 333 6. Questions for Discussion 333 Chapter 13 Race Discrimination in Customer Markets and the Judicial System 334 1. Housing 335 2. Discrimination in Other Markets 345 3. Discrimination in the Justice System 349 4. Concluding Remarks 351 5. Further Reading 352 6. Questions for Discussion 352 Chapter 14 Sex Discrimination 354 1. Theory 354 2. Is There Discrimination against Women in the Labor Market? 360 3. Discrimination, Marriage, and Children 364 4. Sexual Orientation 366 viii Contents 5. Trends in the Female/Male Wage Ratio 368 6. Comparable Worth 373 7. Concluding Remarks 375 8. Further Reading 377 9. Questions for Discussion 378 Chapter 15 Conclusion: An Agenda to Decrease Poverty and Discrimination? 379 1. The Value and Limits of Research 379 2. The Value and Limits of a Strong Labor Market 381 3. Family and Early Childhood Programs 383 4. Education 385 5. Addressing the Needs of High-Poverty Neighborhoods 385 6. Race Discrimination and Inequality 386 7. Addressing Inequality 387 8. Health Care 388 9. Concluding Remarks 388 Author Index 391 Subject Index 395 Contents ix This page intentionally left blank acknowledgments L , I have devoted much of my career to writing academic articles aimed at an academic audience. Such articles typically include only cursory thanks to those who have helped with those particular projects. Therefore, my debt of acknowledgments for broader intellectual influences has grown. Those who know both me and my parents, Kurt Lang and Gladys Engel Lang, will recognize their influence. After all, I learned sociology at the dinner table and, as a young child, observed them both studying and participating in school desegregation efforts. One of my first opportunities to earn pocket money was by clipping news- paper articles for a study of race riots that they were working on in the 1960s. My parents also introduced me to the late Yvan Corbeil, who, while I was taking time off before college, hired me to work at his survey research firm, CROP Inc., and then kept a job open for me during college vacations and after graduation. At CROP, I worked closely with Michael Saykaly, who introduced me to survey design and analysis. With this background, I entered Oxford certain that I wanted to focus on sociol- ogy, and I was encouraged in this direction by my sociology tutor, Anthony Heath, who exposed me to rational choice sociology. But Nick (now Sir Nicholas) Stern and Sudhir Anand exposed me to the rigors of economics and convinced me that I could pursue my interest in social issues more effectively as an economist. There were so many fellow students and faculty who helped me and influenced me during my graduate studies at the University of Montreal and the Massachusetts Institute of Tech- nology that to mention a few would be to slight others, so I will just recognize them collectively. It is difficult to limit my thanks to more recent intellectual influences. I have had the good luck to work with excellent and supportive colleagues, first at the University of California–Irvine, and later at Boston University as well as at MIT during two one- year visits. I have coauthored articles with about thirty different people, all of whom are important in some way. Bill Dickens has most frequently been my coauthor over a period of more than two decades. His work is frequently cited in this book. The late xi Bob Rosenthal taught me game theory while coauthoring two articles with me. I was the beneficiary of both his unflinching honesty and his patience. Bob and Michael Manove have changed the way I write theory papers. I have probably argued more about methods and methodology with Josh Angrist than with anyone else, but his enormous influence on my thinking about research is reflected in this book.