Answers to Final Exam

Part A

1) Currently, among full-time, year-round workers, the hourly wage rate for women is about what percentage of the hourly wage rate for men?

(c) 80 percent

2) Human capital theories of the gender gap in wages emphasize the influence of which of the following variables in determining pay?

(d) Work experience

3) In domestic chores such as cooking and cleaning, survey data show that men perform what proportion of the work done by women?

(b) Less than 50 percent

(Answer (c) was also taken as a correct response for this question, in case domestic chores was broadly interpreted to include all domestic work.)

4) In 1990, spending on AFDC (in 1990 dollars) roughly totalled:

(a) $20 billion

5) In 1990, spending on social security for the elderly (in 1990 dollars) roughly totalled:

(d) $225 billion

6) Which of the following social programs is not means-tested?

(d) Medicaid

7) Table 1 indicates that the 1996 poverty rate in the United States is about:

(b) 10 percent

8) According to Table 1, the 1996 poverty rate among children is about:

(c) 15 percent

9) Table 1 indicates that the House welfare reform bill would raise the overall poverty rate by about:

(b) 10 percent

10. Table 1 shows that the House welfare reform bill would have raised poverty the most among:

(b) Families with children

11) Which of the following statements is true:

(b) Earnings inequality is higher in the United States than in Western Europe, but European inequality is widely increasing.

12) According to sociologist Gosta Esping-Andersen, liberal welfare state regimes, like the United States, are characterized by:

(a) Means-tests and a low level of benefits

13) William Julius Wilson's theory of persistent urban poverty emphasizes the fundamental impact of:

(d) Joblessness due to the decline of urban industry

14) Which of the following statements about postwar poverty trends is true:

(b) The general fall in the U.S. poverty rate was arrested in 1973.

15) Which of the following statements is true:

(a) The gender gap in wages has declined over the last ten years.

Part B

1. Describe how structural changes in the economy may have raised income inequality in the United States.

Technological change is often argued to be the chief structural shift in the economy that has driven the rise in inequality. Evidence for technological change is given by growing earnings inequality by education, and a few studies which show a high premium paid for using computers at work.

Other structural changes include deindustrialization, which may have contributed to job loss in the northeast and the midwest. Some researchers, like William Julius Wilson, claim that deindustrialization in urban centers has contributed to persistent urban poverty among African Americans.

2. Briefly describe the difference between wealth and income, and the significance of the two concepts for understanding social inequality.

Wealth refers to the stock of assets held by a person or household at a single point in time. These assets may include financial holdings and saving, but commonly also include the family home. Income refers to money received by a person or household over some period of time. Income includes wages, salaries, and cash assistance from the government.

In some ways, wealth is more important for understanding social inequality because wealth generates income, so income inequality depends in part on wealth inequality. Research on racial inequality argues, that a large part of inequality between African Americans and whites is due to differences in wealth and discrimination against African Americans in the acquisition of wealth, particularly housing.

3. Describe differences between the funding and organization of social programs for poor families and the elderly in the United States. Relate these features of the programs to the process of policy reform.

Social programs for the poor, like AFDC, are administered at the state level and benefits are subject to means-tests. Consequently benefit levels vary significantly across states, and the programs have weak redistributive effect. Programs for the elderly, like social security, are administered at the national level, and provision is universal, and the programs are strongly redistributive.

The residual character of AFDC reduces political support for the program, making AFDC susceptible to cutbacks and more restrictive eligibility requirements. The universal provision underlying social security has created powerful political constituency supporting the program. Consequently, social security benefits and eligibility requirements have been liberalized throughout the postwar period.

4. Describe how changes in women's labor force participation has influenced inequality between the sexes.

Women's labor force participation has increased steadily throughout the postwar period. This has contributed to women's economic independence, and some have argued that rising labor force participation is associated with increased labor force attachment and this has raised women's earnings. Thus rising labor force participation has reduced inequality between the sexes in the area of paid work.

Overall inequality between the sexes may have increased however because men do relatively little domestic work. Working women commonly face a second shift at home, after the day of paid work has concluded.

5. Human capital theory has often been used to account for gender inequality. Briefly describe human capital theory and explain how it can be applied to understanding inequality more generally.

Human capital theory argues that people's rewards in the labor market depend on their productivity. Individuals and households thus make investments in productivity of individuals---human capital---to maximize income.

Inequality between the sexes is often attributed to differences in human capital. This means that men are more productive than women, commonly due to women's child-rearing obligations. Consequently men are paid more than women. Human capital theory could be applied to racial inequality. In this case, differences in earnings between blacks and white might be related to productivity differences due to educational inequality.

6. Briefly summarize the main features of the 1997 welfare reform.

The 1996 Personal Responsibility and Work Opportunity Reconciliation Act has five main features. First, the Act establishes a system of block grants to the states. The grants can be used for any purpose described in the legislation including assistance to needy families. Second, grants are conditional on state welfare plans that have work requirementd, in which welfare recipients must work after a specified period. Third, time limits are imposed to prevent people from collecting welfare for longer than a total five-year period. Fourth, additional measures are included to prevent out-of-wedlock and teenage births. For example, the new law requires that teenage mothers live with a parent or responsible adult to receive cash benefits. Finally, The legislation also enacts significant cuts in the budgets for food stamps and Supplemental Security Income.

7. Briefly compare patterns of income inequality in the United States to those in Europe, and outline explanations for these patterns.

Income inequality in the United States is significantly higher than in the Europe. Of the European countries, the Scandinavian countries have the lowest level of inequality. When income figures are adjusted to be comparable across countries, the median US household in general has higher income the the European, but the poor the United States make less than the poor in Europe.

Two main reasons have been offered to explain why inequality is so high in the United States compared to other countries. First, the United States has weakly developed institutions for income support for families with children and for the elderly. Second, unions are weak and the United States, but relatively strong in Europe, and unions play an important role in raising the wages of low-wage workers.