ECONOMIC

Because of the lower work participation of low-income female heads offamilies, the major source of income for this group is public assistance. In1972, public assistance accounted on the average for 51 percent of theincome of low-income, female-headed families. Many in-kind benefits aregiven automatically to families receiving public assistance, specifically thosein the Aid to Families with Dependent Children program, which is largelya program for female-headed families. Moreover, because public assistanceincome is not taxed, the real consumption of female-headed families isprobably understated, compared to that of husband-wife families whoseincome depends more heavily on earnings.The increase in female-headed families may, per se, be an important variablein determining the size of the poverty population in future years. Thereis some evidence, discussed below, that our system of welfare payments, whichhas been an important way of increasing income for mothers heading families,may itself have promoted some of the increase in female-headed familiesthrough the structure of incentives. This is clearly an important issue inthe future design of transfer payments to the poor.GOVERNMENT TRANSFER PROGRAMSAll expenditures by government, directly or indirectly, have implicationsfor the distribution of income. Analyses can be made of the direct incomedistribution effect of public transfers. It is far more difficult to identifythe income distribution effects of other government expenditures.Some of the transfer programs were initially viewed as public insurancemechanisms. Social security was intended as a public pension plan. Unemploymentcompensation and workmen's compensation are government mandatedinsurance. Veterans' compensation and benefits were adopted as aform of deferred payment for military service. Public assistance was andis explicitly intended as a mechanism for raising the income of those familiesthat would otherwise fall below a socially desired level of consumption.FEDERAL TRANSFERS IN 1973The Government gives transfers to individuals and families in the formof cash or subsidization of the price of particular goods and services. Of thetwo, transfers in cash are easier to administer, and they also have the advantagethat the recipients presumably know better than the Governmentdoes how to allocate the transfer income so as to maximize their own wellbeing.Some transfers are given in kind, however, on the presumption thatthe goods are of such importance that the recipients should consume at leasta minimum quantity. Food, medical care, and housing are examples.Table 45 presents a summary of the Federal Government transfer expendituresin fiscal 1973. The poverty status of recipients is based on moneyincome, including cash transfers but excluding the value of transfers in kind.167