15: Poverty and Economic Inequality
- Page ID
- 181247
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\(\newcommand{\avec}{\mathbf a}\) \(\newcommand{\bvec}{\mathbf b}\) \(\newcommand{\cvec}{\mathbf c}\) \(\newcommand{\dvec}{\mathbf d}\) \(\newcommand{\dtil}{\widetilde{\mathbf d}}\) \(\newcommand{\evec}{\mathbf e}\) \(\newcommand{\fvec}{\mathbf f}\) \(\newcommand{\nvec}{\mathbf n}\) \(\newcommand{\pvec}{\mathbf p}\) \(\newcommand{\qvec}{\mathbf q}\) \(\newcommand{\svec}{\mathbf s}\) \(\newcommand{\tvec}{\mathbf t}\) \(\newcommand{\uvec}{\mathbf u}\) \(\newcommand{\vvec}{\mathbf v}\) \(\newcommand{\wvec}{\mathbf w}\) \(\newcommand{\xvec}{\mathbf x}\) \(\newcommand{\yvec}{\mathbf y}\) \(\newcommand{\zvec}{\mathbf z}\) \(\newcommand{\rvec}{\mathbf r}\) \(\newcommand{\mvec}{\mathbf m}\) \(\newcommand{\zerovec}{\mathbf 0}\) \(\newcommand{\onevec}{\mathbf 1}\) \(\newcommand{\real}{\mathbb R}\) \(\newcommand{\twovec}[2]{\left[\begin{array}{r}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\ctwovec}[2]{\left[\begin{array}{c}#1 \\ #2 \end{array}\right]}\) \(\newcommand{\threevec}[3]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\cthreevec}[3]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \end{array}\right]}\) \(\newcommand{\fourvec}[4]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\cfourvec}[4]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \end{array}\right]}\) \(\newcommand{\fivevec}[5]{\left[\begin{array}{r}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\cfivevec}[5]{\left[\begin{array}{c}#1 \\ #2 \\ #3 \\ #4 \\ #5 \\ \end{array}\right]}\) \(\newcommand{\mattwo}[4]{\left[\begin{array}{rr}#1 \amp #2 \\ #3 \amp #4 \\ \end{array}\right]}\) \(\newcommand{\laspan}[1]{\text{Span}\{#1\}}\) \(\newcommand{\bcal}{\cal B}\) \(\newcommand{\ccal}{\cal C}\) \(\newcommand{\scal}{\cal S}\) \(\newcommand{\wcal}{\cal W}\) \(\newcommand{\ecal}{\cal E}\) \(\newcommand{\coords}[2]{\left\{#1\right\}_{#2}}\) \(\newcommand{\gray}[1]{\color{gray}{#1}}\) \(\newcommand{\lgray}[1]{\color{lightgray}{#1}}\) \(\newcommand{\rank}{\operatorname{rank}}\) \(\newcommand{\row}{\text{Row}}\) \(\newcommand{\col}{\text{Col}}\) \(\renewcommand{\row}{\text{Row}}\) \(\newcommand{\nul}{\text{Nul}}\) \(\newcommand{\var}{\text{Var}}\) \(\newcommand{\corr}{\text{corr}}\) \(\newcommand{\len}[1]{\left|#1\right|}\) \(\newcommand{\bbar}{\overline{\bvec}}\) \(\newcommand{\bhat}{\widehat{\bvec}}\) \(\newcommand{\bperp}{\bvec^\perp}\) \(\newcommand{\xhat}{\widehat{\xvec}}\) \(\newcommand{\vhat}{\widehat{\vvec}}\) \(\newcommand{\uhat}{\widehat{\uvec}}\) \(\newcommand{\what}{\widehat{\wvec}}\) \(\newcommand{\Sighat}{\widehat{\Sigma}}\) \(\newcommand{\lt}{<}\) \(\newcommand{\gt}{>}\) \(\newcommand{\amp}{&}\) \(\definecolor{fillinmathshade}{gray}{0.9}\)- 15.0: Introduction
- This page examines the origins and implications of the Occupy Wall Street movement, initiated in September 2011 in response to social and economic inequality in the U.S. It addresses wealth concentration among the top 1% and the challenges faced by impoverished families, supported by current statistics. Additionally, it analyzes the labor market's influence on income inequality, government poverty definitions, and potential policy solutions to reduce inequality while preserving work incentives.
- 15.1: Drawing the Poverty Line
- This page discusses economic inequality and the U.S. poverty line, originally defined by Mollie Orshansky in the 1960s based on food costs, which has since been adjusted. It notes fluctuations in poverty rates and highlights disparities among demographic groups, particularly among females, Black, and Hispanic populations. The adequacy of a national poverty line is questioned, taking into account regional cost variations and non-cash assistance.
- 15.2: The Poverty Trap
- This page discusses the poverty trap, highlighting how excessive government assistance may discourage work by resulting in minimal income increase for recipients when support is cut as their earnings rise. It presents a single-parent family example and suggests alternatives like reducing support more gradually and adding work requirements to promote employment and lower welfare costs. Additionally, a feature is introduced to illustrate the effects of these changes on income.
- 15.3: The Safety Net
- This page outlines U.S. safety net programs aimed at alleviating poverty, including TANF, EITC, and SNAP, highlighting their roles, challenges, and controversies, particularly regarding dependency. It notes that participation in SNAP surged during the Great Recession and COVID-19, with federal income security programs providing about $62 billion in aid.
- 15.4: Income Inequality- Measurement and Causes
- This page explores income distribution and inequality in a market economy, using quintiles and Lorenz curves to measure disparity. It distinguishes between poverty and income inequality, noting increasing inequality in the U.S. since the 1970s, especially among the top earners. From 1980 to 2020, the U.S. saw growing disparities compared to other countries, influenced by changes in household composition and wage distribution favoring high-skilled workers.
- 15.5: Government Policies to Reduce Income Inequality
- This page explores economic inequality, its natural causes, and government intervention strategies. It discusses wealth redistribution, equal opportunities, and inheritance taxes as methods to reduce disparity while balancing economic incentives. The relationship between income equality and economic output is examined, noting that greater equality may initially reduce output but can enhance growth with careful design.
- 15.6: Key Terms
- This page discusses economic concepts and social welfare programs, including the earned income tax credit for the working poor, various tax types, and measures of poverty. It addresses income inequality using the Lorenz curve, Medicaid, the poverty trap, wealth redistribution, and government safety nets like SNAP for low-income families.
- 15.7: Key Concepts and Summary
- This page explores poverty and income inequality, explaining their differences and impact on wages influenced by labor market dynamics. It defines the poverty rate necessary for basic needs and describes the poverty trap, where diminishing benefits hinder work efforts. Government safety net programs support the poor, while the page also discusses the measurement, causes of income inequality, and policies to alleviate it, aiming to balance economic incentives with the goal of reduced inequality.
- 15.8: Self-Check Questions
- This page discusses the effects of income changes and welfare systems on poverty and inequality, focusing on work incentives and the earned income tax credit's role in mitigating poverty. It analyzes income distribution across quintiles, societal resistance to redistribution, and the impact of technology and education on income inequality. The text also examines the balance between economic output and equality, influenced by social safety nets.
- 15.9: Review Questions
- This page discusses poverty, income inequality, and government support systems, including poverty rate calculations, the poverty line, and poverty traps. It covers social safety nets like TANF, SNAP, and Medicaid, their impact on marginalized populations, and the Lorenz curve. The text examines changes in U.S. income inequality since the late 1970s, contributing factors, and potential public policies to mitigate inequality.
- 15.10: Critical Thinking Questions
- This page explores poverty, government assistance programs, and income inequality. It questions family necessities, the effects of minimum wage on living standards, labor-leisure tradeoffs, and the impacts of programs like TANF, EITC, SNAP, and Medicaid on low-income individuals.
- 15.11: Problems
- This page explores poverty rates and income distribution through various scenarios, analyzing countries A and B's poverty levels, the income dynamics for a single mother named Susan concerning work incentives, and evaluating the annual incomes of a group of 10 individuals. It compares these income distributions, particularly focusing on quintiles against the U.S. income distribution from 2005.