Outdated Income Inequality

When I think of the term “poverty threshold”, I imagine some kind of physical barrier that is holding poor people back from living a normal life. These people fall under the poverty level and struggle for quite some time, like a fish out of water just hoping for someone to throw them back in so that they could possibly live a normal life. When looking at the gross yearly income that determines the poverty level, which is at about $31,800 for a four-person family (as of 2006), I think to myself ‘How can all of these people be living in such low standards?’ Well obviously they do not have a choice! I mean most of the people in poverty live in dirty places that are screaming with disease and they

The Federal Government defines poverty as income that falls below the United States Poverty threshold. (Begun 95). If a person

In Income Inequality: Too Big to Ignore, Robert H. Frank paints a picture to the reader about the struggles of pier pressure. For example: an upper-classmen chooses to buy a big house and fancy clothing. This acts as a “frame of reference” to the changes and norms of the society. If he spends money on something nice, a middle-classmen will then go and decide to do the same thing, and then a lower-classmen…all the way down the social hierarchy. This is what he calls an “expenditure cascade.” Robert relates this with a person’s downfalls, which can be traced due to lower income inequality. Income inequality basically means that in a given quantity, the dispersion of income is underlined by the gap between individuals and or households with

In terms of federal poverty measure there are two different versions; one is poverty thresholds and the other is poverty guidelines. Poverty thresholds are a version of the federal poverty measure, developed by Mollie Orshansky in the 1960’s, which is the official measure of poverty that was based off of the cheapest food plan for a family (Schiller). In 1955, studies reflected that poor families spent about one-third of their income on food; so multiplying a low-cost food budget by three determined how much income a family needed (Schiller). Poverty thresholds are mainly used to calculate the number of poor Americans and other poverty population figures (lecture). Since then the threshold has only been adjusted for inflation and is an absolute threshold that considers a family poor if its pre-tax cash income falls below the poverty threshold (lecture). Since the food plan was only supposed to be used temporarily or for emergencies, it is clear it needs some updating. Poverty guidelines are used to determine program eligibility and are considered a simplified version of the poverty threshold (lecture).

The issue of income inequality in the United States is complicated and does not have a definite answer. Income inequality can be measured in a few different ways. The first measurement for the income inequality in a country is to look at the percentages on households and group them into income categories, called distribution by income category. The second measurement for income inequality is called distribution by quintiles or fifths. This is when you divide the total number of people, households, families into five groups called quintiles to examine the percentage of total before tax income received by each quintile. Each quintile would then be ordered by income and households in the category.

In any given population, there is a difference between what people within the population earn. The uneven distribution of income in any given population is income inequality. In order for there to be income, there has to be several sources of income. These sources of income may be combinational or independent per person receiving the income. Income may result from wages, rent, bank account interests, salaries or even profits made in business transactions ( Stiglitz, 2012).

In response to the article, some the information was new but a lot of it not surprising.  It was surprising, however, to read that although Mr. Naets is somewhat more educated and most likely in a higher tax bracket than his parents were, his standard of living is a lot lower than that of his parents.  That is alarming only because we have a lot more opportunities available to us through networking or technology and on a scale that was never available to our parents. Also in Mr. Naets case, he and his wife earn well above the national average which is also alarming because you would think that someone in such a position would not be as worried as someone of the opposite spectrum. It is discerning to think that no matter how hard we strive to for a better life, we will always feel that is not enough.

However, this system of measuring poverty is flawed because if a family makes a dollar more above the set limit, they do not qualify for financial help from the government (NCCP, 2008).The poverty threshold is an inadequate measure of whether people are considered poor or not. Current poverty measures are flawed because it assumes how much a family spends and does not accurately include family resources such as Earned Income Tax Credit (NCCP, 2008). The way that the government measures poverty is based on outdated information that was set in the 60s. Because it has not been sufficient to keep up with the standard of living, those who are living in “high cost cities like New York and those who live in rural areas of the country” (NCCP, 2008) are barely getting by.

In 2006, the poverty line was $20,000 for a family of four. Having a cut off such as that is a problem, due to the fact that every family is different, and may have different expenses that comes as priority to them. My family struggles on a month to month basis, but we are above the “poverty line” to get any help from our government. To this day I am still bitter, about the fact that having two parents unemployed at the same time, my brother and I still didn't qualify for free or even reduced lunch in the public school system. Blasi, points this factor out, that

In the United States, income poverty is defined by the poverty threshold, developed in 1959 and based on expected food expenditures (thrifty food basket) for families of varying sizes. Each year the threshold is adjusted for the Consumer

Income inequality has been a major concern around the world, and it mainly links to how economic metrics are distributed among individuals in a country. Economists generally categorise these metrics in wealth, income and consumption. Wilkinson and Picket (2009) showed in their studies that inequality has drawbacks that lead to social problems. This is because income inequality and wealth concentration can hinder or delay long term growth. In 2011, International Monetary Fund economists showed that less income inequality increased the duration of countries’ economic growth spells more than free trade, low government corruption, foreign investment or low foreign debt (Berg and Ostry, 2011).

The Presidential Lecture "What is the Government Doing about Inequality since the 1970's" was quite interesting to me, but challenging to understand. Peter H. Lindert gave the lecture in a business professional point of view and really singled out those interested in economics. Peter H. Lindert has a Ph.D. and is a distinguished professor of economic in university of California, Davis and has a prize-winning book, Growing Public Social Spending and Economic Growth since the Eighteenth Century (Cambridge University Press 2004). He earned an A.B from Princeton University's Woodrow Wilson School of Public and International Affairs, and a Ph.D. from Cornell University (Freetrade Tamiu 2018). In the beginning of his lecture he introduced 4 issues

Income inequality has been a major issue in American history. There are many different factors that contribute to inequality. These include education, wealth, discrimination, ability, and monopoly power.

This could be because of the stagflation, the combination of recession with inflation, of that decade. The stagflation leads to unemployment as there is less growth in the economy, more workers are laid off or they will receive a lower salary. In times of a recession it is very difficult to find a job or a better paying job. On the other hand, the government might give subsidies to companies to stimulate growth, the owners of the companies or managers because of this may receive a higher salary. This contributes to income inequality.

In 2010, about 46.2 million people were considered poor. The nation’s poverty rate rose to 15.1 percent, whereas in 2009, 14.3 percent of people in America were living in poverty (Censky, 2011). That is an increase of 2.6 million people in 2010. In the United States, the federal poverty line – an absolute measure of annual income – is frequently used to determine who is categorized as poor (Ferris & Stein, 2008, 2010). Currently the government defines the poverty line as an income of $11,139 for an individual and $22,314 for a family of four (Censky, 2011). In sociology, poverty can be defined using two terms – relative deprivation and absolute deprivation. Relative deprivation is a comparison between people and social class. With