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Chapter 21 - Poverty, inequality, and discrimination. In this chapter you will learn: What the difference is between relative and absolute measures of poverty? How to explain different methods of measuring income inequality? How income mobility differs from income equality? | Chapter 21 Poverty, Inequality, and Discrimination © 2014 by McGraw‐Hill Education 1 What will you learn in this chapter? • What the difference is between relative and absolute measures of poverty. • How to explain different methods of measuring income inequality. • How income mobility differs from income equality. • What public policies reduce poverty and inequality and what the trade‐off is between equity and efficiency. • What relationship demographic differences in income or wages have with discrimination. © 2014 by McGraw‐Hill Education 2 Poverty • Poverty is a lack of material resources. – This is an important topic to economists as poverty has real effects on individuals lives. • Causes of poverty are not always obvious. – Does a lack of education make people poor? Are the poor less able or willing to access education? – Is it hard to become rich if you start out poor, or vice versa? If your parents were poor, how does this affect your changes in life? • Defining poverty is also difficult. © 2014 by McGraw‐Hill Education 3 1 Measuring Poverty There are two main ways to measure poverty: • Absolute poverty line is a measure that defines poverty as income below a certain amount, fixed at a given point in time. • Relative poverty line is a measure that defines poverty in terms of the income of the rest of the population. Poverty line ($) • The absolute poverty line in the U.S. is based on the price of food for different family sizes. • The poverty lines are determined annually by the U.S. Census Bureau. Family size 11,702 1 15,603 2 18,106 3 22,811 4 26,844 5 30,056 6 33,665 7 © 2014 by McGraw‐Hill Education 4 Measuring Poverty The poverty rate defines the percentage of the population that have incomes below the poverty line. Millions of people Recession 50 45 46% People in poverty 22% 40 35 30 15% Poverty rate 14% 25 13% 20 16% Children .
