Deck 7: Poverty Problems and Discrimination: Why Are so Many Still so Poor

Question 1

What is the difference between "absolute poverty" and "relative poverty"? Provide examples of each.

Answer 1

Absolute poverty is where an individual or group of individuals suffers from such a lack of necessities that their very welfare and survival is threatened. To be homeless and vulnerable to the elements during periods of harsh weather is one example of absolute poverty; another is to be so unable to afford food that death by starvation is an imminent possibility.
Relative poverty , on the other hand, is more based on one's perception of wealth. It is where an individual or family does possess the basic needs but not in as luxurious a quality as their neighbors. To live in a rundown shack or a slum apartment in the same metropolis or suburban area that also comprises penthouses and condominiums is an example of relative poverty.
While they can and do merge, the difference between these two types of poverty lies in perception of what is considered poverty versus what is necessary for survival.

Question 2

How does the incidence of poverty vary across demographic groups in the United States? Why do we see differences in poverty rates between racial and ethnic groups? Which groups are least likely to experience poverty and why?

Answer 2

It is important to know that no one is immune from poverty; all it takes is a freak storm or a mass act of nature to reduce a sprawling mansion to a pile of rubble. With that fact stated, it cannot be ignored that some groups of people seem to encounter poverty more frequently than others.
The reason why the incidence of poverty varies across demographics is based on a variety of factors. A person may possess a skill set or expertise in a field that is known for constant layoffs, for example. Being a single parent or having a large number of children to support are also known poverty factors because they limit the ability to financially adapt in the face of unforeseen and unfortunate circumstances.
With regards to ethnic groups, racial discrimination and differences in income due to job choice (or the limitations thereof) have been cited as the most prevalent factors contributing to poverty.
With all of these factors considered, it would stand to reason that, regardless of race, a person who is well-educated, versatile in job expertise, and able to make sound financial decisions (like supporting himself or herself for a time before deciding to raise a family) will be least like to experience an incidence of poverty that does not arise from circumstances beyond his or her control.

Question 3

Discuss the issues that determine the distribution of income in an economy. What has been the primary trend in the U.S. income distribution in recent years? Explain why we see this trend.

Answer 3

It is argued that the distribution of income in the U. S. could be more evenly applied. However, most economists point, it is not because of the need for incentives to motivate members of the workforce to be diverse, competitive, and able to generate new innovations, methods, and such.
Unfortunately, the possible benefits of a slightly unequal distribution of wealth are offset by the ever increasing gap in income inequality. This current trend is reflecting a shrinking middle class and a rise in families that are meeting or exceeding the requirements to be considered below the poverty line. A main reason that has been identified is the relocating or outsourcing of manufacturing jobs to other countries as a money-saving measure.

Question 4

What factors explain why some people earn very low incomes? Who controls these factors? Can governments through public policy influence all the factors that result in poverty?

Question 5

Explain why some critics claimed that the old welfare system created a "culture of poverty." Using economic reasoning, explain the negative incentive to work that results from cash assistance.

Question 6

Is it possible to provide people with income support without also creating a negative effect on their hours of work? Explain.

Question 7

How do the welfare reform measures address the criticisms of the old system? What problem confronts the new system?

Question 8

How does the Earned Income Tax Credit (EITC) help alleviate the problems of poverty for low-income families? Can the effect of the EITC be seen in the official poverty statistics? Explain.

Question 9

In what ways are the EITC and the negative income tax proposal alike? In what ways are they different? Do you think the United States will ever have a negative income tax system? Why or why not?

Question 10

Explain how a negative income tax differs from more traditional antipoverty programs.

Question 11

Are wage differentials a natural outcome of a market economy? Explain. Under what circumstances do wage differentials reflect discrimination?

Question 12

Discuss the economic costs of discrimination to individuals and to society. How does discrimination compound the problems of poverty?

Question 13

How has government attempted to reduce the incidence and effects of market discrimination in our society? In your opinion, have these efforts been successful? Why or why not?

Question 14

How did the recession of 2001 affect the outcomes of the welfare policy reforms initiated in the late 1990s? Have the reforms been successful? Defend your answer.

Question 15

Which would you favor in terms of an antipoverty tool: an increase in the minimum wage or an expansion of the Earned Income Tax Credit? Explain.

Question 16

If the average female who works full time year-round earns 80 percent of the salary of her male counterpart, does this imply that there is a 20 percent discrimination gap?

Question 17

Over the past several decades, income inequality has been growing in the United States. Do you see any relationship between this and the growth of movements like Occupy Wall Street? Consider the state of the United States if the middle class continues to shrink as it has been.