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Any poverty line will be somewhat arbitrary, and it is useful to have a poverty line whose basic definition does not change much over time. If Congress voted every few years to redefine what poverty means, then it would be difficult to compare rates over time. After all, would a lower poverty rate mean that the definition had been changed, or that people were actually better off? Government statisticians at the U.S. Census Bureau have ongoing research programs to address questions like these.
Wages are influenced by supply and demand in labor markets, which can lead to very low incomes for some people and very high incomes for others. Poverty and income inequality are not the same thing. Poverty applies to the condition of people who cannot afford the necessities of life. Income inequality refers to the disparity between those with higher and lower incomes. The poverty rate is what percentage of the population lives below the poverty line, which is determined by the amount of income that it takes to purchase the necessities of life. Choosing a poverty line will always be somewhat controversial.
In country A, the population is 300 million and 50 million people are living below the poverty line. What is the poverty rate?
In country B, the population is 900 million and 100 million people are living below the poverty line. What is the poverty rate?
Ebeling, Ashlea. 2014. “IRS Announces 2015 Estate And Gift Tax Limits.” Forbes. Accessed March 16, 2015. http://www.forbes.com/sites/ashleaebeling/2014/10/30/irs-announces-2015-estate-and-gift-tax-limits/.
Federal Register: The Daily Journal of the United States Government. “State Median Income Estimates for a Four-Person Household: Notice of the Federal Fiscal Year (FFY) 2013 State Median Income Estimates for Use Under the Low Income Home Energy Assistance Program (LIHEAP).” Last modified March 15, 2012. https://www.federalregister.gov/articles/2012/03/15/2012-6220/state-median-income-estimates-for-a-four-person-household-notice-of-the-federal-fiscal-year-ffy-2013#t-1.
Luhby, Tami. 2014. “Income is on the rise . . . finally!” Accessed April 10, 2015. http://money.cnn.com/2014/08/20/news/economy/median-income/.
Meyer, Ali. 2015. “56,023,000: Record Number of Women Not in Labor Force.” CNSNews.com. Accessed March 16, 2015. http://cnsnews.com/news/article/ali-meyer/56023000-record-number-women-not-labor-force.
Orshansky, Mollie. “Children of the Poor.” Social Security Bulletin . 26 no. 7 (1963): 3–13. http://www.ssa.gov/policy/docs/ssb/v26n7/v26n7p3.pdf.
The World Bank. “Data: Poverty Headcount Ratio at $1.25 a Day (PPP) (% of Population).” http://data.worldbank.org/indicator/SI.POV.DDAY.
U.S. Department of Commerce: United States Census Bureau. “American FactFinder.” http://factfinder2.census.gov/faces/nav/jsf/pages/index.xhtml.
U.S. Department of Commerce: United States Census Bureau. “Current Population Survey (CPS): CPS Table Creator.” http://www.census.gov/cps/data/cpstablecreator.html.
U.S. Department of Commerce: United States Census Bureau. “Income: Table F-6. Regions—Families (All Races) by Median and Mean Income.” http://www.census.gov/hhes/www/income/data/historical/families/.
U.S. Department of Commerce: United States Census Bureau. “Poverty: Poverty Thresholds.” Last modified 2012. http://www.census.gov/hhes/www/poverty/data/threshld/.
U.S. Department of Health&Human Services. 2015. “2015 Poverty Guidelines.” Accessed April 10, 2015. http://www.medicaid.gov/medicaid-chip-program-information/by-topics/eligibility/downloads/2015-federal-poverty-level-charts.pdf.
U.S. Department of Health&Human Services. 2015. “Information on Poverty and Income Statistics: A Summary of 2014 Current Population Survey Data.” Accessed April 13, 2015. http://aspe.hhs.gov/hsp/14/povertyandincomeest/ib_poverty2014.pdf.
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