Poverty and income Inequality

Market Failure: Poverty and income Inequality

Listed below are several summary statements from the 2010 Census report:

1. The official poverty rate in 2010 was 15.1 percent—up from 14.3 percent in 2009. This was the third consecutive annual increase in the poverty rate. Since 2007, the poverty rate has increased by 2.6 percentage points, from 12.5 percent to 15.1 percent.


2. In 2010, 46.2 million people were in poverty, up from 43.6 million in 2009—the fourth consecutive annual increase in the number of people in poverty.

3. Between 2009 and 2010, the poverty rate increased for non-Hispanic Whites (from 9.4 percent to 9.9 percent), for Blacks (from 25.8 percent to 27.4 percent), and for Hispanics (from 25.3 percent to 26.6 percent). For Asians, the 2010 poverty rate (12.1 percent) was not statistically different from the 2009 poverty rate.¹


4. The poverty rate in 2010 (15.1 percent) was the highest poverty rate since 1993 but was 7.3 percentage points lower than the poverty rate in 1959, the first year for which poverty estimates are available.


5. The number of people in poverty in 2010 (46.2 million) is the largest number in the 52 years for which poverty estimates have been published.


6. Between 2009 and 2010, the poverty rate increased for children under age 18 (from 20.7 percent to 22.0 percent) and people aged 18 to 64 (from 12.9 percent to 13.7 percent), but was not statistically different for people aged 65 and older (9.0 percent).²

Source: http://www.census.gov/hhes/www/poverty/data/incpovhlth/2010/highlights.html

Required:

Select any four of the six summary statements and explain in detail the significance and possible causes of each item. Using scholarly sources and or the Internet, Identify possible economic policies that may explain these items and/or those which could be used to deal with the problems or situations described.

Deliverables:

1. Prepare a 5-10 page Microsoft Word document that addresses the above-noted concerns and meets APA standards.

2. 
Create a 5-12 slide PowerPoint presentation that summarizes the findings of your report.

Notes from class

Inequality of income is present in every country in the world, but in the U.S., this inequality has been on the rise since the 1970s. Wealth disparity is more pronounced than income disparity. The top 1% of all households in the U.S. own 38% of all wealth.

When we consider the top 20%, they own as much as 83% of all wealth. The inequality is more pronounced when we exclude owner-occupied housing—1% of families hold half of all non-home wealth.

The rich are getting richer because the rich can invest and re-invest in the economy, increasing their wealth. The middle class and poor barely have enough to save for rainy days and invest in their future.

Several variables determine income and wealth in the U.S. Education, ethnicity, race, opportunities, gender, age, and type of household all determine the income of a person and affect the inequality of income. Another reason for growing inequality of income is minimum wages. Minimum wages have fallen by about 35% in real terms since their peak in 1968. This adds to income disparity and many people who earn minimum wages must seek second jobs for survival.

One issue which arises as a result of income distribution is the issue of “poverty” and its causes and consequences. Poverty is defined as a situation whereby an individual or household does not have the means to satisfy basic needs such as food, clothing, and shelter. Numerous factors contribute to the incidence of poverty. In the U.S., the poor are found throughout our country. They are of all ethnicities, races, ages, and backgrounds. 

Because considerable poverty exists in the U.S., the U.S. Government plays a very active role in determining and implementing public programs which address this issue. One method is by redistributing income. Progressive income taxes are one way of doing this. Other ways include income maintenance programs through social security and welfare programs, and subsidized services, especially in education and healthcare. Effective redistribution reduces poverty and helps the poor and middle class survive tough economic times.

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