Placing the Poverty Line

by Elaine Schwartz    •    Sep 15, 2011    •    337 Views

Any family that earns less than 3 times the annual cost of a nutritionally adequate diet is below the poverty line.

But should we agree with the placement of the line?

If we say that poverty is “relative deprivation, ” then a definition could take us to those who have less than the average household. In 2010, the U.S. average household had 2.3 cell phone subscriptions and 2.9 TVs.

Other considerations could raise or lower household income totals. Maybe we should include in the annual income total such lower income entitlements as housing subsidies, tax credits, and food stamps. Or, we could subtract childcare. In addition, how do we recognize income mobility and the temporary character of poverty for most households? According to a measure from the late 1990s, 2% of the population was poor for 2 years or more.

The Economic Lesson

The highest since the early 1990s, according to the US Census Bureau, during 2010, 46.2 million people lived in poverty. A family of 4 earning less than $22,314 was below the poverty line while for a family with 3 children under 18, the number was $26,023. Looking at someone over 65 living alone in 2010, the poverty line was $10,458.

Slicing the US income pie, the bottom 40% earned 11.8% of all pretax income. By contrast, the top 20% had a 50.2% share of the nation’s pretax income. Is income inequality good or bad? You might look at this article.

An Economic Question: Why is it important for the United States to identify a poverty line?

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