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Poverty
lack of freedom to have or to do basic things that you value
Absolute poverty
adequacy of resources relative to an unchanging standard
Relative poverty
adequacy of your resources relative to others in your society
Poverty rate
fraction of people whose family income is less than the official poverty line
Poverty line
an income level below which a family is defined to be in poverty, varies by family structure, adjusted for inflation ONLY
Official poverty measure (OPM)
census bureau, income based (wages, salaries, social security, interest, dividends, pension), multiples by thrifty food plan by 3, assumed all people residing together who are related marriage, birth or adoption share income, does not vary geographically
Supplemental poverty measure (SPM)
starts with income, then adds other non-cash benefits (tax credits, SNAP, WIC, school lunch, housing and energy subsidies)
Precipitating factors of poverty
divorce, childbirth, losing a job
Poverty metrics
higher poverty among single parents and racial/ethnic minorities, children are most likely to experience poverty, least likely to experience poverty are elderly and full-time workers, long-term poor are a small share of those entering poverty and large share of those in poverty are in for short period of time
Measures of inequality
income inequality, wealth inequality, permanent income inequality, spending inequality, intergenerational inequality
Income
money you receive in a period of time, such as a year
Wealth
all the assets, including savings, cars, and houses, that you currently have
Permanent income
average lifetime income
Quintile
group that contains 1/5 of the population
Lorenz curve
curve that plots for any given percentage of the population, the proportion of total income earned by that particular group of people
Line of perfect equality
line of income distribution on a Lorenz Curve if everyone had equal earnings
Gini coefficient
number that measures a society’s income inequality, based on how income is distributed across quantities, ranges from 0 (perfect equality) to 1 (perfect inequality), doesn’t tell about poverty
Utilitarian
promote greatest happiness for greatest number
Rawlsian perspective
behind the veil of ignorance, consider your perspective before you know what circumstances you’ll be born into
Benefit of redistribution
moves money to those who benefit more from it
Cost of redistribution
moving money is costly
Ways of redistributing wealth
tax policy, social insurance programs (social security, medicare, medicaid)