Term Paper: The Economics of Domestic Poverty

December 11, 2014

Table of Contents:
Page 2-5: Evaluation of poverty rate and suggested improvements
Page 6-8: Causes of U.S income inequality
Page 9-10: Describe and evaluate the welfare reform efforts of the past decade. What measures are still needed?
Page 10-12: Scriptures View On Poverty
Page 13-14: Bibliography

Evaluation of poverty rate and suggested improvements
Who are the poor in United States? The World Bank defines the poor as those who live on less than $2 a day. In the United States, however the most common way of measuring poverty is if a family’s income falls below the official “threshold of poverty”. The United States Census Bureau defines those being below the threshold of poverty as, “households who do not have a sufficient income to meet minimal food and basic needs.” The poverty threshold varies between households with more or less occupants and members under the age of 18 or over the age of 65. For example a household with one member under the age of 18-65 in 2014 has a weighted threshold average of 12,119 per year, while a household with one member over the age of 65 have a threshold of 11,173 (Census Bureau, 2014).
U.S. poverty was first measured in the 1960’s through the Social Security Administration1, under the help of economist Mollie Orshansky. Orshansky helped establish the official poverty threshold, by using the cost of the Department of Agriculture’s economical food plan. She estimated families in United States spent on average a third of their income on food and, thus conceived the poverty threshold should be three times the of minimal food requirements for adequate living. In 1969, the U.S. government adopted her poverty threshold as the official statistical definition of poverty (Kolesnikova and, Liu 2012),
One very disconcerting finding of the poverty threshold is it has seen little to no improvement overtime. In 1973 we had a poverty level of 11.1%, which is slightly lower compared to 2005 of 12.6%. Economists conversely have found many problems with the official measure of poverty especially with comparing poverty rates between decades (Eberstadt, 2006). The official poverty threshold most importantly fails to include changes in: food prices, higher standards of living, and government in-takes services.
The official poverty threshold is based on three times food consumption, however food prices are not stagnated and have changed drastically over the years. Orshansky found the poorest fifth of American families were forced to devote nearly 30 percent of their expenditures to buying food, however in 2004 the poorest fifth of American families spent only one-sixth on food. In the 1960’s hunger and undernourishments were common problems regarding those living in the poverty threshold, however ironically today we face the opposite issue. Most poor households today in fact eat too much, which is why government programs like “Lets Move!” have rose in order to reduce obesity (Let’s Move, 2014). Eight percent of Children in low-income homes for example were surveyed by the Centers for Disease Control to be underweight; on the other hand in 20014 the rate was below 5 percent. The lower percent spent on food per families, means that Orshansky’s multiplier of three used for calculating the poverty threshold has become outdated and the poverty threshold needs to adjust accordingly (Kolesnikova and Liu, 2012). Food is one of the many improvements provided over the years. Housing in 2004 for example had only six percent of the country's poor households living in crowded dwellings2 compared to 25 percent in 1970 (Census Bureau, 2014). Poor households have many new modern luxuries such as telephone service or televisions. According to the Department of Energy survey in 2001, “most poverty households have microwaves, VCRs or DVDs, and cable television.” The poor have also seen improved health records over the years. The CDC's National