THE POVERTY RATE
A commonly used gauge of the distribution of income is the poverty rate poverty rate is the percentage of the population whose family income falls below an absolute level called the poverty line The poverty line is set by the federal government at roughly three times the cost of providing an adequate die This line is adjusted every year to account for changes in the level of prices, and it depends on family size To get some idea about what the poverty rate tells us, consider the data ‘for 2003. In that year median family had an income of $52,680, and the poverty line for a family of four was $18,810. The poverty rate was 12.5 percent. In other words, 12.5 percent of the population were members of families with incomes below the poverty line for their family size.
Figure 1 shows the poverty rate since 1959, when the official data begin. You can see that the poverty rate fell from 22.4 percent in 1959 to a low of 11.1 percent in 1973. This decline is not surprising, for average income in the economy (adjusted for inflation) rose more than 50 percent during this period Because the poverty line is an absolute rather than a relative standard, more families are pushed above the poverty line as economic growth pushes the entire income distribution upward. As John F Kennedy once
put it, a rising tide lifts all boat Since the early 1970s, however, the economy’s rising tide has left some boats behind Despite continued growth in average income, the poverty rate has not declined below the level reached in 1973. This lack of progress in reducing poverty in recent decades is closely related to the increasing inequality we saw in
Table 2. Although economic growth has raised the income of the typical family, the Increase in inequality prevented the poorest families from sharing in this greater economic prosperity Poverty is an economic malady that affects all groups within the population, but it does not affect all rounds with equal frequency Table 4 shows the poverty rates for several groups, and it reveals three.
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