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Unit 6 Macroeconomics: GDP and Economic Challenges Chapters 13.3

Unit 6 Macroeconomics: GDP and Economic Challenges Chapters 13.3. Economics Mr. Biggs. Poverty. Despite the success of the American economy, many Americans lack sufficient food, clothing, and shelter. The Poor Economists analyze Census

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Unit 6 Macroeconomics: GDP and Economic Challenges Chapters 13.3

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  1. Unit 6 Macroeconomics: GDP and Economic Challenges Chapters 13.3 Economics Mr. Biggs

  2. Poverty Despite the success of the American economy, many Americans lack sufficient food, clothing, and shelter. The Poor Economists analyze Census data to reveal important characteristics, such as how many families and households live in poverty.

  3. Poverty Threshold • In 2009, the poverty threshold was about $15,000 for a single parent under 65 years old and about $22,000 for a family of four with two children. • Poverty threshold - The income below • which income is insufficient to support • a family or household. • The Poverty Rate • Poverty rate - The percentage of people • who live in households with income below • the official poverty threshold. • African American and Hispanics have twice the poverty rate than white and Asian Americans. • Single mothers have six times the poverty rate than two-parent families. • People in inner cities have double the poverty • rate than people who live outside the inner city. • Children are the largest age group living in poverty.

  4. Causes of Poverty • A family is poor when the adults in the family • fail to earn enough income to provide for • its members’ basic needs. Lack of Education High-school graduates earned about 1/3 more than dropouts, and college graduates earned about three times as much. Location Lack of transportation to good jobs in the suburbs leads to inner city residents earning less. Racial and Gender Discrimination White workers generally earn more than minority workers, and men generally earn more than women. This typeof discrimination is diminishing.

  5. Economic Shifts People who lack human capital are often the “last hired and the first fired”. Shifts in Family Structure The divorce rate and percentage of children born to unmarried parents has risen significantly since the 1960s causing more single parent homes with higher poverty rates. Income Distribution • In 2008, the real median household • income was about $51,000. • This is a misleading number due • to income distribution. • Income distribution - How the • nation’s total income is distributed • among its population.

  6. Income Inequality • Economists rank households by income and then divides them by fifths (quintiles). • The richest fifth earns more than 13 • times the income of the poorest fifth. • The Lorenz Curve - The curve that • illustrates income distribution. • Complete income equality is • represented by a straight line • running diagonally across the graph. • In 1999, the distribution of income • was not equal. • The poorest fifth earned 3.6% of the nation’s total income (if equal, it should be 20%). • The richest fifth earned 49.6% of the nation’s total income (if equal it should also be 20%). • The greater the difference between the curves, the greater the income inequality.

  7. Income Gap • In 1999, the richest fifth earned almost as much income (49.6%) as the bottom four-fifths combined (50.4%). • Key factors in the income gap are: • Differences in skill and education • Inheriting money or a business • The income gap between poor and rich continues to widen. Antipoverty Policies • Recent antipoverty programs include: • Enterprise zones • Job training • Employment assistance • Welfare reform

  8. Enterprise Zones • Enterprise zones - Areas where companies can relocate free of certain local, state, and federal taxes. • The idea is that enterprise zones can help provide jobs in inner cities. • For example, select parts of Chula Vista, National City, and Downtown San Diego. • Employment Assistance • Federal and state governments have developed job training programs to deal with workers who lack skills.

  9. Welfare Reform • Aid to Families with Dependent Children (AFDC) was replaced with a program called Temporary Assistance for Needy Families (TANF) which set a 5 year limit on benefits. • The federal government now gives states block grants to implement programs to move most poor adults from welfare to employment. • Block grants - Funds given to states in lump sums. • Workfare - A program requiring work in exchange for temporary assistance. • Welfare reform has the potential to reduce poverty by providing labor skills and access to a steady, adequate income.

  10. The End

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