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Economic Challenges Chapter 13 Section 3 Poverty Economic Challenges Objectives: Define who is poor, according to government standards. Describe the causes of poverty. Analyze the distribution of income in the United States. Summarize government policies intended to combat poverty.

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Economic Challenges

Chapter 13 Section 3


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Economic Challenges

  • Objectives:

    • Define who is poor, according to government standards.

    • Describe the causes of poverty.

    • Analyze the distribution of income in the United States.

    • Summarize government policies intended to combat poverty.

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Economic Challenges

  • What images come to mind when you think of poverty?

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  • Third World Countries

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Economic Challenges

  • Paris Hilton in Poverty

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Economic Challenges

  • Homelessness

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  • Poverty is a Homeless person

  • Poverty is a poorly clothed child

  • Poverty is a person living in a run down shack

  • Poverty is not having enough to eat

  • Poverty is not having money

  • Poverty is the unequal distribution of income in the United States

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  • The Poor:

    • The US Bureau of Census help determinehow many families and individuals live inpoverty.

    • The government says that a poor family is one whose total income is less than the amount required to satisfy the family’s minimum needs.

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  • Poverty Threshold – the income level below which income is insufficient tosupport a family or household.

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  • Poverty Threshold or Poverty Line

    • A single parent under the age of 65 with one child was $ 11,869 {in 2000}.

    • For a family of four with two children it was $ 17,463 {in 2000}.

    • If a family’s total income is below the poverty threshold, everyone in the family is counted as poor.

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Economic Challenges

  • The Poverty Rate:

    • It is the percentage of people who live in households with income below the official poverty threshold.

    • Poverty rates differ sharply by different groups.

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Economic Challenges

  • Race & Ethnic Origin

    Poverty rate is greater among Hispanics & African Americans.

  • Type of Family

    Families with a single mother have a poverty rate almost six times greater than that of a two-parent family.

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Economic Challenges


The percentage of children living in poverty is significantly larger than that for any other age group.

4. Residence

People who live in the inner city have double the poverty rate of those who live outside the inner city. People who live in rural areas also have a higher poverty rate.

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  • Causes of Poverty

  • Economists agree that poverty and lack of income go hand in hand.

  • There are other characteristics that contribute to poverty.

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1. Lack of Education

  • Median income of high school drop-outs in 2000 was $ 20,724 (this was just above the poverty line).

  • High school graduates earn 1/3 more than a drop out.

  • College grad earns about 3x as much as a drop out.

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2. Location

  • Many people in the inner cities do not own a car, but use mass-transit to get around town.

  • They earn less money than people living outside of the inner city areas,

  • People in rural areas also have similar problems as those in the inner cities.

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Economic Challenges

3. Racial and Gender Discrimination

  • White working men usually earn more than women and minorities.

  • Economists feel that this type of discrimination is diminishing as a fast rate.

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4. Economic Shifts

  • People who lack education and skills are not very productive workers.

  • For this reason, they are often the “last hired and first fired”

  • They get hired when the economy is expanding and get laid off when the economy slows down.

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5. Shifts in Family Structure

  • The divorce rates have risen significantly since the 1960s, as have the number of children born to unmarried parents.

  • The shift tends to result in more single-parent families and more children living in poverty.

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  • Income Distribution

    • In 2000, the median income in the US was $ 40,816

    • Income distribution – how the nation’s total income is distributed among its population.

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  • Income Inequality

    • The US has millions of poor people, but it has one of the highest per capita GDP.

    • Food Stamps – are government-issued coupons that recipients exchange for food.

    • Income Distribution

      Bottom 1/5 = 3.6% Second Fifth = 8.9%

      Third Fifth = 14.8% Fourth Fifth = 23.0

      Highest Fifth = 49.6%

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  • Income Gap – The wealthiest fifth of the American population earn as much as the other 80% of the population.

  • What factors contribute to this:

    • Differences in Skills and Education

    • Inheritances – get large sums of money from family members.

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  • Antipoverty Policies:

    • The federal government has many programs designed to reduce poverty.

    • Spent mainly as cash assistance, education, medical benefits, noncash benefits (food stamps and subsidized housing).

    • Many of these programs have drawn criticism from those who say that much of the money is wasted and that the programs do not help people.

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  • Some Reforms of the System;

    • Enterprise Zones – areas where companies can locate free of certain state, local, and federal taxes. Give residents of the area a chance at a job.

    • Employment Assistance – job-training programs to help people get the training they need to get a better paying job.

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  • Welfare Reform – Changes to the current programs that tried to get people off the welfare system instead of keeping them on it.

  • Most money is in the form of block grants given to the states to distribute as they see fit.

  • States have to design programs that get people off welfare and into the work force.

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  • Aid to Families with Dependent Children has been replaced by TANF – Temporary Assistance for Needy Families. This program has a set 5-year limit for people to receive benefits. After that time period, they are out of the program.

  • Most people on TANF, shift from welfare to workfare – a program requiring work in exchange for temporary assistance.