Poverty Lecture 4 Schiller, Chapter 3: Counting the Poor

Broad Outline, Chapter 3 Poverty: Drawing A Line--where should the line separating the poor from the nonpoor be drawn? –The Absolute Approach (p. 36) –The Relative Approach (p. 38) The Fuchs Point Whose Standard? –The Subjective Approach (deleted from 10th ed.)

Broad Outline, Chapter 3 The Official Poverty Line (p. 41) –The Concept of Minimum Needs (p. 41) –Monetary Measures--translating generic standards into dollars (p. 42) –Hardship Indexes (p. 43)

Broad Outline, Chapter 3 Poverty Thresholds (p. 44) –The CEA Line (p. 44) Family Size –The SSA Index (p. 45) equivalence scales: a means to allow for comparisons of the poverty status of families of different sizes and compositions

Broad Outline, Chapter 3 –The Official Poverty Index (p. 46) Inflation Adjustments (p. 46) Declining Relative Adjustments (p. 47) –What standard of living is implied by the official poverty budgets (lines)? Hard Choices (p. 47) –Schiller’s answer to the above question: “Every day a poor person or family must choose between an adequate diet of the most economic sort and some other necessity because there is never enough money to have both.” Cultural Context (p. 49) –“The Official Poverty Line express only a common and contemporary view of what is too little.”.

Broad Outline, Chapter 3 The Number of Poor People (p. 49) –The Official Poverty Count (p. 50) –The Poverty Rate--can you calculate it? –How Poor? (p. 51) Income to needs ratios The Poverty Gap (p. 51)

Broad Outline, Chapter 3 Measurement Problems (p. 51) –Understates the number of poor (p. 52) poverty line for a family of 4 as a percent of median income –1963: 50 percent –2001: 34 percent Food multiplier should be 5, not 3. –Overstates the number of poor (p. 52) In-Kind Income excluded –Is a dollar of in-kind transfers equal to a $1?

Broad Outline, Chapter 3 –Underreporting (p.55) How should we value the material possessions of the poor? –Income Mobility (p. 56) Is the accounting period too long or too short? –The Uncounted (homeless) Poor (p. 57) –Latent Poverty (p. 59) The number of poor removed from poverty by any one transfer program is dependent on the order in which transfers from various sources are added to income. –The Call for Revision (p. 60) NAS measure changed the composition of the poor

Questions from Chapter 3 in Schiller 1.What is the practical, policy importance of Schiller’s statement on p. 41, “In reality, one’s choice of a relative standard is likely to be influenced by the absolute standard of living implied, just as the choice of an absolute standard is likely to be affected by the degree of inequality and the general standards of living we observe”?

Answer to Question 1 1.No one can claim to solely support an absolute or a relative poverty measure. Once this admission occurs, the debate is about the dominance of the principles of adequacy over equality and vice versa.

Questions from Chapter 3 in Schiller 2.In what way, if at all is the Official Poverty Line a relative poverty line? –Selecting the bundle of goods and services that is “minimally adequate” involves subjective judgments that refer to the consumption habits of the non-poor. 3.What standard of living is implied by the official poverty budgets (lines)? Use the lives of Angie, Jewell, and Opal to answer this question.

Questions from Chapter 3 in Schiller 4.Could we eliminate poverty by transferring to each poor family an amount equal to it’s poverty gap? Explain. –Such a policy would create incentives for poor families to adjust their incomes so as to receive larger transfers and for other families to become poor.

Questions from Chapter 3 in Schiller 5.The NAS revised measure of poverty includes in-kind transfers and allows for child care expenses. How would these changes affect the composition of the poor? –There are fewer poor single-parent families and elderly persons, and more poor two-parent families.

Sen’s Capability Deprivation 1.What definition of poverty does Sen propose? –Why is measuring “lowness of income” inadequate as a measure of poverty?

Sen’s Capability Deprivation 3.Is it feasible to measure poverty using Sen’s definition? a)Human Poverty Index, 1)For definition see: b)Human Development Index (maps!) tries tries

Sen’s Capability Deprivation –How would Sen respond to the claims of some that by world standards, no Americans are poor?

Sen’s Capability Deprivation 4.What are the implications of Sen’s analysis for the formulation of policies to aid the poor? –Hint: consider the following quotation: “What the capability perspective does.... is to enhance the understanding of the nature and causes of poverty and deprivation by shifting primary attention away from the means [income].... to ends and.... and to the freedom’s to be able to satisfy these ends.” (p. 90)