The taxes used to collect money for the poor cause deadweight loss, even though the redistribution of income from the rich to the poor reduces income inequality. The tools of economics do a lot to inform the debate about that subject. In this module, we look at the issue of poverty and how public policy can affect it.

Every U.S. president has promised to reduce poverty over the past 75 years. Lyndon Johnson declared a "war on poverty" in 1964, creating a number of new programs to help the poor. A large part of the U.S. is covered by antipoverty programs.

Any definition is arbitrary.

Consid poor families have incomes that fall below the poverty threshold.

The threshold for poverty depends on the size of the family.

The poverty threshold for a household consisting of two adults and two children was $23,850 in 2014; for an adult living alone it was $11,670.

You might expect the percentage of the population living below the poverty threshold to decline as the economy grows and average incomes rise.

The percentage of the population with incomes below the early 1970s fell steeply during the 1960s. It has fluctuated up and down with no clear trend since then.

A stereotype of poverty in America is an African-American or Hispanic family with no husband present and the female head of the household unemployed at least part of the time. African-Americans and Hispanics are more likely to be poor than female-headed households. Most of the poor don't fit the stereotype.

About one in seven Americans were living in poverty in the year 2012 About one-quarter of the poor were black and Hispanic. The poverty rates for African-Americans and Hispanics were higher than the national average. The poverty rate for non-Hispanic Whites was 9.7%.

There is a correlation between poverty and family makeup. Female-headed fami lies with no husband present had a very high poverty rate. About 39% of poor families were married couples, but the poverty rate was only 6.3%.

The data shows an association between poverty and lack of employment. Full-time workers are more likely to be poor than other workers. 85.4% of the poor in 2012 were adults who worked part time or not at all.

Benefits such as health plans, paid vacation days, and retirement benefits are absent from part-time work, and it pays a lower hourly wage than comparable fulltime work.

People with higher incomes are more likely to be poor. In 1979 the average hourly wage of men with a college degree was 38% higher than that of men with only a high the multiple choice section of the school diplomas; by the year 2013, the "college premium" had increased to 83%.

Two-thirds of Mexican-born male workers in the United States earn less than native-born men because they have not graduated from high school. Although discrimination is less pervasive today than it was 50 years ago, it still poses a barrier to advancement for many Americans. Whites with comparable levels of education are more likely to be employed than non-Whites. Studies show that African-American males are discriminated against by employers in favor of Whites, African-American women, and Hispanic immigrants. Men with similar qualifications earn higher incomes than women.

Bad luck is an important source of poverty. A wage-earner losing a job or a family member falling ill can cause a family to be impoverished.

Children are more vulnerable to the consequences of poverty. In the United States, more than 20% of children live in poverty. Poverty is associated with a lack of access to health care, which can lead to further health problems that can erode the ability to attend school and work later in life. Poor families often move because of affordable housing, disrupting school and work schedules.

Children raised in poverty are more likely to suffer from lifelong learning disabilities. American children growing up in poverty don't have an equal chance at the beginning of their lives. Talented children from poor families are not likely to finish college.

The students took a mathematics test that the study used as an indicator of their innate ability, and the study also scored them based on their parents' income and employment. Only 29% of students who were in the highest- scoring 25% on the test finished college, even though their parents were of low status.

One of the most vexing problems to significant social, intellectual, one program whose participants are facing any society is how to break and financial advantages for kids by age 20 were 26% more likely to finish high school.

They are more likely to get a job and not attend pre school. To earn a high salary later in life, the observed should be unemployed or underemployed.

The chronic health problems are the result of a large study.

Early childhood intervention has looked at early-childhood interven providing high-quality pre school offered some hope of breaking the tion programs from a dollars and education to every American cycle. A 2006 study by the RAND cents perspective found that high-quality to $7 in benefits for every $1 spent GDP, the total value of a country's early-childhood programs that focus on early-childhood intervention domestic output. Re resenting over 3 million more jobs was pointed out in the study.

The children of high-status parents had a 70% chance of finishing college even if they had low test scores. It's important to know that poverty is self-perpetuating and that the children of the poor start at such a disadvantage that it's hard for them to achieve a better life.

The United States is rich. In 2012 the average US household had an income of more than $71,000. The answer is that many households earn less than the average, while others earn more.

The first and second quintiles contain households whose income puts them between the 20th and 40th percentiles, and so on. 5% of families have the highest incomes according to the Census Bureau.

The range of incomes is shown in the second column. In 2012 the bottom quintile had households with annual incomes of less than $20,599; the next quintile had households with incomes between $20,599 and $39,764; and so on. The third column shows the average income for each group, ranging from $11,490 for the bottom fifth to $318,052 for the top 5 percent. The percentage is shown in the fourth column.

The two numbers do not lie in the middle of the measure the same way. Economists ask people income distribution.

The tycoon's income increases the average, but the median income does not.

You don't need to calculate the Gini distributed. The richest fifth of families have an average income of more than three times that of families in the middle, and the lowest fifth of families have an average income of less than a quarter of the Gini coefficients.

Since 1980, the distribution of income in America has become more equal, making it a significant political issue.

The poor would be 100% if income were equally distributed.

The line of equality is below the Lorenz curve.

The Lorenz curve is below the line of equality because the data in Table 78.2 shows that the poor get less than the rich.

A single number that summarizes a country's level of income inequality is convenient.

If all of a country's income went to just one person, the Gini coefficient would be 1--the level it would attain.

Inter national comparisons can be used to get a sense of what Gini coefficients mean in practice.

Africa and Latin America have the highest levels of income inequality.

Compared to other wealthy countries, the United States has less data availability.

The most popular explanation is rapid the past century, the United States since. The longer-term data shows that technological change has creased the demand for highly skilled workers more rapidly than falling inequality during the 1930s. The demand for other workers in the late 19th century led to an era of stable inequality and a rise in the wage gap after World War II.

Growing international trade may happen in the future.

Between the late United States and the end of World War II, the Detailed U.S. data on income by ity declined sharply. Products from low-wage countries were only available in 1947.

From 1980 to 2012 may be the year of rising immigration. The Great Compression is another source. Period grants have lower education levels during World War II, and on average, there is a clear difference between the two. In the first period, the income of the U.S. government grew at a higher rate than native-born workers because of the special controls on wages and the supply of low- skilled labor. Evidence shows that low-skilled wages are depressing.

All of the explanations fail to account for one key feature: the board. It was easier for employers to raise wages after 1980, as the rise in inequality doesn't grow as quickly at the top as it does at the bottom. To raise executive salaries. It's puzzling that the equality of highly educated work has increased since 1980. Inflation-adjusted by wartime controls lasted themselves. The school income for the top quintile rose for decades after the controls of teachers and business executives were removed, but it fell in 1946.

The data on income is available, but the distribution of teachers' salaries isn't. Pre-tax income has not. In 1947, economists used to estimate the share of income tax in America as if it were the same as it was in the 1920s. The panel shows how the effects of inequality are different than they were a generation ago.

It's not clear what caused the detailed data to be available since 1947. The change is intense.

Tables and figures were updated in 2012

Brazil has a Gini coefficients close to 0.6. Sweden has a Gini coefficients of 0.25, which is the most equal income distribution in Europe. The United States, with a Gini coefficients of 0.477, has high inequality, but it isn't as bad as in Latin America.

Some people don't share in the prosperity of a nation because of high income inequality. It's possible that the U.S. poverty rate hasn't fallen in 35 years even though the country as a whole has become wealthier. In Latin America, extreme inequality is associated with political instability because of the tension between a wealthy minority and the rest of the population.

The true degree of inequality in America is overstated in Table 78.2 for a number of reasons. The incomes of many individual families fluctuate over time, whereas the data represent a snapshot for a single year. Many of the people near the bottom are having a bad year and many of the people at the top are having a good one.

Their incomes will return to a more normal level over time. A table showing average incomes within quintiles over a longer period would not show as much inequality. Most people earn less in their early working years than they will later in life, and then experience a drop in income when they retire. The table that compares families of similar ages shows more inequality than the table that combines young workers, mature workers, and retirees.

There is a lot of genuine inequality in the United States. It's not good news that families' incomes vary from year to year. The year-to-year fluctuations are part of a problem that worries even affluent families.

Reducing economic insecurity is one of the reasons for the welfare state. When a family member loses a job or is forced to take a new job that pays less, there is a risk of economic insecurity. According to recent estimates, about one in six American families will see their income cut in half. The percentage of people who find themselves below the poverty threshold for at least one year over the course of a decade is several times higher than the percentage of people below the poverty threshold in any given year.

A family can face a surge in expenses even if it doesn't face a loss in income. A medical problem that requires expensive treatment is the most common reason for surge. Many Americans have health insurance that covers a large share of their expenses, but a lot of them don't have health insurance or rely on the government for coverage. 42 million Americans were uninsured last year. In the year 2010, several major provisions of theAffordable Care Act went into effect, with the aim of expanding health insurance coverage to an additional 24 million citizens.

Means-tested programs only offer benefits to families or individuals whose incomes fall below a certain threshold.

By contrast, non-means-tested programs give their benefits to everyone, although they tend to reduce income inequality by increasing the incomes of the poor by a larger proportion than the incomes of the rich.

The numbers suggest services.

TANF is the main source of monetary aid in the United States. The program is only available to poor families with children and only for a limited period of time.

The older program was accused of creating perverse incentives for the poor and encouraging family break up.

TANF has time limits so welfare recipients must eventually seek work. TANF is a small part of the modern U.S. welfare state.

Other means-tested programs are less controversial.

Americans with no other source of income are unable to work.

The Supplemental Nutrition Assistance Program helps low-income families buy food.

The Supplemental Nutrition Assistance Program income is provided to millions of workers by the Earned Income Tax Credit. It has become more generous because traditional helps those with low-incomes put food on the welfare. Only workers who table are given an incentive to work. Purchases are eligible for the EITC if they are made using an electronic earn income. As an incentive to work more, benefits transfer card that works like a debit over a certain range of incomes, the more a worker earns, the higher the card but can only be used to purchase food.

EITC payments were equal to 40% of earnings for married couples with two children earning less than $13,000 per year. The payments were slightly lower for single-parent families. The EITC is phased out at higher incomes.

The largest program in the U.S. is Social Security. Workers who become disabled and family members of workers who die receive survivor benefits. The Social Security portion of the payroll tax is used to pay for Social Security benefits. If you earn more than the maximum amount subject to Social Security taxes during your working years, you will receive more in retirement. Benefits aren't strictly proportional to earnings. Instead, they're determined by a formula that gives high earner more than low earner, but with a sliding scale that makes the program more generous for low earner.

Because most senior citizens don't receive pensions from their former employers, and most don't own enough assets to live off the income from their assets, Social Security benefits are an important source of income for them.

Unemployment insurance is one of the key social insurance programs. It gives workers who lose their jobs a portion of their previous salary until they find a new job or until 26 weeks have passed. Employers pay a tax on unemployment insurance.

The U.S. welfare state has the effect of redistributing income from some people to others.

If Americans stopped receiving Social Security checks, they would still be working. Estimates are only a partial indicator of the true effects of the welfare state. The results are striking.