Inequality, Poverty, and Discrimination

Read this chapter for a more detailed look at the topic of income inequality and discrimination in the labor markets as these are real examples of market failures. Attempt the "Try It" problems at the end of each section before checking your answers.

3. The Economics of Poverty

3.2. The Demographics of Poverty

There is no iron law of poverty that dictates that a household with certain characteristics will be poor. Nonetheless, poverty is much more highly concentrated among some groups than among others. The six characteristics of families that are important for describing who in the United States constitute the poor are whether or not the family is headed by a female, age, the level of education, whether or not the head of the family is working, the race of the household, and geography.

Figure 19.4 "The Demographics of Poverty in the United States, 2010" shows poverty rates for various groups and for the population as a whole in 2010. What does it tell us?

  1. A family headed by a female is more than five times as likely to live in poverty as compared to a family with a husband present. This fact contributes to child poverty.
  2. Children under 18 are about two times more likely to be poor than "middle-aged" (45–64) persons.
  3. The less education the adults in the family have, the more likely the family is to be poor. A college education is an almost sure ticket out of poverty; the poverty rate for college graduates is just 4.7%.
  4. The poverty rate is higher among those who do not work than among those who do. The poverty rate for people who did not work was about nine times the poverty rate of those who worked full time.
  5. The prevalence of poverty varies by race and ethnicity. Specifically, the poverty rate in 2010 for whites (non-Hispanic origin) was less than half that for Hispanics or of blacks.
  6. The poverty rate in cities is higher than in other areas of residence.

The incidence of poverty soars when several of these demographic factors associated with poverty are combined. For example, the poverty rate for families with children that are headed by women who lack a high school education is higher than 50%.

The new, more broad-based Supplemental Poverty Measure shows an increase of only 0.1 compared to the official poverty rate measure, but bigger differences for different segments of the population. For example, a smaller percentage of people under the age of 18 are poor according to the supplemental poverty measure (18.2% versus 22.5%), while a larger percentage of those over 64 years of age are considered poor (15.9% versus 9.0%). The new measure also shows lower poverty rates among blacks, renters, people living outside metropolitan areas, and those covered by only public health insurance. Other groups show the same or higher poverty rates.

Figure 19.4 The Demographics of Poverty in the United States, 2010

Figure 19.4

Poverty rates in the United States vary significantly according to a variety of demographic factors. Panels (a) through (f) compare poverty rates among different groups of the U.S. population. The data are for 2010.