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

3.6. Key Takeaways

  • Poverty may be defined according to a relative or an absolute definition.
  • Official estimates of the number of people who are "poor" are typically based on an absolute definition of poverty, one that many view as inadequate and dated.
  • Several demographic factors appear to be associated with poverty. Families headed by single women are three times as likely to be poor as are other families. Poverty is also associated with low levels of education and with minority status.
  • There is a wide range of welfare programs; the majority of welfare spending is for noncash assistance. Those receiving this aid do not have it counted as income in the official calculations of poverty.
  • Welfare reform has focused on requiring recipients to enter the labor force. Many poor people, however, are not candidates for the labor force.