POSC411 Lecture Notes - Lecture 2: Mollie Orshansky, Working Poor, Financial Capital

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PovertyThe Nature of the Problem (3/15)
The Concept of Minimum Needs
o Bega y asselig a ietoy of Miiu eeds of hua susistee; suh a list
Food, clothing, shelter, fuel, transportation
o Persons who cannot obtain all the items of the list will be considered poor
o Poverty is understood as the inability to obtain the goods and services sufficient to meet
socially defined minimum needs
Counting the Poor and Measuring Poverty: Units of Measurements
o The ability to obtain needed goods and services is determined by purchasing power;
accordingly, we can simplify the poverty standard by expressing that measure
o The est sigle idiatos of a peso’s purchasing power is income; income is the primary
measure used
Incomethe money received on a regular basis from work, investments, labor, etc.
There are complications because income is not the sole determinate of
purchasing power (i.e. assets, credit)
Despite these limitations, income is the single best index government can use to
measure poverty
o Other units of measurements:
Housing quality
Access to health services
Financial capital
Poverty Threshold: Council of Economic Advisors
o I 1963, the Pesidet’s Couil of Eooi Adisos as appoited to idetify the iiu
income needed by poor families
o The CEA accepted the notion that food requirement should be the major determinant of
income needed
o Accordingly, they set out to determine the minimum nutritional requirement of the typical
o Studies had shown that poor families spend approximately 2/3 of their income on food
o Using this observation as a benchmark the CEA suggested multiplying the basic good budget by
two to determine how much income was needed by poor families
Poverty Line as a Threshold: Social Security Administration
o First calculations of the poverty line were developed by Mollie Orshansky of the Social Security
Administration in 1964
Orshansky took a minimal daily diet cost prepared by the USDA and multiplied it by 3
(which was stated as the official poverty line)
o She then adjusted for the varying family needs based on whether
Family size
Resident (rural or urban)
Sex of head or household
Number of children
Using these four variables plus the minimal diet as a base, she identified 124
family types and calculated a poverty budget for each
o Since 1981, the figures for female-headed households and farm families are no longer used to
calculate poverty rates; Today’s poety lie euals
The cost of the Thrifty Plan for a family multiplied by three
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