Ten Principles of Economics - Part 44. Economics is the study of how society manages its scarce resources. In most societies, resources are allocated not by a single central planner but through the combined actions of millions of households and firms. Economists therefore study how people make decisions: how much they work, what they buy, how much they save, and how they invest their savings. Economists also study how people interact with one another. | CHAPTER 20 INCOME INEQUALITY AND POVERTY 443 Group Poverty Rate Table 20-4 All persons White not Hispanic Black Hispanic Asian Pacific Islander Children under age 18 Elderly over age 64 Female household no husband present Who Is Poor This table shows that the poverty rate varies greatly among different groups within the population. Source . Bureau of the Census. Data are for 1998. for inflation rose more than 50 percent during this period. Because the poverty line is an absolute rather than a relative standard more families are pushed above the poverty line as economic growth pushes the entire income distribution upward. As John F. Kennedy once put it a rising tide lifts all boats. Since the early 1970s however the economy s rising tide has left some boats behind. Despite continued although somewhat slower growth in average income the poverty rate has not declined. This lack of progress in reducing poverty in recent years is closely related to the increasing inequality we saw in Table 20-2. Although economic growth has raised the income of the typical family the increase in inequality has prevented the poorest families from sharing in this greater economic prosperity. Poverty is an economic malady that affects all groups within the population but it does not affect all groups with equal frequency. Table 20-4 shows the poverty rates for several groups and it reveals three striking facts Poverty is correlated with race. Blacks and Hispanics are about three times more likely to live in poverty than are whites. Poverty is correlated with age. Children are more likely than average to be members of poor families and the elderly are less likely than average to be poor. Poverty is correlated with family composition. Families headed by a female adult and without a husband present are more than twice as likely to live in poverty as the average family. These three facts have described . society for many years and they show which .
