Income deficit

Income deficit

The Income Deficit is the difference between a single person or family's income and its poverty threshold. This term gives quantified data to show income inequality in a specific area. Different families are further from the poverty threshold then others; above or below. In theory, families that fall below the line are in extreme poverty where as families that fall above are not. The income deficit is one of two measures that are used to determine a person or family's income distance from the poverty threshold. There are both positive and negative factors when using this particular method.

Poverty threshold

Poverty threshold, or poverty line, is updated each year by the Census Bureau and is generally used for statistical data. This information gives the federal government tangible information to determine the number of people in extreme poverty each year. The number is adjusted according to inflation and cost of living in particular areas. Currently, it is estimated that nearly 12% of Americans are living below the poverty threshold. Poverty thresholds are determined by race/ethnicity, male/female, and number of members within the household.

Methods of determining distance from poverty level

* Income deficit takes a person or family's income and subtracts that from the poverty threshold. If the poverty threshold is $15,000 a year and a family's income is $12,000 yearly salary, then the income deficit is $3,000. Government bureaus can use this information to help rectify poverty and gain a better understanding of the problem at hand.

* The second method is used in terms of a ratio. The ratio of 1.00 would show the level of income is exactly equal to that of the poverty threshold. A number below 1.00 indicates that the person or family's income is below the poverty threshold; on the contrary, a number above 1.00 would indicate the person or family's income is above the poverty threshold. This method works to find how many people are above or below the poverty threshold, but does not say much about standard of living.

Positive effects of income deficit

* Income deficit allows the federal government to collect data on the extreme poverty level. These values portray a real problem that occurs all around the world and can be mathematically calculated to evaluate the populations.
* Having these numbers allows federal governments to implement certain policy or plans to help fix their national poverty status as best as possible.

Problems with income deficit

* Income deficits are numeric values that do not always portray accurate conditions of a household. A family that is $1,000 above the poverty line and conversely a family that is $1,000 dollars below the poverty line could in fact be quite similar. This method of determining poverty leaves no room for health issues, food consumption, and other necessary requirements of a household. Living conditions is not black and white, using this method of income deficit, it leaves no room for a gray area.
* Using income deficits gives very little mention to families that are technically above the poverty threshold but cost of living keeps them barely able to survive.

US Income Deficit

The total United States deficit runs to the figure of over $700 billion. This debt is the biggest ever seen in world history says Maurice Obstfeld, professor in economics at the University of California, Berkeley. He explains that the American deficit has indeed become a problem for the United States, and therefore for the world economy as a whole.

In the United States, the census bureau separates the data collected into categories based on several different categories. Each category is then separated even further by number of children, age of children, yearly salary, social security income, et cetera. Data below shows the average of each subcategory within the three larger ones. Data is collected from the year 2000.
* Families have a mean income deficit of $7,247.
* Married-couple families have a mean income deficit of $6,946.
* Families with female householder and no male present have a mean income deficit of $7,562

References

* [http://aspe.hhs.gov/poverty/07poverty.shtml]
* [http://www.ed.gov/about/offices/list/ocr/raceneutral2/image014.gif]
* Hurst, Charles. "Social Inequality: forms, causes, and consequences"

External links

* [http://factfinder.census.gov/servlet/QTTable?_bm=y&-geo_id=01000US&-qr_name=DEC_2000_SF3_U_QTP35&-ds_name=DEC_2000_SF3_U US Census Bureau]
* [http://zonecours.hec.ca/documents/A2007-P1-1364866.Obstfeld_2005.pdf America's Deficit, the World's Problem]


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