Supply curve of labor is how much time workers are willing to spend for a certain amount of pay

Poverty line: the specific amount of income one requires for a basic standard of living

Poverty rate: the percentage of the population that’s below the poverty line in any given year

Poverty overstate: doesn’t take benefits into account

Understate: doesn’t take cost of living into account

Poverty reduction policy: possible ideas:

Reduce poverty
Maintain work incentives
Administrative efficiency

Policy options
1. TANF - temporary assistance for needy families (work/education required)
2. In-kind transfers (foodstamps, SNAPS, Medicaid, housing subsidies)
3. EITC - Earned Income Tax Credit
4. Basic Income - same handout regardless of wealth

Want to avoid a poverty trap: Antipoverty programs set up so that government benefits decline
substantially as people earn more income - as a result, working provides little financial gain

Measuring inequality: a Lorenz curve graphs the cumulative shares of income received by
everyone up to a certain quintile.

Income vs wealth

Income: money coming in, outputs and costs not factored

1% of US population takes 24% of income and 40% of wealth, 9% of income in the 70s
Bottom 80% shares 7% of wealth

Some causes of rising inequality

● Skill biased technological change
● Family composition (two high earners vs one)
● Globalization
● Decline of Labor unions
● Increasing firm consolidation
● Superstar & Executive effects
● Fundamental nature of capitalism (Piketty)