Poverty and Inequality: International Comparisons - Report Example

POVERTY AND INEQUALITY INTRODUCTION This paper will provide an overview on poverty, trends, and inequalities in the United States, Canada, Germany, and Great Britain. For each country, terms of poverty, absolute and relative, will be discussed, along with social and economic inequalities. A four-country comparison will be reviewed, and trends related to poverty and inequality will be analyzed. POVERTY, TRENDS, and INEQUALITIES IN THE UNITED STATES The measurement for United States poverty is defined as total family annual income being less than the poverty guideline issued by the United States government. The measure for absolute poverty was created in the 1960’s as a segment of the war on poverty program. As defined by this measurement, the poverty boundary is set at about triple the annual cost of a nutrition-based diet. It fluctuates by the size of the family and is reflected yearly to illustrate adjustments in the consumer price index. 1 At this time, about thirteen percent of the population in the United States is below the threshold set by the federal government. Controversy surrounding whether the federal poverty line is understated or overstated is ongoing. There are two variations of the federal measure of poverty: the thresholds and the guidelines. The Census Bureau administers the thresholds, which are used to determine statistics. The Department of Health and Human Services supplies the guidelines to decide if a family or single person is eligible for any federal assistance. The United States government defines poverty in the absolute, which is the boundary below which people lack the sources to provide for their basic needs. The “Orshansky Poverty Thresholds” sculpt the base for the current United States poverty measure. An economist, Mollie Orshansky worked for the Social Security Administration at the time of the Johnson administration when he had stated war on poverty. Her published article coincided with this event, and the United States adopted her thresholds for planning and budgetary reasons in May 1965. Orshansky’s definition is used for statistical purposes, the measure giving a range of income cutoffs (thresholds.) These thresholds are adjusted for factors such as size of family, gender of the head of family, and number of under-eighteen children in the family, and whether the residence is a farm or not. The core of this poverty definition was economy food plan, which consisted of four least-costly nutritional food plans created by the Department of Agriculture.2 The current thrifty food plan was devised in 1975, using the same cost level. In 1981, other changes made to the definition of poverty included eliminating thresholds for farm residences and female head of household. The remaining approach to poverty measurement has stayed constant for forty years. The 2006 poverty rate threshold for an individual in the United States is $9800 annual income for the 48 contiguous stats and D.C.; Alaska is at $12,250 and Hawaii is at $11,270. 3 The alternative method of examining poverty is in relative measures. “Relative poverty” is described as having significantly less means to income than other society members. Some causes of poverty in the United States can be attributed to social class structure, less job opportunities, racism, a low minimum wage, crime, more natural disasters, poor work ethic, lack of education, substance abuse, illnesses and disabilities, and adverse economic situations. Many governmental officials, economists, and sociologists believe that United States poverty is understated. They claim that households living in true poverty are much larger than households being shown statistically as living below the threshold. Others believe that United States poverty is overstated. Some claim that poor communities now enjoy things which were once luxuries many years ago. Critics also stress that while some of these properties may not be necessary, they are easier to manufacture today than forty years ago, therefore making “luxuries” inexpensive in today’s society. By comparison, luxuries of an earlier time are everyday products of today. Claimants arguing overstatement also say that since poverty measures don’t include such items as food stamps and cost of low-income housing, which raise the standard of living for poor individuals, the figures depicting the poverty line are distorted. Source: Poverty in the United States, October 2006 Wikipedia, the free encyclopedia The gap between the poverty-stricken and the wealthy is hurting the health and social economics of the poor. Inequality in the ratio of United States wealth distribution is greater than the income inequality. These U.S. inequality trends are constantly rising, creating harmful results for society’s health. The U.S. has lived with the notion that it is acceptable for the rich to get wealthier, as long as minimal provisions are made to care for the poor. Source: Montague, Peter, Economic Inequality and Health Liberal Resurgent There are available options for low-income citizens, such as high-risk pools which are currently offered by over thirty states for individuals unable to qualify for private health insurance. Medicaid is also an option to some people. Pharmaceutical organizations have created assistance programs to help get needed medications to maintain a person’s health SCHIP (State Children’s Health Insurance Program) also offers coverage for children whose families may not be able to assistance from Medicaid. Local community clinics are stepping up to provide healthcare to the impoverished, either free of charge or for a relatively minute fee. Source: American Diabetes Association POVERTY, TRENDS, and INEQUALITIES IN CANADA Unlike the United States, Canada has no official poverty guideline. As poverty thresholds, Canada’s Low-Income Cut-Offs (LICOs) is used as a measurement. However, using this method to produce poverty lines has consequential flaws. We must take into account that wages are higher in Canada; so are expenditures. The LICO is considered to be “relative” since it increases along with the increase in average spending. Therefore, LICO is not measuring poverty; it is actually measuring inequality. The LICO measure also does not relate to cost differentials in varied regions of Canada. For example, Montreal and Toronto may have identical LICO values, but the two cities have extremely unlike housing costs. Statistics Canada publishes LICOs and stresses that these cannot be misconstrued as poverty measures. Instead, they only compare average individuals to ones who are worse off.4 Despite the LICO flaws, researchers continue to use this methodology as lines of poverty. The basic-needs approach, established in 1992, measures poverty based on the pricing of a list of necessities. This list has been updated to allow for healthcare costs paid for by the person. The old list assumed that the poor person’s medical needs were met by welfare programs. Home insurance, school supplies, and laundry expense were also added to the updated list. The trend has revealed that the rate of poverty has remained at approximately 8% since 1996. Researchers in Canada believe that incomes may be understated; therefore, poverty is inflated. They maintain that an improved labor market may not be the solution to assist their citizens who suffer from psychological and personal problems and low self esteem and lack of motivation. It is believed that more creative solutions need to be addressed. Income is a misinterpretation of how lower-level individuals are faring. Problems include the growing number of students who are post-secondary with understated income measurements, more people living in subsidized lodging, and the increase in reporting under-income. The result is an extremely underestimate of Canadian income; therefore, an overstatement of poverty extent. Statistics Canada should consider creating a formula to represent how the Canadian population is really doing. It is said that Canada has a growing inequality. However, trends in disposable income have been quite stable since the 1970’s. Evidence has shown that purchases of home appliances have decreased. True of virtually every province is the inadequacy of assistance to welfare recipients because of the work-encouraging policy of the Canadian government. The poverty estimates are formulated beyond income. Consumer spending and ownership of facilities for the household are also considered to depict better detail of deprivation in Canada. Source: The Fraser Institute, Measuring Poverty in Canada, July 2001 Author, Chris Sario, Directorof School of Business and Economics, Nippissing University Poverty, health, and social inequality are linked. The World Bank identifies Canada as the world’s second wealthiest country, and yet, one-fifth of the population is poverty-stricken. This should be a great concern for its citizens, since illness will not only affect the poor, but the rich as well. It will induce stress and financial concerns on all Canadian citizens. Source: Raphael, Dennis, Ph.D., C.Psych Dept. of Public Health Sciences, University of Toronto Pathways to Health Conference, Antigonish, Nova Scotia, May 15, 1999 POVERTY and SOCIAL INEQUALITY IN GERMANY There are more insolvent German citizens today because the gap between the wealthy and poor has widened. The insolvent are claimed to be in the range of approximately three million people, about 8% of the population. Since the wealth statistics are determined on a voluntary basis, its extent is really unknown. In 2006, the German social inequality has reached the utmost levels. The current government5 is laboring toward widening the gap between the wealthy and the insolvent even further. Social divisions are being deepened through cuts in pension funds, developing a sector of low-wage populace, increasing value added tax, and decreasing business taxes solely for the benefit of Germany’s wealthy. The social welfare state is moving toward a charity state, treating poverty as acceptable. Since wealth is also growing daily, the socio-political measures believe this is the way to assimilate United States conditions. In 2005, Germany’s largest companies increased profits up to 60 percent. The large bonuses are going to the executives on the committees, and nothing to the staff employees. Individuals on the executive boards have given themselves substantial monetary awards, and are still announcing plans for cutbacks and dismissal of employees. The leader of the pack is Josef Ackermann, Deutsche Bank’s board chairman. In 2005, his income was increased by 17.8% plus stock options reaching the millions. He also sits on other boards and receives a supplemental income for doing so. Another example is Franz Muntefering, minister of labor and social affairs. He campaigns to cut pensions for the ordinary German citizen; however, the incomes of Germany’s managers are safeguarded against financial downfall. While staff workers at Bayer Pharmaceuticals in Germany are introduced to the Hartz laws6, the incomes of executives are protected. The Bayer contract claims that any executive terminating his company service is assured 80% of his previous month’s wage for sixty months. Ordinary employees face a reduced retirement pension, not the case for Bayer’s management. The 2000 poverty rate was at 17.3%, the highest in postwar history. It has been calculated that every fifth German resident lives in poverty in East Germany and half a million people are living in poverty in Berlin, the capital city. Germany’s children are suffering the most, with 2.5 million children living in poverty on welfare relief. A mandate for family strengthening calls for unemployed individuals up to 25 years of age to depend on their parents for support. It also stipulates that an adult over the age of twenty-five should also support his unemployed parents as soon as he can do so financially. The Hartz IV law came into being on August 1, 2006, further pressuring the unemployed. Immigration investigators demand access to the residences of aliens residing in Germany. They scour the premises to uncover evidence of fictitious marriages and permits for residency obtained under false pretenses. This also gives permission for employment agency detectives to enter an unemployed person’s home to find evidence that two people jointly renting a residence are living as a married couple and can then be obligated to support each other. The lowest rate for labor costs in Europe belongs to the country of Germany, adding to the social misery. Millions of workers barely exist in the sector of low-paying jobs. Some of these same citizens are even made to pay toward their children’s schoolbooks. The government claims that their provision of learning aids is merely voluntary, therefore cutting the expense. Source: Dietmar Henning, August 12, 2006 WSWS News and Analysis POVERTY, TRENDS, and INEQUALITIES in GREAT BRITAIN Almost 13 million people, approximately one in four, live in poverty in the United Kingdom. Approximately 6.5 million individuals can’t afford warm clothing when temperatures dip. Almost 18% of the child population don’t have appropriate attire, toys, and in some instances, three daily meals. Poor children are said to have a lower life expectancy, more likely to be ill, a higher likelihood of unemployment at adulthood, and a low level of academic achievement. Minority ethnic groups are more prone to poverty. The depth of poverty in Great Britain is very much like that of developing countries. Power and wealth inequalities, the way the poor are treated by other people, and having no voice in making life-affecting decisions exists in the United Kingdom just as elsewhere. The poor believe they are not heard or respected. Because the Prime Minister has been committed to stopping child poverty, the numbers of the poor community have begun to decline. The Labour government has recognized that public support is a crucial tool in reducing poverty. Source: Oxfam – UK Poverty Programme A 2005 presentation from the Institute of Fiscal Studies revealed that pensioner poverty has decreased slightly under New Labour.7 The group afflicted with increasing poverty includes the non-working households, the disabled, and those on sick-leave. It must be noted that relative poverty for childless adults has declined under Tony Blair’s leadership. Income equality is now higher than when Blair came into office. A publication of The Financial Times, printed March 20, 2006, revealed an investigation outcome showing that economies during Tony Blair’s government have become different at a faster rate than under the rule of Margaret Thatcher, the former prime minister. The widening divide revealed that the wealthier areas profited from quicker growth since 1997 than the poorer regions. London is the only outstanding Britain city to perform economically. This is the city with the populace commuting to it and/or dependent on it. Some of the surrounding areas are included in this thriving division. London can be said to be poverty in the midst of plenty. Though London has the most prosperous economy in Great Britain, London is also riddled with poverty and inequality. Divided areas have experienced steadily increasing life expectancy inequalities under New Labour (of which they vowed to reduce.) Government claims that citizens are to blame for this trend. Though access to a college education was pledged to widen, access has been given only to those who were likely to go anyway. The universities blame the secondary schools for this, and the secondary schools put the blame the primary level, and the primary schools blame the home atmosphere. Even if all the children of Britain were to excel to the level of university acceptance, the places in higher education are fixed. Private school admittance has grown steadily since Tony Blair’s administration in 1997. This ensures that wealthy parents can keep taking the available spots while the poor parents can be told they just weren’t smart enough. The government tells the lower-income populace they are lucky to have the minimum-wage jobs. The Job Seeker’s Allowance (JSA) was created for this group, which also includes Income Support (IS). This is merely the government’s support system for welfare recipients. Today’s government policy is built on the premise that the victims and the labor market are to blame, meaning that workless people have no motivation, therefore no job. Amongst the trends in inequalities based on geography, trends in housing wealth and costs of housing, inequities have increased since 1997. Britain’s pension reform minister has said that the young workers are risking poverty due to not investing savings for retirement. Again, the government is clearly blaming its citizens. Source:Danny Dorling, Dept. of Geography, University of Sheffield, 2006 Poverty and social economics are more than merely reviewing income and expenditures. Recent trends in UK’s poverty-inequality link were published in March, 2005 showing income inequality had fallen for three straight years. The study also showed the effect of poverty linked to job situations, marriage and divorce, and the growing rate of childbirth. Source: Economic & Social Research Council, March, 2005 The level of poverty in the UK appears to depend on the source of the report. According to a BBC News report dated March 8, 2001, millions are living in “absolute” poverty. Absolute poverty was earlier described as living in severe deprivation of basic human needs, such as lack of sanitary conditions, nourishment, education, shelter, and a provision for accessible benefits. This ordinarily describes living conditions in third world countries. Other reports tell us that not much has changed for the better in Britain since the Blair regime. The highest poverty rate in Britain was situated with single parents. Also suffering are single pensioners. There seems to be a definite problem in the United Kingdom as to how to arrive at a standard related to measuring the level and rate of poverty. Source: Kim Catchside, March 8, 2001 for BBC News Millions live in poverty in the UK The Joseph Rowntree Foundation also monitors and issues reports on poverty and inequalities in the UK. Their December 2005 study revealed numerous issues related to disabled persons. This report revealed that approximately one third of employed disabled citizens reside in income poverty, this rate being higher than ten years ago. About five million adult employees are in low-income jobs, and children residing in non-working households in the United Kingdom have the highest rate in the country of Europe Many inequalities dealing with health are persistent in the UK. Infant deaths are more likely to occur among those from manual backgrounds. The homeless populace has also increased in the past decade. Unemployment is lower now in the UK than on other European countries. The unemployed are more likely to be victims of, or involved in, violent crime. Fear of violence and crime is more prevalent for persons with low income. Source: Joseph Rowntree Foundation Monitoring poverty and social exclusion in the UK 2005 CONCLUSION and COMPARISONS In a finding from an April 2005 study conducted by the London School of Economics and Political Science (LSE), it was reported that Britain’s social mobility was declining after already being lower than other progressive countries. Compared to North American countries and eight European countries, the United States and Britain had the lowest social mobility. In the United States, mobility has remained stable; in Britain, it has decreased. A portion of the reason is given to the premise that the higher-income population has benefited from the increased opportunities for education. Social mobility is defined as the pattern of adulthood as related to their childhood situations. Britain’s social mobility was found to be lower than Canada’s. While opportunities between the wealthy and the less fortunate are quite similar in the United States and Britain, the U.S. remains at a static level, while it is getting wider in Britain. A comparison shows that Britain and the U.S. are ranked with being the lowest in social mobility. Norway is ranked with the highest. Germany is situated in the middle between the extremes, and Canada revealed more mobility than the United Kingdom. Inequality of educational access has greatly contributed to the widening of Britain’s mobility. Source: Blanden, Gregg, Machin, April, 2005 London School of Economics & Political Science Data gathered for periods ending year 2000 from multiple surveys, report was submitted by Cornell University professors in June2005.8 Data revealed economic-growth gains in the United States for this period were greatly distributed over the business cycle of the 1980’s. They were also equitably distributed at a higher level than were Germany’s gains in their business cycle of 1991-20001. However, Britain’s gains were distributed the most equitably in their period of 1990-2000. The results are revealed using both inequality measures and estimations of kernel density. In both Great Britain and the United States, the entire distribution of income increased in the 1990’s. In the United States and Germany during the 1980’s period, there was a decrease in the center of the distribution of income and then increases at the end of the time frames. In the U.S., persons aged sixty-four and younger benefited more than older people; the opposite was true in Germany and Great Britain. Inequality of income dropped among the older populace in the United States, Germany, and Great Britain. For the younger population, it increased in Germany, decreased in Great Britain, and stayed the same in the U.S. Source: Richard V. Burkhauser, Professor of Policy Analysis, Cornell University and Ludmila Rovba, Professor of Economics, Cornell University, June 2005 Income Inequality in the 1990’s: Comparing the United States, Great Britain, and Germany WORKS CITED Blanden,Jo, Gregg,Paul, Machin,Steve, April 2005 London School of Economics & Political Science Disturbing finding from LSE study-social mobility in Britain lower than other advanced countries and declining http://www.lse.ac.uk/collections/pressAndInformationOffice/newsAndEvents/archiv... Burkhauser,Richard V., Rovba,Ludmila, June 2005 Professors of Policy Analysis, Economics, Cornell University http://ideas.repec.org/p/diw/diwwpp/dp576.html Catchside,Kim, March 8, 2001 BBC News, Millions live in poverty in the UK http://news.bbc.co.uk/1/health/1207241.stm Dorling,Danny, Department of Geography, University of Sheffield, 2006 article submitted to Local Economy http://sasi.group.shef.ac.uk/publications/2006/dorling_inequalityinBritain1997.pdf Henning,Dietmar, August 12, 2006 World Socialist Web Site Social inequality in Germany reached record levels http://www.wsws.org/articles/2006/aug2006/germ-a12_prm.shtml Montague, Peter, date unknown Economic Inequality and Health article submitted to Liberalism Resurgent http://www.huppi.com/kangaroo/Inequality&Health.htm Raphael, Dennis, Ph.D., C.Psych Dept of Public Health Sciences, University of Toronto Pathways to Health Conference, May 15, 1999 http://www.utoronto.ca/qol/IHpaper1.PDF Sario,Chris, Director, School of Business and Economics, Nipissing University, July 2001 The Fraser Institute – Measuring Poverty in Canada http://www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=216 Author unknown, 2005 Joseph Rowntree Foundation Monitoring poverty and social exclusion in the UK 2005 http://www.poverty.org.uk/intro/index.htm Wikipedia, the free encyclopedia Poverty in the United States http://en.wikipedia.org/wiki/Poverty_in_the_United_States American Diabetes Association Health Insurance Options for Low-Income Individuals http://www.diabetes.org/utils/ Author unknown Economic & Social Research Council published March, 2005 http://www.esrc.ac.uk/ESRCInfoCentre/Images/wealth_a-level_tcm6-11453.pdf Read More