Relationship between Measures of Inequality and Measures of Poverty
Inequality refers to a situation, where some people in a society have more money, opportunities, and other things than other people. Inequality has continued to show itself in many societies everywhere around the globe. Poverty, on the other hand, refers to the lack of enough money to meet one’s basic needs, which include clothing, food, and shelter. Several researches have been conducted in order to measure inequality and poverty. This paper seeks to identify these events and draw the relationship between the measures of poverty and the measures of inequality.
Measures of Inequality
Economic Inequality
When it comes to measures of inequality, the most debated is the measure of economic inequality, since economic inequality issues have been slowly pushing their way into national debates. For example, some people argue that the government must work on narrowing the existing huge gap between the poor and the rich. In essence, economic inequality simply refers to the economic disparity. Economists have for a long time linked economic inequality to all the other inequalities, while arguing that it is the one, which eventually leads to the other inequalities. Thorbecke, a sociology professor, pointed out that income disparities are more closely associated with resource inequalities, which go along with the disparities in access to education, nutrition, and other life necessities. Several studies portray that wealth is more evenly distributed, as compared to income; therefore, the most familiar measure of inequality involves income.
The most recent report shows that the top 5 percent households in the context of the US received a 22.1 percent of equivalence-adjusted cumulative income for last year, almost as much as the bottom 58 percent of households. Even though economists argue that income data has by so far too many flaws and cannot, therefore, be the primary inequality measure. For one thing, almost all inequality measures use income even before transfer pavements (such as food stamps, social security, and unemployment benefits), and taxes which may act to reduce inequality. Some evidence-based studies show that transfers and taxes reduce the income.
A Focus on the Household Wealth
Another way to measure economic inequality is though looking at the household wealth. People, who have much accumulated wealth, may not get much in a way of income (capital gains and trust income on investments and stock, for instance, often are left out from the analyses of income). On the other hand, those, who earn much, but have higher expenses, such as tuition or child care, may not exactly consider themselves as wealthy.
Various studies have keenly looked at the consumption data of the different households and reached different conclusions. A recently prepared study found consumption inequality to have grown almost two thirds faster than income inequality between the years 1985 and 2010. Researchers from Rochester and Princeton University came up with another finding that they named “systematic measurement error”. Their conclusion was that the inequality of consumption is, in fact, tracked by the inequality of income, since high-income households no longer spend on the necessities, but have shifted their spending towards luxuries. The researchers further argue that other studies underestimate the consumption of some types of goods and are also vulnerable to households that are richer, under-reporting their consumption in general.
Measures of Poverty
There are two vaguely diverse poverty measures in the US. The first are poverty thresholds, which are based on the Thrifty food plan of the US Agricultural Department, and second, poverty guidelines, which are a sweeping statement of poverty threshold used in determining eligibility for various federal programs. Poverty thresholds are mainly established at the end of the year and are generally used for the research and statistical purposes, such as, an estimate of Americans living in poverty every year. On the other hand, poverty guidelines are usually issued at the commencement of every year and are used in determining eligibility for the programs of poverty. In most cases, these two can be interchangeably used; except, when precision is required for legislative or administrative purposes.
Poverty Thresholds
Molly Orshansky, a member of the social security management, developed poverty thresholds in 1963-1964 basing them on the Thrifty food plan. The food plan was the cheapest among the four plans, which were developed by the Agricultural Department. According to the United States Department of Agriculture (USDA), this plan was appropriate for temporary use when funds are lower. Molly used the USDA 1955 survey of household food consumption and found out that families of more than three persons would spend almost one third of the after-tax income they acquired on food. She went on to multiply the USDA cost of economy food plan by the three to get to a minimal yearly income that a family would require. The author did differentiate her thresholds by both family status and by farm/non-farm status, by number of children in a family, gender of household head, and by the aged/non-aged status. Though many changes have been made to Molly’s poverty threshold, there are no significant changes that have ever been made on the method of calculation.
Poverty Guidelines
Poverty guidelines slightly differ from the poverty thresholds, since they are simplifications of poverty thresholds in order to serve administrative purposes. The health and human service department issues guidelines of poverty each year in federal register. These guidelines are designated according to the year they are issued. The guidelines issued at the beginning of 1999, for instance, are designated as the 1999 guidelines for poverty, but which only reflect the changes of price though the calendar of 1998; in approximation, they are equal to the poverty threshold of census bureau for 1998 calendar year. Various programs and policies, whether instated by local or federal governments, employ poverty guidelines in determining the eligibility. However, here are many other programs and policies that do not utilize poverty guidelines as measures of poverty. An example includes federal earned income tax credit, as well as other housing programs. In most cases, these poverty guidelines are sometimes regarded as the Federal Poverty Level or Poverty Line.
Correlation in Measures of Poverty and Inequality
In assessing the relationship between the measures of inequality and the measures of poverty, it becomes critical to consider that inequality and poverty have more similarities than differences. This is due to the fact that both these concepts connote a similar ideology. In this regard, it means if an individual is poor, then there is another or others, who are rich. Similarly, unequal distribution of income implies that there is another kind of distribution that could be equal. Similarly, unequal distribution of income implies that there is another kind, which is equal. In addition, because of the unequal distribution of income, some people have more, while others have less. In this sense, therefore, the two go hand-in-hand, since an individual that lives under poverty must also be having less share in the society’s income.
When it comes to measures of these two concepts, both are subject to critics due to the various reasons, some of which are similar. Measures of poverty, for instance, have a critique, which questions the type of income included in the poverty measure. By failing to incorporate the income received by many low-income individuals as public assistance, critics maintain that poverty extend is overstated. In addition, if the values of food stamps, health insurance benefits provided publicly, and payments of cash welfare were seen as income in the calculation, very many people would not be considered poor anymore. The same goes to the fact that a method of poverty measure that was derived a long time ago is still in use to date. Critics argue that the method could not be a reflection of the current realities of life.
Measures of inequality receive the same critic treatment, especially when it comes to the type of income included in the inequality measure. The income, if included before deductions, tax, and transfer payments will give a completely wrong figure, since it is those deductions that serve to equalize the inequality in a way.
There is, however, much similarity between these two, because the measures of inequality make use of the income between the rich and the poor to determine the inequality, and at the same time the measures of poverty use income to establish the extent of poverty. In the same note, measures that are put in place to combat inequality will also in some way reduce poverty, because equal distribution of income would mean that most people are able to meet their basic needs.
To the larger extent, it is evident that the measures of both inequality and poverty have a lot of similarities, also considering the fact that both poverty and inequality address the issues related to the people, who are not able to meet their basic needs. We should also note that both poverty and income inequality connote or advocate the same ideology. By this we mean when one person has been found to be poor, there is another or others, who are on a comfortable level. In addition, when there is an unequal distribution of income, it gives an assumption that there is another kind of distribution that is said to be unequal. Furthermore, it implies that as a consequence of income distribution, there are the individuals, who are better off, while others are worse off.

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