Chapter Five Summary and Discussion Questions

Chapter Five Summary

Chapter five discusses various concepts related to poverty. This chapter highlights
relevant theories that correlate with poverty. Additionally, this reading examines varying
perspectives on poverty such as the socialist and radical views. The chapter reviews information
regarding the measurement of poverty that can be split up into two versions. The poverty
threshold and the poverty guideline are these versions of measurement. This chapter also
explains who make up the poor population. Low-income families are highlighted as well, with
single mothers topping the ranks of poverty level families. The rural poor and working poor are
also topics of focus in this chapter. The rural poor primarily consist of individuals who maintain
employment in the farming, fishing, and forestry industries. The working poor consists of those
who work at least twenty-seven weeks but still have an insufficient income that prevents them
from affording daily living. Another theme of concentration in this chapter is the dual labor
markets. The dual labor markets consist of the primary labor market and the secondary labor
market. Chapter five covers underemployment, unemployment, and minimum wage rates both
on a federal level and state level. Additionally, this reading explains various strategies to combat
poverty. Some of these strategies include individual development accounts (IDAs), the curative
approach, the alleviative approach to poverty, and the preventive approach to poverty. Another
concept focused on in this chapter is world poverty. According to our text, between 1990 and
2008, the number of people in developing countries living below the extreme poverty line . . .
fell from 1.82 billion to 1.29 billion (p. 110). Americas fringe economy is another concept
highlighted in chapter five. Americas fringe economy focuses on the most recent recession,
along with Americans who refrain from using the banking system. The unbanked population
report six primary reasons for why they do not hold checking accounts. These reasons vary from

Chapter Five Summary and Discussion Questions

wanting to keep their financial records private, to not having a sufficient amount of income to
warrant a checking account. Another aspect concentrated on in this chapter includes credit
availability and the poor. This portion of the chapter covers the various types of credit cards
available. Additionally, other ideas incorporated into this chapter include imperative information
on furniture rental businesses, pawnshops, and car title pawns. Other pertinent information
includes the tax refund anticipation loans and check cashing outlets. Low-income populations
use these services frequently. One obstacle that poverty stricken populations face is
transportation. Many of the methods used in purchasing a vehicle are not aimed to assist the
poor; rather they take advantage of their low credit ratings and insufficient incomes.
Discussion Questions
1. How is the new Supplementary Poverty Measure superior to the older poverty index?
Answers should include regional variation in the cost of living, health care costs, the costs
of earning a living, and contemporary consumption patterns. Special attention should be
focused on regional and stage of life variation in these last three factors.
The Supplementary Poverty Measure is superior because it takes into consideration more
factors when determining poverty levels. These factors include high cost of healthcare,
childcare, housing, utilities, and in-kind benefits. The old poverty index fell short on measuring
factors such as expenses of in-kind benefits including costs of clothes, transportation,
employment, regional variations in cost of living, sales payroll, property taxes, change in
consumption patterns, and out of pocket medical care expenses. For example, a person living in
New York City would have higher living expenses than a person residing in Port Huron,
Michigan. Additionally, a person who pays ten dollars for a subway ride would be facing more

Chapter Five Summary and Discussion Questions

expenses in transportation than one who pays only five dollars. An example of a stage of life
variation would include a teenage boy would eat more than a one-year-old child.
2. How does child support enforcement resolve and exacerbate the problems of family
poverty? Answers should move beyond the textbook to think of the impact of child support
on the family that receives the payments as well as on the family that remits the payments.
Poverty problems of families can be alleviated to an extent if child support enforcement
is executed properly, and the absent parent pays the amount due on time. However, this same
concept can exacerbate the problem if the absent parent does not pay on time. A couple of
consequences that relate to the exacerbation of family problems include the revocation of a
delinquent payers drivers license and sentencing them to jail time. These particular
consequences make it more difficult for the court-ordered support to get paid. As a result, the
expected payer cannot go to work and if jailed, cannot see his or her children. If a non-payer
cannot go to work, this not only eliminates child support payments but it also removes that
person from the family. Both of these consequences prove to be detrimental to both the family
receiving child support payments and the family who remits the payments.
3. Why are wages lower than a living wage permitted by law in the U. S? Answers should
focus on discussion of the beneficiaries of a low minimum wage, employment at will, and
the existence of dual labor markets.
It is my belief that the some states set a proper living wage while considering factors
associated with the cost of living. Minimum wage is set so low because traditional labor
economists think that if minimum wage is increased then inflation will increase as well. As a
result, traditional labor economists believe that low-wage workers will experience an increase of
employment loss. These concepts worry the traditional labor economists because if there is a

Chapter Five Summary and Discussion Questions

loss of workers then there may be a loss of profits as well. The beneficiaries of minimum wage
jobs are those who fall ino the secondary labor market who are struggling with low wages and
less than desirable working conditions. Generally, the poor are those confined to the secondary
labor market. Employment at will means that a boss or worker can terminate employment at any
given time. For this reason, if a worker is working for minimum wage, they are considered
easily replaceable.
4. What are the strengths and weaknesses of the three approaches to combatting poverty
curative, alleviative, and preventative? Discussion should go beyond the textbook to discuss
policy ideas that might really be curative, alleviative, and preventative.
One of the strengths stemming from the curative approach to combat poverty is assisting
individuals in becoming empowered. By helping the poor changes their lives for the better and
becoming self-supporting, they are becoming empowered. However, one of the weaknesses of
this method is that not everyone is capable of becoming empowered through the curative
approach. Policy ideas that could be put in place to assist with this approach would include more
programs to assist the physically, developmentally, or mentally disabled.
One strength encompassing the alleviative approach includes providing resources for
poverty stricken families to use in time of need. For example, SNAP benefits can assist those in
need of food when they are struggling. One of the weaknesses in this program includes recent
cuts to people who receive Social Security Disability and those who are convicted of drugrelated felonies. Over the past year, I have had clients report to me that they were either
ineligible for SNAP benefits because of drug-related convictions. Other clients have reported
having their SNAP benefits decrease significantly because they receive Social Security
Disability Income. As a result of this flaw, it conveys institutional discrimination where some

Chapter Five Summary and Discussion Questions

people are eligible for the assistance and others are not. One policy idea would be to implement
a separate program for these individuals where they can have access to some type of
supplemental food benefits.
The preventive approach includes the strength of supporting people who cannot work
with an income from Social Security. However, the weakness is that is not nearly enough for
them to live on. A policy idea to assist with this approach would include, supplementing their
income with programs that aim to keep their cost of living low, such as low-income housing for
all who receive these benefits.
5. What is the fringe economy? Answers should focus the identification of links between
U.S. labor markets and the alternative financial services discussed in the textbook.
The fringe economy can be defined as Americans living beyond their means. When
viewing our countrys spending habits from 1960 to 2008, from an outsider view, foreigners
became envious of our ability to afford new homes, flashy boats, and nice cars. However, when
examining this spending more closely, Americans were just driving themselves into debt.
According to our text, by 2009, more than 83 percent of all consumer debt was secured by
residential property that was rapidly declining in value (p. 112). For this reason, when
Americans were no longer able to pay the debt financial service companies benefited greatly.
Some of these included check cashing companies, payday lenders, and pawnshops. These
financial service companies provided Americans with money that was much needed. The
secondary labor market was at the mercy of the primary labor market because number of payday
loans increased significantly from 2000 to 2009, and ten large companies owned and operated
nearly forty percent of the payday loan stores in the U.S.

Chapter Five Summary and Discussion Questions