Principles of Economics- Mankiw (5th) 431

Principles of Economics- Mankiw (5th) 431 - CHAPTER 20...

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CHAPTER 20 INCOME INEQUALITY AND POVERTY 443 for inflation) rose more than 50 percent during this period. Because the poverty line is an absolute rather than a relative standard, more families are pushed above the poverty line as economic growth pushes the entire income distribution upward. As John F. Kennedy once put it, a rising tide lifts all boats. Since the early 1970s, however, the economy’s rising tide has left some boats behind. Despite continued (although somewhat slower) growth in average in- come, the poverty rate has not declined. This lack of progress in reducing poverty in recent years is closely related to the increasing inequality we saw in Table 20-2. Although economic growth has raised the income of the typical family, the in- crease in inequality has prevented the poorest families from sharing in this greater economic prosperity. Poverty is an economic malady that affects all groups within the population, but it does not affect all groups with equal frequency. Table 20-4 shows the poverty
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