Module-15. The ec o n o m i c s of po v e r t y: American indian

Transcription

1 Module-15 The ec o n o m i c s of po v e r t y: American indian

2 TEACHER S GUIDE P. 453 Defined P. 459 Content standards P. 460 Materials P. 461 Procedure P. 468 Closure P. 469 Assessment P. 473 Overheads Visuals N Visuals for overhead projector. Copy to transparent paper for overhead. P. 474 NVisual-1: Income P. 475 NVisual-2: Household budget P. 476 NVisual-3: Human capital P. 477 NVisual-4: Montana income P. 478 NVisual-5: Poverty P. 479 NVisual-6: Cycle of poverty Lessons 2 Copy and handout to students. P Lesson assessment

3 Defined Poverty can be defined as a condition of lacking a sufficient level of money, goods, or means of support. It is a condition of being poor. Poverty is a relative term. The wealthiest people living in the United States 100 years ago would be considered to be living in poverty according to today s standards. As our standard of living rises, the poverty threshold income level also rises. Poverty is determined by some level of income under which people are considered to be poor. Many s, in Montana and throughout the United States, live under that poverty threshold income level. s constitute the largest minority ethnic group in Montana. The most recent United States population census, carried out in 2000, reported that Montana s total population was 902,195 people, of which 65,945 individuals, 7.3 percent of the population, identified themselves as s. In fact, Montana is the state with the largest proportion of s in its population. Many, but not all, of Montana s citizens who are s, live on Montana s seven Tribal Reservations. The reservation communities are therefore important components of Montana s social, cultural, and economic life. However, many households on Montana s tribal reservations live in economic poverty. As of 2007, unemployment rates among the reservations were variously reported as lying between 20% and 80% while the statewide average unemployment rate was less than 5%. Correspondingly, average household incomes are low. Nationally, the U.S. Census Bureau reported that, in 2005, median earnings for American Indian men and women were only 80 % of the national average and that, in 2004, 24.3% of all households were in poverty as compared to 12.4 % of all U.S. households. On Montana reservations, median incomes are almost certainly much lower and the extent of poverty among s on Montana reservations is almost certainly greater than among all households. This is because the reservations are highly rural in nature and geographically isolated from major Montana centers of employment like Billings, Bozeman, Great Falls, and Missoula. Moreover, household and per person (per capita) incomes in Montana are considerably lower than the national average and even lower in counties where reservation communities are predominant. Members of households in economic poverty often have poorer health (including higher incidences of diabetes, obesity, cancer, Copyright 2008 by MCEE ( Economics: The Study of Choices 459

4 and heart disease) and lower levels of educational attainment than members of households that are not in poverty. Among members of households in poverty, problems with alcohol and drug abuse are more prevalent and, for several reasons, the incidence of criminal activity and imprisonment is also greater. Members of poor households also tend to be victims of crime more frequently. The difficulties confronted by adult members of households in poverty also often exacerbate the challenges children in those households face in achieving good health and being successful in school and college. As a result, on average, children from poor households are less successful in school and college, and are less prepared to compete for jobs and to perform successfully in the jobs they obtain. The outcome is what is sometimes called the poverty cycle. All of these economic poverty-related problems confront Tribal Reservation communities. For example, a 2002 study among adult s on six Montana reservations reported that 52.3 % of all adults in low income households were unemployed at a time when the unemployment rate in Montana was only 5%. The same study also reported that 35% of all adult members of low income reservation households were in need of treatment for their alcohol and drug abuse problems, compared to an average of 4.5% among all American households. A 2005 Montana Office of Public Instruction study on the performance of children relative to white students in Montana reported substantial gaps between the percentages of students and white students who performed at the proficient level for their age group on mathematics and reading standardized tests. A 2005 report by Lohse and Ockert found that 66% of white students and 38% of students were proficient in math while 72% of white students and 28% of students were proficient in reading. Cultural and language issues play important roles in explaining these differences. Economic poverty is also a major contributor to the relative performance of the two groups. Similar problems exist among all households experiencing economic poverty, regardless of the ethnicity of household members. Causes of Poverty Some people are not in poverty because they have inherited wealth from their families and this wealth includes financial and physical assets such as stocks, bonds, land, and other property that provides them 460 Copyright 2008 by MCEE ( Economics: The Study of Choices

5 with substantial annual incomes. Many people with incomes above the poverty line did not receive such inheritances, but they do have the ability to earn income from the sale of their time and effort in the market for labor. They have a considerable amount of what economists call human capital. A person s human capital has two major components: The person s health status and the person s skills. An individual s health status is affected by their genetic makeup (about which they can do nothing), their nutrition (health choices made today) and nutritional history (especially their pre-natal and early childhood nutrition), and their access to health care. Their skills are determined by their innate abilities and their level of education and training (both in school and on-the-job). The market value of an individual s human capital is also affected by the value employers place on the skills the individual possesses, especially with regard to the relative scarcity of workers with a particularly necessary set of skills. Adults in poverty typically have low levels of human capital. Often an adult in poverty has poor physical and/or psychological health and limited access to health care. People with poor health may not be able to work at all or have frequent absences from work. Where psychological health is poor, people may have difficulty with interpersonal relationships in the work place. Individuals with low levels of education have limited skills, and often the skills they do have are plentiful in the market place and therefore are bought and sold at a low price. The result is that many adults with low levels of human capital have difficulty obtaining and retaining jobs and receive low wages for their work because of their limited sets of skills. The laws of supply and demand also matter. The likelihood that a person will be poor increases when the person lives in a community in which job opportunities are scarce. Even highly skilled individuals receive lower incomes when they live in places where there is little or no demand for their skills. For example, lawyers and physicians in highly rural communities, on average, earn much lower incomes than they would if they lived in densely populated areas where the demand for the services they provide is much greater. Individuals with limited skills face similar problems, especially when there is little demand for their labor skills but lots of competition from other workers for the jobs that are available. Many adults living on Copyright 2008 by MCEE ( Economics: The Study of Choices 461

6 have limited skills and substantial health problems, and face low levels of demand for the skills they are able to offer. As a result, they have low incomes and live in economic poverty. Many non-indians with limited skills who live in highly rural areas also experience economic poverty for the same reasons. In addition, feelings of inadequacy, lack of self worth, and the limited availability of recreational opportunities lead to much higher rates of alcoholism and drug abuse. These addictions compound the problems many adults with limited human capital face in addressing their poverty status. Poverty, health care, and health status In the United States, while the MEDICAID program provides health care for many poor people without health care insurance, most health care is provided to people with jobs and paid for through private health insurance plans. These health insurance plans are subsidized by the federal and state governments because employer and some employee contributions to such health care plans are not subject to income tax or corporate profits taxes. Many families in poverty are not covered by these health insurance plans because no one in the family has a job or the employers for whom family members work do not provide health care benefits. Access to health care, and in particular high quality health care, is therefore much more limited for families in poverty. On reservations, the problem of access to health care for the poor is addressed, to some extent, by federal policy through the federal Indian Health Service (IHS). The IHS provides health care to an estimated 55% of all s in the United States, including individuals who live on and off tribal reservations. It is a major provider of health care to s living on reservations; but, on a per person basis, has an estimated 40% less in funding than typical private health care insurance programs. As a result, IHS provides fewer health care services for low income than those provided to most Americans who are insured under typical private health care programs (including programs provided to federal government employees). Poverty and education Children who are growing up in poor households often experience 462 Copyright 2008 by MCEE ( Economics: The Study of Choices

7 limited opportunities. In many of those households, the parents (or single parent, or other guardian of the child such as an aunt or grandparent) have limited educations. In many poor households, primary care providers have limited reading, math, and other academic skills and therefore, education in the home is limited. Further, in many low income households, children have inadequate diets, come to school hungry, and as a result, are less able to concentrate and learn. Typically, a poor child s home is located in a low income neighborhood where the members of the child s peer groups also often live. In many of these households little education is provided and so peer support for education is limited. In many such neighborhoods, the schools are poorly managed (partly because of lack of parental involvement) and poorly funded (partly because of low property tax bases). These forces all contribute to the fact that children who grow up in poverty are more likely to have limited human capital, to be low wage earners, and to remain in poverty as adults compared to children who grow up in households with higher incomes. In the context of communities, some American Indians view formal education with suspicion. As a result, they may be reluctant to support their children s educational pursuits. Some still regard western schools as tools for Indian cultural destruction, while others hold deep feelings about their own negative experiences in school. In some instances, s who have succeeded in obtaining significant education become disillusioned after returning to their home communities where they discover that the economic infrastructure for rewarding the skills they have developed does not exist. Students surrounded with these kinds of familial and community influences often receive little encouragement to invest in education. Poverty and crime The fact that individuals with limited human capital earn relatively low wages or fail to obtain any employment also tends to encourage criminal activity. A person who commits a crime for economic gain (say a robbery or sale of illegal drugs) expects to obtain economic benefits from the crime, but also incurs economic costs in committing the felony. These costs include the value of the time involved in planning and committing the crime and escaping from the crime scene undetected, as well as costs of other resources needed for the criminal activity Copyright 2008 by MCEE ( Economics: The Study of Choices 463

8 (for example, a get away vehicle and breaking and entering tools). In addition, however, the individual runs the risk of being caught and jailed or fined. If incarcerated, the convicted criminal incurs the cost of losing income from the sale of their labor while in prison. A convicted felon faces a substantial reduction in their ability to earn income once they have served their sentence. Individuals with limited human capital who can only earn low wages, if they are able to find a job at all, have much less to lose from being caught than do individuals with high levels of human capital. So the opportunity costs of committing crimes are typically much lower for individuals in poverty than for individuals with higher incomes. Moreover, the economic benefits of crime tend to be viewed as larger by individuals with low, or no income than by individuals with higher incomes. This is because, in many cases, the value of an extra dollar of income is higher for the poorer person. An extra $100 obtained from illegal activity is likely to be viewed as more valuable by an individual earning $200 a week than an individual earning $1,500 a week because the poorer individual is less able to meet their basic needs. An important related issue concerns those living in low income neighborhoods who suffer from the crimes that are committed. Individuals who live in low income neighborhoods incur fewer costs if they commit a local crime. This is in part because they are less likely to be caught in their own neighborhoods and in part because fewer transportation and other costs are likely to be incurred. As a result, crime is generally more prevalent in low income neighborhoods and individuals in poverty are more likely to be the victims of crime than individuals with higher incomes. In the United States as a whole, crime is generally more prevalent in communities where poverty is more extensive. In Montana, crime rates are generally higher on tribal reservations than in other communities. In large part, this is because poverty is more extensive on Montana s tribal reservations than in most other Montana communities. Su m m a r y Montana s Tribal Reservation communities are an important component of Montana s economy. However, many households have incomes well below the poverty line, 464 Copyright 2008 by MCEE ( Economics: The Study of Choices

9 partly because the adult members of those households have limited human capital (relatively poor health and limited skills). The economic consequences of poverty are extensive and include lower levels of health care, limited in-home and in-school education, and higher crime rates. These forces contribute to an inter-generational cycle of poverty that is not easy to break. The economic consequences of poverty occur in many low income households, regardless of their ethnic make-up. They are, however, prevalent on Montana s Tribal Reservations because so many people in those communities are poor. Some of the most critical economic policy issues in the United States today concern poverty. They include education policy, health care policy, child nutrition programs, policies that provide incomes to poor households, policies that address crime and the treatment of criminals, and policies that create economic opportunities for workers with limited skills. So far, these programs have important but limited impacts on the long run policy goal of eradicating poverty in the United States. Why do you think that is the case? CONCEPTS 1. Poverty 2. Unemployment 3. Median Income 4. Human Capital 5. Poverty Cycle OBJECTIVES 1. Understand the meaning of poverty. 2. Realize that there is a poverty cycle. 3. Understand the meaning of median income. 4. Realize that human capital can help people out of poverty. CONTENT STANDARDS National Content Standards in Economics 1. (Standard 4) People respond predictably to positive and negative Copyright 2008 by MCEE ( Economics: The Study of Choices 465

10 incentives. 2. (Standard 10) Institutions evolve in market economies to help individuals and groups accomplish their goals. 3. (Standard 13) Income for most people is determined by the market value of the productive resources they sell. 4. (Standard 15) Investment in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living. 5. (Standard 19) Unemployment imposes costs on individuals and nations. Montana Social Studies Content (Standard 5) 1. (Benchmark 1) Identify and explain basic economic concepts. 2. (Benchmark 2) Use basic economic concepts to explain current and historical events. 3. (Benchmark 3) Understand the social costs and benefits to society of allocating goods and services through private and public sectors. 4. (Benchmark 4) Understand how different values and beliefs influence economic decisions in different economic systems. TIME REQUIRED 1-2 class periods MATERIALS Overhead projector Transparency pen Visuals for overhead projector: Copy to transparency. NVisual-1: Income NVisual-2: Household budget NVisual-3: Human capital NVisual-4: Montana income NVisual-5: Poverty NVisual-6: Cycle of poverty Lesson worksheets: Copy for each student:. 2Lesson assessment 466 Copyright 2008 by MCEE ( Economics: The Study of Choices

11 PROCEDURE 1. Talk with students about household income. Household income is the annual income that is earned by a household. Income can be earned by working for a wage or salary, it can be earned from interest on money invested, and it can be earned by renting or selling an owned resource, such as the income that could be earned by renting your garage for someone else to use. LQuestion: Do any students in class earn an income? LQuestion: What do they do to earn an income? Answer: Some students may have a job. Their income would be the wage or salary paid to them for their labor. This would be part of their household income. Other students may have investments from which they receive interest income. An allowance would be income to the individual receiving it but it may not add to the household income if it is a transfer from another family member. 2. Income is often discussed in relative terms. LQuestion: Think about your income as a teacher. Is it higher, lower, or about the same as the income level of other citizens? When discussing income, we often refer to the median income or the average income. The median income is the middle income of a group. The average income is the sum of the incomes in a group divided by the number in that group. Display NVisual-1: Income. Have students determine the median income. The median income is also the middle income; $50,000. The median income of this group is the third richest and the third poorest household of the group. The average income is the sum of all incomes in the group ($10,000 + $25,000 +$50,000 $115,000 + $200,000 = $400,000) divided by the number in the group (5). The average income is $80,000 ($400,000/5). The median income and the average income are typically not the same. 3. Assign students an annual household income level. Students with last names A through E earn an annual household income of $10,000. Last names beginning with F through J will earn an annual income of $25,000; K through O will have an income of $50,000; P through T incomes we will be $115,000 and U through Z will earn $200,000 a year. Ask students to think about what type of housing they will live in and what type of car they might drive given their assigned Copyright 2008 by MCEE ( Economics: The Study of Choices 467

12 income level. Working around the room ask a few students to share ideas about how they may live with their assigned income level. 4. Have students with the same income level sit together as a group. Each group will make up a single household. Display NVisual-2: Household budget. Have student households think about how they will spend their money given the assigned household income. NVisual-2: Household budget, provides some ball park figures from which they can work. Talk about the trade-offs students will have to make, particularly those assigned a low income level. Brainstorm some of the many goods and services not included in the budget table provided. Not included in the budget is education. One way for households to increase income is to increase human capital through education. 5. Display NVisual-3: Human capital. Human capital refers to a person s skills and their health status. Skill sets include what we are born with and what is learned through education and experience. We can be more productive with greater human capital. That human capital is also affected by health status. 6. Tell students that salaries and wages depend upon a person s human capital and the value potential employers place on that skill set. People with high human capital tend to be productive and earn a higher level of income as long as that human capital is a skill set desired by potential employers. Adults in poverty typically have low levels of human capital. Often an adult in poverty has poor physical and/or psychological health and limited access to health care. People with poor health may not be able to work at all, or have frequent absences from work. Where psychological health is poor, they may also have difficulty with interpersonal relationships in the work place. Talk with students about how poor health could impact productivity and wages. As an employer you cannot afford to pay an unproductive worker as much as a productive worker. 7. Now discuss the variation in skill sets and human capital. Individuals with low levels of education and experience have limited skills, and often the skills they do have are plentiful in the market place and therefore are bought and sold at a low price. Think about the local 468 Copyright 2008 by MCEE ( Economics: The Study of Choices

13 fast food joint and the skills necessary for employment. Compare that to the skills necessary to work at the local doctor s office. LQuestion: Which pays more? Make a list of low paying jobs and high paying jobs in your community. Discuss the reasons for different wages. Answer: Low skill jobs often produce less than high skill jobs, hence earn lower wages. There is often a greater supply of low skill workers than high skill workers. A supply curve shifted further right will result in lower wages. If you live in a rural setting there may be fewer jobs available, hence a lower demand for workers and lower wages. 8. You may wish to review the laws of supply and demand. The likelihood that a person will be poor increases when the person lives in a community in which job opportunities are scarce. Even highly skilled individuals receive low incomes when they live in places where there is little or no demand for their skills. For example, lawyers and physicians in highly rural communities, on average, earn much lower incomes than they would if they lived in densely populated areas where the demand for the services they provide is much greater. Individuals with limited skills face similar problems, especially when there is little demand for their labor skills and lots of competition from other workers for the jobs that are available. 9. Discuss the idea of poverty with students. poverty is a level of income determined annually by the US Census Bureau. It is calculated using the proportion of income spent on food as determined in 1963, though adjusted for changing prices (inflation) over time. It is intended to be an estimate of the level of income necessary for an individual or family to cover their basic needs. The poverty line, also called a threshold, is adjusted for an individual s age and the number of people living in a household. In 2006, the poverty level for a family of four in the United States was a household income of $20,444. Household earnings below that threshold would be considered living in poverty status. You can find poverty tables and calculations by accessing poverty.html. LQuestion: How many students in the exercise that assigned Copyright 2008 by MCEE ( Economics: The Study of Choices 469

14 household income levels felt that they were living under the poverty threshold? LQuestion: How many actually were? 10. Help students put poverty into perspective. About 12% of U.S. citizens live under the poverty line. In the United States in 2005, the average per person, or per capita, income was $34,471. The average per capita income in Montana was $29,015. Though the average Montanan income exceeds the poverty level, many living on one of the states seven Indian Reservations do not; in Big Horn County (where much of the Crow Reservation and parts of the Northern Cheyenne Reservation are located) income was $20,866; in Roosevelt County (most of the Fort Peck Reservation) it was $20,755; in Glacier County (Blackfeet Reservation) it was $22,091; and in Blaine County (Fort Belknap Reservation) it was $20,893. NVisual-4: Montana Income, shows the county income levels in Montana in You can see the different incomes in areas that contain Indian Reservations. 11. Talk with students about how s influence Montana. Montana is the state with the largest proportion of s in its population. You may wish to take a look at history here, or stick with the current social and economic implications that follow. About 7.3% of the Montana population identify themselves as s. Many of them, though not all, live on one of the state s seven reservations. Many of those live in poverty. Share with students that about 24.3% of s live in poverty. That is about twice the rate of non-indians. While nationally and in Montana the unemployment rate is less than 5%, unemployment rates reported among the reservations are between 20% and 80%. 12. Use NVisual-5: Poverty, to think about some of the reasons that poverty may be more prevalent on Tribal Reservations than elsewhere. Brainstorm some of the ideas related to human capital that may impact income levels on reservations. a. Answer: Many reservations are in highly rural areas and are geographically isolated from major centers of population. The demand for labor, skilled or unskilled, is relatively low in these 470 Copyright 2008 by MCEE ( Economics: The Study of Choices

15 areas putting downward pressure on wages. b. Answer: Many adults living on reservations in Montana have limited skills and substantial health problems. As a result, they have low incomes and live in economic poverty. Many non-s with limited skills who live in highly rural areas also experience economic poverty for the same reasons. c. Answer: Feelings of inadequacy, lack of self worth, and the limited availability of recreational opportunities lead to much higher rates of alcoholism and drug abuse. These addictions compound the problems many adults with limited human capital face in addressing their poverty status. d. Answer: Access to health care can be more difficult because the regions are remote and, if no family member is working, there may be no health insurance coverage. Note that there is some federal funding through the Indian Health Service, though it is less than half the typical coverage an insured citizen receives. e. Answer: Children growing up in poor households often have limited education. In many households in poverty, primary care providers have limited reading, math, and other academic skills and so education in the home is also limited. f. Answer: In many low income households, children have inadequate diets, come to school hungry, and as a result, are less able to concentrate and learn. g. Answer: Typically, a poor child s home is located in a low income neighborhood where the members of the child s peer groups also often come from homes in which little education is provided and so peer support for education is limited. In many such neighborhoods, the schools are also poorly managed (partly because of lack of parental involvement) and poorly funded (partly because of low property tax bases). These forces all contribute to the fact that children who grow up in poverty are more likely to have limited human capital, to be low wage earners, and to remain in poverty as adults than are children who grow up in households with higher incomes. h. Answer: In the context of communities, some s view formal education with suspicion. As a result, they may be reluctant to support their Copyright 2008 by MCEE ( Economics: The Study of Choices 471

16 children s educational pursuits. Some still regard western schools as tools for Indian cultural destruction, while others hold deep feelings about their own negative experiences in school. In some instances, s who have succeeded in obtaining significant education become disillusioned after returning to their home communities where they discover that the economic infrastructure for rewarding the skills they have developed does not exist. Students surrounded with these kinds of familial and community influences often receive little encouragement to invest in education. 13. Talk with students about the cycle of poverty. Poverty often cycles from one generation to the next. Much of what was discussed regarding the prevalence of poverty on Tribal Reservations is relevant here, too. Using NVisual-6: Cycle of poverty, discuss some of the reasons for this. a. Answer: Members of households in economic poverty often have poorer health, including higher incidences of diabetes, obesity, cancer, and heart disease. Poor health reduces human capital and productivity which leads to lower wages and less ability to pay for health care, exacerbating health issues. b. Answer: The difficulties confronted by adult members of households in poverty often make worse the challenges children in those households face in achieving good health and being successful in school and college. As a result, on average, children from poor households are less successful in school and college. They are also less prepared to compete for jobs and to perform successfully in the jobs they obtain. c. Answer: Among members of households in poverty, problems with alcohol and drug abuse are more prevalent. Again, the difficulties confronted by adult members of households in poverty worsen the challenges children in those households face and they are often less successful and less well prepared as a result. 14. Further impacting the cycle of poverty is the connection between poverty and crime. Remind students about the concept of 472 Copyright 2008 by MCEE ( Economics: The Study of Choices

17 opportunity cost, which is the value of the next best alternative given up. People in poverty often have a low opportunity cost for work because they do not earn much if they are working at all. This makes the benefits of crime appear relatively high. a. Imagine a person that earns $200 per week. An additional $100 gained through crime could be huge in helping to cover basic necessities. Now imagine a person that earns $1500 per week. That additional $100 from crime is not likely to be valued as highly. The value of an additional dollar of income is likely to be higher for a poorer person. b. Now talk about the costs to the criminal of committing a crime. There are the costs of the time involved in planning and committing the crime and escaping from the crime scene undetected. Remind students that for someone with a low wage or no job the opportunity cost of their time is fairly low. The individual also runs the risk of being caught and jailed or fined. If incarcerated, the convicted criminal incurs the cost of losing income from the sale of their labor while in prison. A convicted felon faces a substantial reduction in their ability to earn income once they have served their sentence. Individuals with limited human capital who can only earn low wages, if they are able to find a job in the first place, have much less to lose from being caught than do individuals with high levels of human capital. So the opportunity costs of committing crimes are typically much lower for individuals in poverty than for individuals with higher incomes. c. Finally, have the class think about who suffers from the crime that is committed. Individuals who live in low income neighborhoods incur fewer costs if they commit a local crime, partly because they are less likely to be caught in their own neighborhoods and partly because fewer transportation and other costs are likely to be incurred. As a result, crime is generally more prevalent in low income neighborhoods and individuals in poverty turn out to be more likely to be the victims of crime than individuals with higher incomes. In the United States as a whole, crime is generally more prevalent in communities where poverty is more extensive. In Montana, crime rates are generally higher on tribal reservations than in other communities. Copyright 2008 by MCEE ( Economics: The Study of Choices 473

18 CLOSURE Lesson review 1. LQuestion: What is poverty? Answer: A level of income set by the U.S. Census Bureau under which people are presumed to be poor and unable to obtain their basic needs. 2. LQuestion: How do you determine a median income? Answer: The median income is the middle income. It is the middle number of a list of incomes ordered numerically. It is different than the average income which is calculated by summing all incomes in a group and dividing by the number in that group. 3. LQuestion: What is human capital? Answer: A person s human capital has two major components: The person s health status and the person s skills. An individual s health status is affected by their genetic makeup (about which they can do nothing), their nutrition and nutritional history (especially, their prenatal and early childhood nutrition), and their access to health care. Their skills are determined by their innate abilities and their level of education and training (both in school and on-the-job). The market value of an individual s human capital is also affected by the value employers place on the skills the individual possesses, especially with regard to the relative scarcity of workers with a particularly necessary set of skills. 4. LQuestion: Why does poverty often cycle from one generation to the next? Answer: Members of households in economic poverty often have poorer health (including higher incidences of diabetes, obesity, cancer, and heart disease) and lower levels of educational attainment than members of households that are not in poverty. Among members of households in poverty, problems with alcohol and drug abuse are more prevalent and, for several reasons, the incidence of criminal activity and imprisonment is also greater. Poor households also tend more frequently to be the victims of crime. The difficulties confronted by adult members of households in poverty also often exacerbate 474 Copyright 2008 by MCEE ( Economics: The Study of Choices

19 the challenges children in those households face in achieving good health and being successful in school and college. As a result, on average, children from poor households are less successful in school and college, and less prepared to compete for jobs and to perform successfully in the jobs they obtain. The outcome is what is sometimes called the poverty cycle. ASSESSMENT Multiple-choice questions 1. LQuestion: What is the poverty threshold? a. Level of income at which people believe they cannot cover their basic needs b. A level of income determined by the U.S. Census Bureau that estimates the income necessary for people to cover their basic needs c. A level of income and estimated asset value under which it is presumed people are poor d. A level of household income under which the government will provide housing and food 2. LQuestion: Given the following list of household incomes, what is the median income: a. $10,000 b. $30,000 c. $40,000 d. $45,000 e. $50, LQuestion: How does human capital influence wages? a. Individuals with greater human capital will likely earn higher wages. b. Individuals with greater human capital will likely earn lower wages. c. Individuals with lower human capital will likely earn higher wages. d. Human capital does not influence wages, productivity does. 4. LQuestion: Which of the following does human capital include? Copyright 2008 by MCEE ( Economics: The Study of Choices 475

20 a. Individual s skills, education, income, and assets b. Individual s income, assets, and interest earned c. Individual s skills and health status d. An individual s health and capital assets 5. LQuestion: What is the poverty cycle? a. The cycle of the number of people living in poverty as it rises and decreases over time b. The idea that poverty often skips a generation c. The cycle of increasing and decreasing incomes in a community over time d. The idea that poverty often cycles from one generation to the next Answers: 1. b 2. b 3. a 4. c 5. d Discussion/Essay Questions 1. LQuestion: Why does poverty often cycle from one generation to the next? Answer: Members of households in economic poverty often have poorer health (including higher incidences of diabetes, obesity, cancer, and heart disease) and lower levels of educational attainment than members of households that are not in poverty. Among members of households in poverty, problems with alcohol and drug abuse are more prevalent and, for several reasons, the incidence of criminal activity and imprisonment is also greater. Poor households also tend more frequently to be the victims of crime.the difficulties confronted by adult members of households in poverty also often exacerbate the challenges children in those households face in achieving good health and being successful in school and college. As a result, on average, children from poor households are less successful in school and college, and less prepared to compete for jobs and to perform 476 Copyright 2008 by MCEE ( Economics: The Study of Choices

21 successfully in the jobs they obtain. The outcome is what is called the poverty cycle. 2. LQuestion: What is human capital? Answer: A person s human capital has two major components: The person s health status and the person s skills. An individual s health status is affected by their genetic makeup (about which they can do nothing), their nutrition and nutritional history (especially, their prenatal and early childhood nutrition), and their access to health care. Their skills are determined by their innate abilities and their level of education and training (both in school and on-the-job). The market value of an individual s human capital is also affected by the value employers place on the skills the individual possesses, especially with regard to the relative scarcity of workers with a particularly necessary set of skills. NOTES Copyright 2008 by MCEE ( Economics: The Study of Choices 477

22 NOTES Copyright 2008 by MCEE ( Economics: The Study of Choices 478

23 Module-15 O v e r h e a d v i s u a l s The economics of poverty

24 Vi s u a l Visual-1: Income is the amount of money a household earns in a year. Is the middle income of a group numerically ordered. is the sum of a group of incomes divided by the number in that group. What is the median income of this group? What is the average income of this group? N480 } $10, $25, $50, $115, $200,000.00

25 Vi s u a l Visual-2: household budget N481

26 Vi s u a l Visual-3: Human Capital refers to a person s skill and ability to perform. innate Abilities (what we are born with) Education Experience We can be more productive with greater human capital. Human capital is also affected by health status N482

27 Vi s u a l Visual-4: montana Income N483

28 Vi s u a l Visual-5: poverty of possible reasons for extreme poverty in certain regions, on Tribal reservations, for example. N484

29 Vi s u a l Visual-6: Cycle of poverty of possible reasons that poverty cycles from generation to generation. low skills Low education poor health No Job Poor housing N485

30 Vi s u a l Visual-6: Cycle of poverty N486

31 Module-15 L e s s o n w o r k s h e e t s The economics of poverty

32 Lesson Lesson Assessment Multiple-choice questions 1. LQuestion: What is the poverty threshold? a. Level of income at which people believe they cannot cover their basic needs b. A level of income determined by the U.S. Census Bureau that estimates the income necessary for people to cover their basic needs c. A level of income and estimated asset value under which it is presumed people are poor d. A level of household income under which the government will provide housing and food 2. LQuestion: Given the following list of household incomes, what is the median income: a. $10,000 b. $30,000 c. $40,000 d. $45,000 e. $50, LQuestion: How does human capital influence wages? a. Individuals with greater human capital will likely earn higher wages. b. Individuals with greater human capital will likely earn lower wages. c. Individuals with lower human capital will likely earn higher wages. d. Human capital does not influence wages, productivity does. 4. LQuestion: Which of the following does human capital include? a. Individual s skills, education, income, and assets b. Individual s income, assets, and interest earned c. Individual s skills and health status d. An individual s health and capital assets 5. LQuestion: What is the poverty cycle? a. The cycle of the number of people living in poverty as it rises and decreases over time b. The idea that poverty often skips a generation c. The cycle of increasing and decreasing incomes in a community over time d. The idea that poverty often cycles from one generation to the next Copyright 2008 by MCEE ( Economics: The Study of Choices

33 Lesson Lesson Assessment Discussion/Essay Questions 1. LQuestion: Why does poverty often cycle from one generation to the next? 2. LQuestion: What is human capital? Co p y r i g h t 2008 b y MCEE (w w w.e c o n e d m o n ta n a.o r g) Ec o n o m i c s: Th e St u d y o f Ch o i c e s 2489

34 NOTES Copyright 2008 by MCEE ( Economics: The Study of Choices 490