POSC411 Lecture Notes - Lecture 2: Mollie Orshansky, Working Poor, Financial Capital
16 May 2018
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Poverty—The Nature of the Problem (3/15)
• The Concept of Minimum Needs
o Bega y asselig a ietoy of Miiu eeds of hua susistee; suh a list
includes:
▪ Food, clothing, shelter, fuel, transportation
o Persons who cannot obtain all the items of the list will be considered poor
o Poverty is understood as the inability to obtain the goods and services sufficient to meet
socially defined minimum needs
• Counting the Poor and Measuring Poverty: Units of Measurements
o The ability to obtain needed goods and services is determined by purchasing power;
accordingly, we can simplify the poverty standard by expressing that measure
o The est sigle idiatos of a peso’s purchasing power is income; income is the primary
measure used
▪ Income—the money received on a regular basis from work, investments, labor, etc.
• There are complications because income is not the sole determinate of
purchasing power (i.e. assets, credit)
▪ Despite these limitations, income is the single best index government can use to
measure poverty
o Other units of measurements:
▪ Housing quality
▪ Consumption
▪ Access to health services
▪ Financial capital
• Poverty Threshold: Council of Economic Advisors
o I 1963, the Pesidet’s Couil of Eooi Adisos as appoited to idetify the iiu
income needed by poor families
o The CEA accepted the notion that food requirement should be the major determinant of
income needed
o Accordingly, they set out to determine the minimum nutritional requirement of the typical
family
o Studies had shown that poor families spend approximately 2/3 of their income on food
o Using this observation as a benchmark the CEA suggested multiplying the basic good budget by
two to determine how much income was needed by poor families
• Poverty Line as a Threshold: Social Security Administration
o First calculations of the poverty line were developed by Mollie Orshansky of the Social Security
Administration in 1964
▪ Orshansky took a minimal daily diet cost prepared by the USDA and multiplied it by 3
(which was stated as the official poverty line)
o She then adjusted for the varying family needs based on whether
▪ Family size
▪ Resident (rural or urban)
▪ Sex of head or household
▪ Number of children
• Using these four variables plus the minimal diet as a base, she identified 124
family types and calculated a poverty budget for each
o Since 1981, the figures for female-headed households and farm families are no longer used to
calculate poverty rates; Today’s poety lie euals
▪ The cost of the Thrifty Plan for a family multiplied by three
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