A persons earnings depend on wage rate he/she receives which depends on the supply and demand for labor of the occupation. I am sure you may have seen that BLS publish occupational outlook which lists numerous occupations and corresponding wages. Some occupations have very high wages and some have very low wages. The more specialized the occupation less people supply that type of labor thus creating a scarce commodity for firms to buy. This prompts firms to offer higher wages. As long as there are differences in wages there will be income inequality in the country. Factors that determine wages are also the causes of how the country’s income is distributed among wage earners. Table 1 of this chapter 20 shows the yearly family income distribution for the United states.
Poverty on the other hand apply to households that earn income below a level sufficient to maintain a independent living. Federal government has guidelines for such minimum income levels. When the income is below the level required to live, it becomes necessary for the government to intervene and provide the means for these people to survive. One of the goals of the World Bank is to alleviate poverty in the world. Simple giving food does not solve this problem. What can we to reduce poverty in the world?
-Any thoughts or comments?
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