Inequality

Why did we include this measure?

The Gini coefficient is a common measure of inequality and describes the extent to which a measure like income is concentrated within certain groups. When the income Gini coefficient is zero, it means everyone has exactly the same income. When it is 100, it means that a single person has all the income. (Of course, these extremes almost never occur in practice, but the extremes are useful for understanding the scale.) The specific income Gini coefficient we use captures all sources of income, including wage earnings as well as pensions, government taxes and transfers. We also prefer this measure because it reflects the income of all households, rather than comparing only the rich versus the poor (i.e., those at the ends of the income distribution).

Why did we include this measure?

There is general agreement that people should be able to provide the most basic material needs for themselves and their families. Poverty measures capture this by identifying households where these needs are not being met.

An advantage of the Supplemental Poverty Measure we use is that it accounts for a wide variety of factors affecting the economic resources people have available. First, it counts more than just wage income and includes cash benefits and some in-kind government supports that are intended to prevent poverty. Income from Social Security, Supplemental Nutrition (SNAP), Earned Income Tax Credit (EITC), Child Tax Credit, and housing subsidies are all included, for example. Second, this supplemental poverty measure subtracts necessary expenses, such as taxes and out-of-pocket health expenses, from that income when deciding whether someone is living in poverty. (Medicare and Medicaid benefits are not directly counted as income, but these programs affect out-of-pocket health expenses, which are accounted for as necessary expenses.)