Question

6\. To keep a family of four at the poverty line a person working a 40 -hour week would need to earn about _____ an hour. a) \(\$ 7\) b) \(\$ 9\) c) \(\$ 11\) d) \(\$ 13\) e) \(\$ 15\)

Short answer

The most suitable answer is \( \$13 \) per hour (option d) to keep a family of four at the poverty line, given a person works a 40-hour week.

Step-by-step solution

Understanding the Problem

The problem deals with calculating the wage per hour required for a person working 40-hour per week to keep a family of four above the poverty line. Understand that this involves the relation between wage rates, working hours, and the cost of living.

Recalling the Concepts

Recall that the poverty line is a level of personal or family income below which one is classified as poor according to governmental standards. Also, remember that the cost of living for a family of four depends on various factors like housing, food, healthcare, transportation, etc.

Estimation Strategy

Given that the person is working a 40-hour week, this means he or she is working for about 2080 hours in a year (40 hours per week times 52 weeks in a year). The yearly income needed to keep a family of four above the poverty line is calculated by multiplying the appropriate wage rate by the total number of hours worked in a year.

Checking the Options

To estimate the wage rate, consider the options provided. It's important to calculate the yearly income based on each wage rate and then compare it with the standard poverty line for a family of four. Unfortunately, without more specific figures it's not possible to calculate exactly. However, taking into consideration current living wage rates and poverty line approximations, compare each option.

Selecting the Suitable Option

As per US Living wage calculations and governmental standards in recent years, the poverty line for a family of four is typically closer to around \(25,000 to \)26,500 per year. This suggests that a person would need to earn somewhere between \(12 and \)13 per hour to maintain the minimum standard of living for a family of four. Therefore, based on the choices provided and the current conditions, the closest answer is (d) 13$. But note that these figures vary from year to year, and might differ depending upon the specific policies or economic conditions of a country or a region.

Key concepts

Living Wage

When we talk about the concept of a living wage, we are referring to the minimum income necessary for a worker to meet their basic needs. This includes housing, food, healthcare, and other essentials that contribute to maintaining an adequate standard of living.

A living wage is typically higher than the minimum wage because it considers what people actually need to earn to live on, rather than just the market's lowest pay. This is important because earning a living wage ensures that individuals and families are not only surviving but actually living with dignity and security.

The living wage is also adjusted for inflation and may vary according to geographical areas due to the difference in the cost of living. For instance, the living wage in a large metropolitan area with high housing costs will be significantly more than in a rural area.

Cost of Living

The cost of living is the amount of money needed to support a specific lifestyle in a given place. It is determined by the price of a 'basket' of goods and services that are typically used by an average household. This basket can include things like rent, food, transportation, entertainment, and healthcare.

The cost of living varies greatly between different geographic locations. For instance, living in downtown Manhattan is much more expensive than living in a small town in the Midwest. When considering the poverty line, understanding the cost of living in the relevant area is crucial because it directly impacts what wage would be needed to stay above that line.

Cost of living calculations are used for several purposes, including determining salaries for transferred employees, cost of living adjustments in contracts, and determining a living wage.

Income Standards

Organizations and governments establish income standards to classify individuals and families into economic categories such as poor, middle-class, or wealthy. These standards often include measures like the poverty line, median income, and living wage.

The poverty line is one such standard, below which a person or family is deemed to be in poverty. It’s based on the assumption of what income is needed to cover basic necessities. Governing bodies use these standards to design policies and distribute services and benefits, like health care subsidies and food assistance programs.

However, critics argue that income standards sometimes fail to account for the full picture of economic hardship, such has high debt or regional cost of living differences. Therefore, while income standards are helpful for broad policies, they are often complemented by more nuanced measures for effective economic policy and personal financial planning.

Economic Conditions

The term economic conditions refers to the state of the economy in a specific area, which can range from a neighborhood to an entire country or even globally. Factors influencing economic conditions include unemployment rates, inflation rates, gross domestic product (GDP), and many others.

Economic conditions are significant when discussing issues like the poverty line because these conditions affect the availability of jobs, the level of wages, and the cost of goods and services. In times of economic growth, for example, we often see wages increase and unemployment decrease, which could, in turn, affect the cost of living and the calculation of a living wage.

Therefore, understanding economic conditions is essential for policy-makers who determine minimum wage laws and what constitutes a living wage. It's also crucial for individuals who are trying to budget and plan for their future in an ever-changing economic landscape.