1. Are incomes distributed equally in the United States?
   
   No. In a market system, income is derived from the ownership of resources: people with more resources, or with more highly valued resources, receive higher incomes. Doctors are more highly paid than ditch diggers; people who have accumulated lots of capital receive more interest than people without any savings. In the United States, the top 20 percent of the population earns over 44 percent of the total national income, and the bottom 20 percent of the population earns less than 5 percent of the national income.
   
   A Lorenz curve shows the degree to which income is distributed equally (or unequally) within a society. If all incomes are the same, the Lorenz curve is a straight line; the more unequally distributed incomes are, the more bowed the Lorenz curve becomes. Lorenz curves provide an easy way to compare income distributions across countries or within the same country at different times.
   
   
2. How is poverty measured, and does poverty exist in the United States?
   
   Poverty can be measured in two ways. Lorenz curves look at poverty in relative terms: What share of the national income do the poorest people get? Poverty also can be looked at in absolute terms: What per capita income is necessary to meet basic human needs? The official U.S. poverty statistics gathered by the federal government use an absolute standard to set the minimum income level that avoids poverty, based on the cost of a nutritionally adequate diet. Officially, income includes earnings and cash transfers, but not all in-kind transfers (for example, food stamps and Medicaid). Using this standard, over 14 percent of the U.S. population—over 36 million people—live in poverty.
   
   
3. Who are the poor?
   
   The incidence of poverty is distributed unevenly across groups within the United States. Age is one factor here. Younger and older people make up most of the poverty group. The percentage of families headed by a female that are below the poverty line is much higher than that of families headed by a male; African-American and Hispanic families have larger percentages below the poverty line than do white families.
   
   Many people who are poor stay that way for only a little while; they find new jobs, for example, and move back above the poverty line. But there are large numbers of people for whom poverty is a normal condition. Of those people in poverty at any specific time, about half will still be in poverty in ten years.
   
   
4. What are the determinants of income?
   
   For individuals, the major determinants of income are employment, place of residence, and education. The poor are primarily those without jobs, those who live either in the centers of large cities or in rural areas, and those without much education.
   
   
5. Do government programs intended to reduce poverty benefit the poor?
   
   Changing the income distribution in society has been the main target of government policy to reduce poverty; since 1929, income inequality in the United States has decreased. Progressive income taxes, whereby richer people pay proportionately more of their income in taxes, reduce income inequality and generate revenue that can be used for transfer payments to the poor. These are the main transfer programs:
   
   Social insurance (social security, unemployment insurance, Medicare)
   Cash welfare (Temporary Assistance for Needy Families, Supplemental Security Income)
   In-kind transfers (Medicaid, food stamps, school lunch program, energy assistance)
   Employment programs (jobs and job training, Head Start)
   
   All of these policies may also harm the poor, by creating incentives that discourage people from trying to climb out of poverty. Progressive taxes can reduce incentives to increase your income. Transfer programs that reduce or eliminate benefits when people go to work discourage working. Economists have long proposed a negative income tax (NIT) as a way to overcome the effects of welfare on incentives to work.
   
   
6. Why are incomes unequally distributed among nations?
   
   The major reason standards of living differ among countries is that different countries have had different economic growth rates over the last several centuries. Some countries have grown rapidly for a long time, giving them a high standard of living, while other countries have experienced little or no economic growth, leaving their living standards lagging behind.
   
   Most countries that have grown more rapidly share some common institutions: free markets, political freedom, and enforcement of private property rights.