Future Poverty Level 1) What do you expect to see happening with the poverty level in the future? http://www.ssa.gov/policy/docs/ssb/v64n3/v64n3p23.html Notes from class The Poverty Rate A commonly used gauge of the distribution of income is the poverty rate. The poverty rate is the percentage of the population whose family income falls below an absolute level called the poverty line. The poverty line is set by the federal government at roughly three times the cost of providing an adequate diet. This line is adjusted every year to account for changes in the level of prices, and it depends on family size. To get some idea about what the poverty rate tells us, consider the data for 2008. In that year, the median family had an income of $61,521, and the poverty line for a family of four was $22,025. The poverty rate was 13.2 percent. In other words, 13.2 percent of the population were members of families with incomes below the poverty line for their family size. Policies to Reduce Poverty As we have just seen, political philosophers hold various views about what role the government should take in altering the distribution of income. Political debate among the larger population of voters reflects a similar disagreement. Despite these continuing debates, most people believe that, at the very least, 427 428 the government should try to help those most in need. According to a popular metaphor, the government should provide a “safety net” to prevent any citizen from falling too far. Poverty is one of the most difficult problems that policymakers face. Poor families are more likely than the overall population to experience homelessness, drug dependence, health problems, teenage pregnancy, illiteracy, unemployment, and low educational attainment. Members of poor families are both more likely to commit crimes and more likely to be victims of crimes. Although it is hard to separate the causes of poverty from the effects, there is no doubt that poverty is associated with various economic and social ills. Suppose that you were a policymaker in the government, and your goal was to reduce the number of people living in poverty. How would you achieve this goal? Here we examine some of the policy options that you might consider. Each of these options helps some people escape poverty, but none of them is perfect, and deciding upon the best combination to use is not easy. Minimum-Wage Laws Laws setting a minimum wage that employers can pay workers are a perennial source of debate. Advocates view the minimum wage as a way of helping the working poor without any cost to the government. Critics view it as hurting those it is intended to help. The minimum wage is easily understood using the tools of supply and demand, as we first saw in Chapter 6. For workers with low levels of skill and experience, a high minimum wage forces the wage above the level that balances supply and demand. It therefore raises the cost of labor to firms and reduces the quantity of.

1. Future Poverty Level
1) What do you expect to see happening with the poverty level
in the future?
http://www.ssa.gov/policy/docs/ssb/v64n3/v64n3p23.html
Notes from class
The Poverty Rate
A commonly used gauge of the distribution of income is the
poverty rate. The poverty rate is the percentage of the
population whose family income falls below an absolute level
called the poverty line. The poverty line is set by the federal
government at roughly three times the cost of providing an
adequate diet. This line is adjusted every year to account for
changes in the level of prices, and it depends on family size.
To get some idea about what the poverty rate tells us, consider
the data for 2008. In that year, the median family had an income
of $61,521, and the poverty line for a family of four was
$22,025. The poverty rate was 13.2 percent. In other words,
13.2 percent of the population were members of families with
incomes below the poverty line for their family size.
Policies to Reduce Poverty
As we have just seen, political philosophers hold various views
about what role the government should take in altering the
distribution of income. Political debate among the larger
population of voters reflects a similar disagreement. Despite
these continuing debates, most people believe that, at the very

2. least,
427
428
the government should try to help those most in need.
According to a popular metaphor, the government should
provide a “safety net” to prevent any citizen from falling too
far.
Poverty is one of the most difficult problems that policymakers
face. Poor families are more likely than the overall population
to experience homelessness, drug dependence, health problems,
teenage pregnancy, illiteracy, unemployment, and low
educational attainment. Members of poor families are both more
likely to commit crimes and more likely to be victims of crimes.
Although it is hard to separate the causes of poverty from the
effects, there is no doubt that poverty is associated with various
economic and social ills.
Suppose that you were a policymaker in the government, and
your goal was to reduce the number of people living in poverty.
How would you achieve this goal? Here we examine some of the
policy options that you might consider. Each of these options
helps some people escape poverty, but none of them is perfect,
and deciding upon the best combination to use is not easy.
Minimum-Wage Laws
Laws setting a minimum wage that employers can pay workers
are a perennial source of debate. Advocates view the minimum
wage as a way of helping the working poor without any cost to
the government. Critics view it as hurting those it is intended to
help.
The minimum wage is easily understood using the tools of
supply and demand, as we first saw in Chapter 6. For workers
with low levels of skill and experience, a high minimum wage
forces the wage above the level that balances supply and
demand. It therefore raises the cost of labor to firms and
reduces the quantity of labor that those firms demand. The
result is higher unemployment among those groups of workers

3. affected by the minimum wage. Those workers who remain
employed benefit from a higher wage, but those who might have
been employed at a lower wage are worse off.
The magnitude of these effects depends crucially on the
elasticity of demand. Advocates of a high minimum wage argue
that the demand for unskilled labor is relatively inelastic so that
a high minimum wage depresses employment only slightly.
Critics of the minimum wage argue that labor demand is more
elastic, especially in the long run when firms can adjust
employment and production more fully. They also note that
many minimum-wage workers are teenagers from middle-class
families so that a high minimum wage is imperfectly targeted as
a policy for helping the poor.
Welfare
One way for the government to raise the living standards of the
poor is to supplement their incomes. The primary way the
government does this is through the welfare system. Welfare is
a broad term that encompasses various government programs.
Temporary Assistance for Needy Families (TANF) is a program
that assists families with children and no adult able to support
the family. In a typical family receiving such assistance, the
father is absent, and the mother is at home raising small
children. Another welfare program is Supplemental Security
Income (SSI), which provides assistance to the poor who are
sick or disabled. Note that for both of these welfare programs, a
poor person cannot qualify for assistance simply by having a
low income. He or she must also establish some additional
“need,” such as small children or a disability.
Negative Income Tax
Whenever the government chooses a system to collect taxes, it
affects the distribution of income. This is clearly true in the
case of a progressive income tax, whereby high-income families
pay a larger percentage of their income in taxes than do low-
income families. As we discussed in Chapter 12, equity across
income groups is an important criterion in the design of a tax

4. system.
Many economists have advocated supplementing the income of
the poor using a negative income tax. According to this policy,
every family would report its income to the government. High-
income families would pay a tax based on their incomes. Low-
income families would receive a subsidy. In other words, they
would “pay” a “negative tax.”
DataIDSalCompaMidAgeEESSERGRaiseDegGen1Gr1581.01757
3485805.70METhe ongoing question that the weekly
assignments will focus on is: Are males and females paid the
same for equal work (under the Equal Pay Act)?
2270.870315280703.90MBNote: to simplfy the analysis, we will
assume that jobs within each grade comprise equal
work.3341.096313075513.61FB4661.15757421001605.51METh
e column labels in the table
mean:5470.9794836901605.71MDID – Employee sample
number Sal – Salary in thousands
6761.1346736701204.51MFAge – Age in yearsEES – Appraisal
rating (Employee evaluation
score)7411.0254032100815.71FCSER – Years of serviceG –
Gender (0 = male, 1 = female) 8231.000233290915.81FAMid
– salary grade midpoint Raise – percent of last
raise9771.149674910010041MFGrade – job/pay gradeDeg (0=
BSBA 1 = MS)10220.956233080714.71FAGen1 (Male or
Female)Compa - salary divided by midpoint, a measure of
salary that removes the impact of
grade11231.00023411001914.81FA12601.0525752952204.50M
EThis data should be treated as a sample of employees taken
from a company that has about 1,000
13421.0504030100214.70FCemployees using a random
sampling
approach.14241.04323329012161FA15241.043233280814.91FA
16471.175404490405.70MCMac Users: The homework in this
course assumes students have Windows Excel,

5. and17691.2105727553131FEcan load the Analysis ToolPak into
their version of Excel.18361.1613131801115.60FBThe analysis
tool pak has been removed from Excel for Windows, but a free
third-party 19241.043233285104.61MAtool that can be used
(found on an answers Microsoft site)
is:20341.0963144701614.80FBhttp://www.analystsoft.com/en/pr
oducts/statplusmacle21761.1346743951306.31MFLike the
Microsoft site, I make cannot guarantee the program, but do
know that 22571.187484865613.81FDStatplus is a respected
statistical package.You may use other approaches or
tools23231.000233665613.30FAas desired to complete the
assignments.24501.041483075913.80FD25241.0432341704040
MA26241.043232295216.20FA27401.000403580703.91MC2875
1.119674495914.40FF29721.074675295505.40MF30491.020484
5901804.30MD31241.043232960413.91FA32280.903312595405
.60MB33641.122573590905.51ME34280.903312680204.91MB3
5241.043232390415.30FA36231.000232775314.30FA37220.956
232295216.20FA38560.9825745951104.50ME39351.129312790
615.50FB40251.086232490206.30MA41431.075402580504.30M
C42241.0432332100815.71FA43771.1496742952015.50FF4460
1.0525745901605.21ME45551.145483695815.21FD46651.1405
739752003.91ME47621.087573795505.51ME48651.1405734901
115.31FE49601.0525741952106.60ME50661.1575738801204.60
MEhttp://www.analystsoft.com/en/products/statplusmacle
Week 1Week 1.Describing the data.<Use right click on the row
numbers at the left to insert rows below each question for your
results and comments.>1Using the Excel Analysis ToolPak
function descriptive statistics, generate and show the
descriptive statistics for each appropriate variable in the sample
data set.a. For which variables in the data set does this function
not work correctly for? Why?2 Sort the data by Gen or Gen 1
(into males and females) and find the mean and standard
deviation for each gender for the following variables:sal,
compa, age, sr and raise.Use either the descriptive stats function
or the Fx functions (average and stdev).3What is the probability
for a:a. Randomly selected person being a male in grade

6. E?b. Randomly selected male being in grade E?c. Why are
the results different?4 Find:a. The z score for each male salary,
based on only the male salaries.b.The z score for each female
salary, based on only the female salaries.c.The z score for each
female compa, based on only the female compa values.d.The z
score for each male compa, based on only the male compa
values.e.What do the distributions and spread suggest about
male and female salaries?Why might we want to use compa to
measure salaries between males and females?5Based on this
sample, what conclusions can you make about the issue of male
and female pay equality? Are all of the results consistent with
your conclusion? If not, why not?
Week 2 Week 2Testing means with the t-test<Note: use right
click on row numbers to insert rows to perform analysis below
any question>For questions 2 and 3 below, be sure to list the
null and alternate hypothesis statements. Use .05 for your
significance level in making your decisions.For full credit, you
need to also show the statistical outcomes - either the Excel test
result or the calculations you performed.1Below are 2 one-
sample t-tests comparing male and female average salaries to
the overall sample mean. Based on our sample, how do you
interpret the results and what do these results suggest about the
population means for male and female
salaries?MalesFemalesHo: Mean salary = 45Ho: Mean salary =
45Ha: Mean salary =/= 45Ha: Mean salary =/= 45Note when
performing a one sample test with ANOVA, the second variable
(Ho) is listed as the same value for every corresponding value
in the data set.t-Test: Two-Sample Assuming Unequal
Variancest-Test: Two-Sample Assuming Unequal
VariancesSince the Ho variable has Var = 0, variances are
unequal; this test defaults to 1 sample t in this
situationMaleHoFemaleHoMean5245Mean3845Variance3160Va
riance334.66666666670Observations2525Observations2525Hyp
othesized Mean Difference0Hypothesized Mean
Difference0df24df24t Stat1.9689038266t Stat-
1.9132063573P(T<=t) one-tail0.0303078503P(T<=t) one-

7. tail0.0338621184t Critical one-tail1.7108820799t Critical one-
tail1.7108820799P(T<=t) two-tail0.0606157006P(T<=t) two-
tail0.0677242369t Critical two-tail2.0638985616t Critical two-
tail2.0638985616Conclusion: Do not reject Ho; mean equals
45Conclusion: Do not reject Ho; mean equals
45Interpretation:2Based on our sample results, perform a 2-
sample t-test to see if the population male and female salaries
could be equal to each other.3Based on our sample results, can
the male and female compas in the population be equal to each
other? (Another 2-sample t-test.)4What other information would
you like to know to answer the question about salary equity
between the genders? Why?5If the salary and compa mean tests
in questions 3 and 4 provide different results about male and
female salary equality, which would be more appropriate to
use in answering the question about salary equity? Why?What
are your conclusions about equal pay at this point?
Week 3Week 3Testing multiple means with ANOVA<Note: use
right click on row numbers to insert rows to perform analysis
below any question>For questions 3 and 4 below, be sure to list
the null and alternate hypothesis statements. Use .05 for your
significance level in making your decisions.For full credit, you
need to also show the statistical outcomes - either the Excel test
result or the calculations you performed.1. Based on the
sample data, can the average(mean) salary in the population be
the same for each of the grade levels? (Assume equal variance,
and use the analysis toolpak function ANOVA.) Set up the
input table/range to use as follows: Put all of the salary values
for each grade under the appropriate grade label.Be sure to
incllude the null and alternate hypothesis along with the
statistical test and result.ABCDEFNote: Assume equal variances
for all grades.2. The table and analysis below demonstrate a
2-way ANOVA with replication. Please interpret the
results.GradeGenderABCDEFM242740475676The salary values
were randomly picked for each
cell.252847496677F223441506575243642576977Ho: Average
salaries are equal for all gradesHa: Average salaries are not

8. equal for all gradesHo: Average salaries by gender are equalHa:
Average salaries by gender are not equalHo: Interaction is not
significantHa: Interaction is significantPerform analysis:Anova:
Two-Factor With
ReplicationSUMMARYABCDEFTotalMCount22222212Sum495
58796122153562Average24.527.543.5486176.546.8333333333V
ariance0.50.524.52500.5364.5151515152FCount22222212Sum4
67083107134152592Average233541.553.5677649.3333333333V
ariance220.524.582367.3333333333TotalCount444444Sum9512
5170203256305Average23.7531.2542.550.756476.25Variance1.
583333333319.58333333339.666666666718.916666666731.333
33333330.9166666667ANOVASource of VariationSSdfMSFP-
valueF
critSample37.5137.53.84615384620.07348333714.7472253467C
olumns7841.833333333351568.3666666667160.85811965810.0
0000000013.1058752391Note: a number with an E after it (E9
or E-6, for
example)Interaction91.5518.31.87692307690.17230826083.105
8752391means we move the decimal point that number of
places.Within117129.75For example, 1.2E4 becomes 12000;
while 4.56E-5 becomes 0.0000456Total8087.833333333323Do
we reject or not reject each of the null hypotheses? What do
your conclusions mean about the population values being
tested?Interpretation:3. Using our sample results, can we say
that the compa values in the population are equal by grade
and/or gender, and are independent of each factor?GradeBe sure
to include the null and alternate hypothesis along with the
statistical test and result.GenderABCDEF<Randomly pick
compas to fill each cell - for exampe, a compaMfor the
intersection of M and A might be 1.043.><If desired, you can
use the compa values that relate to the Fsalary values used in
question 2 for a more direct comparison of the two
outcomes.>Conduct and show the results of a 2-way ANOVA
with replication using the completed table above. The results
should look something like those in question 2.Interpret the
results. Are the average compas for each gender (listed as

9. sample) equal? For each grade? Do grade and gender
interaction impact compa values? 4. Pick any other variable
you are interested in and do a simple 2-way ANOVA without
replication. Why did you pick this variable and what do the
results show?Variable name: Be sure to include the null and
alternate hypothesis along with the statistical test and
result.GenderABCDEFMHint: use mean values in the
boxes.F5. Using the results for this week, What are your
conclusions about gender equal pay for equal work at this
point?
Week 4Week 4Confidence Intervals and Chi Square (Chs 11 -
12) Let's look at some other factors that might influence
pay.Q1Q2<Note: use right click on row numbers to insert rows
to perform analysis below any question>For question 3 below,
be sure to list the null and alternate hypothesis statements. Use
.05 for your significance level in making your
decisions.GrDegGen1SalFor full credit, you need to also show
the statistical outcomes - either the Excel test result or the
calculations you performed.A0F341One question we might have
is if the distribution of graduate and undergraduate degrees
independent of the grade the employee? A0F41(Note: this is the
same as asking if the degrees are distributed the same
way.)Based on the analysis of our sample data (shown below),
what is your answer?Ho: The populaton correlation between
grade and degree is 0.C0F77Ha: The population correlation
between grade and degree is > 0Perform analysis:OBSERVEDA
BCDEFTotalCOUNT - M or 075325325 COUNT - F or
182237325total1575512650EXPECTED7.53.52.52.56325<Highl
ighting each cell with show how the value7.53.52.52.56325is
found: row total times column total divided by1575512650grand
total.>By using either the Excel Chi Square functions or
calculating the results directly as the text shows, do wereject or
not reject the null hypothesis? What does your conclusion
mean?Interpretation:2Using our sample data, we can construct a
95% confidence interval for the population's mean salary for
each gender. Interpret the results. How do they compare with

10. the findings in the week 2 one sample t-test outcomes (Question
1)?MalesMeanSt error Low to
High523.658779395744.448279327259.5517206728Results are
mean +/-2.064*standard
errorFemales383.622754176930.522635378945.47736462112.06
4 is t value for 95% interval<Reminder: standard error is the
sample standard deviation divided by the square root of the
sample size.>Interpretation:C0F55D1M773Based on our sample
data, can we conclude that males and females are distributed
across grades in a similar pattern within the population?
D1M604Using our sample data, construct a 95% confidence
interval for the population's mean service difference for each
gender. Do they intersect or overlap? How do these results
compare to the findings in week 2, question 2?5How do you
interpret these results in light of our question about equal pay
for equal work?
Week 5Week 5 Correlation and RegressionFor each question
involving a statistical test below, list the null and alternate
hypothesis statements. Use .05 for your significance level in
making your decisions.For full credit, you need to also show the
statistical outcomes - either the Excel test result or the
calculations you performed.1Create a correlation table for the
variables in our data set. (Use analysis ToolPak function
Correlation.)a. Interpret the results. What variables seem to be
important in seeing if we pay males and females equally for
equal work?2Below is a regression analysis for salary being
predicted/explained by the other variables in our sample (Mid,
age, ees, sr, raise, and deg variables.) (Note: since salary and
compa are different ways of expressing an employee’s salary,
we do not want to have both used in the same regression.)Ho:
The regression equation is not significant.Ha: The regression
equation is significant.Ho: The regression coefficient for each
variable is not significantHa: The regression coefficient for
each variable is significantSalThe analysis used Sal as the y
(dependent variable) andSUMMARY OUTPUTmid, age, ees, sr,
g, raise, and deg as the dependent variables (entered as a

11. range).Regression StatisticsMultiple R0.9921549762R
Square0.9843714969Adjusted R Square0.9817667464Standard
Error2.5927763074Observations50ANOVAdfSSMSFSignificanc
e
FRegression717783.65546282842540.5222089755377.91392688
488.44042689148567E-
36Residual42282.34453717166.7224889803Total4918066Coeffi
cientsStandard Errort StatP-valueLower 95%Upper 95%Lower
95.0%Upper 95.0%Intercept-4.0093.775-1.0620.294-
11.6273.609-
11.6273.609Mid1.2200.03040.6740.0001.1591.2801.1591.280A
ge0.0290.0670.4390.663-0.1050.164-0.1050.164EES-
0.0960.047-2.0200.050-0.191-0.000-0.191-0.000SR-0.0740.084-
0.8760.386-0.2440.096-
0.2440.096G2.5520.8473.0120.0040.8424.2610.8424.261Raise0.
8340.6431.2990.201-0.4622.131-
0.4622.131Deg1.0020.7441.3470.185-0.5002.504-
0.5002.504Interpretation: Do you reject or not reject the
regression null hypothesis?Do you reject or not reject the null
hypothesis for each variable?What is the regression equation,
using only significant variables if any exist?What does result
tell us about equal pay for equal work for males and
females?3Perform a regression analysis using compa as the
dependent variable and the same independentvariables as used
in question 2. Show the result, and interpret your findings by
answering the same questions.Note: be sure to include the
appropriate hypothesis statements.4Based on all of your results
to date, is gender a factor in the pay practices of this company?
Why or why not?Which is the best variable to use in analyzing
pay practices - salary or compa? Why?5Why did the single
factor tests and analysis (such as t and single factor ANOVA
tests on salary equality) not provide a complete answer to our
salary equality question?What outcomes in your life or work
might benefit from a multiple regression examination rather
than a simpler one variable test?