Limitations and/or problems with the poverty threshold.

Sample Solution

Assumptions on which the EPI bases its calculations of a basic family budget The EPI's basic family budget calculator takes into account the following assumptions:

• Families need to be able to afford housing, food, childcare, transportation, healthcare, and other basic necessities.
• The cost of living varies depending on family size and place of residence.
• Families should be able to live a decent standard of living, not just survive.

EPI's basic family budget calculator I used the EPI's basic family budget calculator to find out the cost of living for a family of four in Eldoret, Kenya. The calculator estimated that a family of four would need to earn an annual income of KSh 2,199,000 to live a basic budget lifestyle. This is equivalent to KSh 183,250 per month. Limitations and/or problems with the poverty threshold The poverty threshold is a measure of income that is used to determine whether or not a family is living in poverty. The poverty threshold is calculated by the Department of Health and Human Services (DHHS) and is updated annually. There are two main limitations and/or problems with the poverty threshold:

• It is too low. The poverty threshold is set at a level that is much lower than the cost of living for many families. This means that many families who are actually struggling to make ends meet are not considered to be living in poverty.
• It does not take into account regional differences in the cost of living. The poverty threshold is the same for all families in the United States, regardless of where they live. However, the cost of living varies significantly from one region to another. This means that families in high-cost regions may be living in poverty even if they earn above the poverty threshold.

How these problems affect a person’s ability to escape poverty The limitations of the poverty threshold make it difficult for people to escape poverty. If a family is not considered to be living in poverty, they may not be eligible for government assistance programs that can help them make ends meet. Additionally, the fact that the poverty threshold does not take into account regional differences in the cost of living means that families in high-cost regions may have a more difficult time escaping poverty. Response to colleagues Colleague 1: I am a single mother of two living in Los Angeles, California. I work full-time, but I am still struggling to make ends meet. I am not eligible for any government assistance programs because I earn slightly above the poverty threshold. Response: The EPI's basic family budget calculator estimates that a single mother of two living in Los Angeles, California would need to earn an annual income of $82,000 to live a basic budget lifestyle. This is significantly higher than the DHHS poverty threshold for a family of three, which is $21,960. Based on the EPI's basic family budget calculator, it is clear that the DHHS poverty threshold is too low to meet the needs of many families. This is especially true for families living in high-cost regions such as Los Angeles. Colleague 2: I am a married couple with no children living in a rural area of Kansas. We are both working full-time and we are able to save money each month. We are confident that we will be able to retire comfortably. Response: The EPI's basic family budget calculator estimates that a married couple with no children living in a rural area of Kansas would need to earn an annual income of $61,000 to live a basic budget lifestyle. This is slightly higher than the DHHS poverty threshold for a family of two, which is $17,820. Based on the EPI's basic family budget calculator, it appears that the DHHS poverty threshold is more aligned with the colleague's stated ability to escape poverty. However, it is important to note that the EPI's basic family budget calculator is just one estimate of the cost of living. The actual cost of living can vary depending on individual circumstances. Conclusion The EPI's basic family budget calculator provides a more realistic estimate of the cost of living than the DHHS poverty threshold. The DHHS poverty threshold is too low and does not take into account regional differences in the cost of living. This makes it difficult for people to escape poverty.