Volume 12, Number 1 (Winter) 1977
Garfinkel, Irwin, and Robert Haveman. 1977. "Earnings Capacity, Economic Status, and Poverty." Journal of Human Resources 12(1):49-70.
Whether or not a household is counted among the poor depends upon its annual money income. As a measure of economic status, however, annual money income has serious limitations. In this paper an alternative indicator of economic status, called earnings capacity, is developed. Earnings capacity is designed to measure the ability of a living unit to generate an income stream if it were to use its physical and human capital at capacity. Using this measure, the composition of the poverty population is estimated and compared to the composition of the poverty population according to the official definition. In addition, the socioeconomic and demographic determinants of poverty as measured by earnings capacity and by annual money income are compared and contrasted.
Garfinkel is Professor of Social Work and Director, Institute for Research on Poverty, University of Wisconsin, Haveman is Professor of Economics, University of Wisconsin. The research reported here was supported by funds granted to the Institute for Research on Poverty, University of Wisconsin-Madison, by the U.S. Department of Health, Education, and Welfare pursuant to the provisions of the Economic Opportunity Act of 1964. The opinions expressed are those of the authors.
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