Income Inequality and Poverty Please listen to the audio as you work through the slides.

Slides:



Advertisements
Similar presentations
When you have completed your study of this chapter, you will be able to C H A P T E R C H E C K L I S T Describe the inequality in income and wealth in.
Advertisements

Chapter 16 Economic Inequality
Poverty and Economic Inequality
Class Structure A social class consists of a category of people who share similar opportunities, similar economic and vocational positions, similar lifestyles,
Overview of Income Redistribution Programs
19. Income Distribution and Poverty Income Inequality in the U.S. Poverty in the U.S. Income Inequality in the U.S. Poverty in the U.S.
Poverty in America The Economics of Poverty. Statistics Poverty in America Over half the world lives on under $2.00 per day. In 2003, over 12% of all.
18 Income Distribution and Poverty  How much inequality and poverty exist in our society?  What policies are used to fight poverty?  What are the problems.
Ch. 18: Economic Inequality
Chapter 12 Poverty, Welfare, and Women Poverty in the U.S. Welfare  programs  incentives  reform EITC Poverty in the U.S. Welfare  programs  incentives.
Copyright 2008 The McGraw-Hill Companies Income Inequality and Poverty.
Regarding the income distribution in the United States, we have: 0 of Too much inequality 2. Just the right amount of inequality 3. Not enough inequality.
Chapter 11, Section 3.  Another way to examine the economic well being of a nation is to measure the number of people who are living in poverty.
Copyright McGraw-Hill/Irwin, 2005 Facts About Income Inequality The Lorenz Curve Causes of Income Inequality Trends in Income Inequality Equality.
1 Chapter 12 Income Distribution, Poverty, and Discrimination Key Concepts Summary Practice Quiz Internet Exercises ©2002 South-Western College Publishing.
Chapter 20 Income Inequality, Poverty, and Discrimination
Inequality and social policy Growing Inequality since ‘74.
Government and Households Chapter 9 What makes poor ‘poor’? What should government do?
Copyright 2008 The McGraw-Hill Companies 20-1 Facts About Income Inequality Causes of Income Inequality Equality Versus Efficiency The Economics of Poverty.
Copyright McGraw-Hill/Irwin, 2002 Facts About Income Inequality The Lorenz Curve Causes of Income Inequality Trends in Income Inequality Equality.
Chapter 3 section 4 Providing a Safety Net Income and Poverty In a Market economy, income depends primarily on earnings, which depend on the value of each.
 Poverty = when a person’s income and resources to not allow him/her to achieve a minimum standard of living  Minimum standard varies from country to.
Timebanking and Poverty: Creating Abundance in a Challenged Economy.
Poverty and the Distribution of Income
Inequality and social policy Compensation for bottom 80% of Americans vs productivity growth.
Providing a Safety Net. The Poverty Problem The wealth has spread unevenly throughout society as the free market has generated wealth. Some people are.
Chapter 6: Poverty and Discrimination. Poverty Kind: Absolute vs. Relative Absolute: inability to satisfy basic human needs (food, shelter, clothing,
According to the Census Bureau, individuals, families, or households are living in poverty if their total incomes fall below the designated income levels.
Chapter 18Copyright ©2009 by South-Western, a division of Cengage Learning. All rights reserved 1 ECON Designed by Amy McGuire, B-books, Ltd. 18 CHAPTER.
Copyright 2011 The McGraw-Hill Companies 11-1 Facts About Income Inequality Causes of Income Inequality Equality Versus Efficiency The Economics of Poverty.
Economic Inequality CHAPTER 18. After studying this chapter you will be able to Describe the inequality in income and wealth in the United States and.
 Goal of Equity in Income distribution: is to have a more equitable (fairer) distribution of income. That means productive income is divided among the.
Providing a Safety Net. Why Households Differ One of the main reasons why household income differs is because the number of household members who work.
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.
Chapter 27 Income Inequality and Poverty. Facts Income Inequality Income Inequality million (14.3%) in poverty million (14.3%) in.
1 Labor Markets and Income Distribution ©2006 South-Western College Publishing.
Income Inequality, Poverty, and Discrimination Chapter 20 McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All rights reserved.
1 Chapter 14 Income Distribution © 2003 South-Western College Publishing.
Chapter 21 Income Inequality, Poverty, and Discrimination Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution.
Chapter 7 Poverty and Discrimination: Why Are So Many Still Poor? Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin.
Visit UMT online at Page 1 of 22 Chapter 14, ECON125 Version © 2007 Thomson South-Western © 2009 UMT Economics for Managers University.
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 3.41 LESSON 3.4 Providing a Safety Net  Determine why incomes differ across households, and identify the.
1 Chapter 12 Tutorial Income Distribution, Poverty, and Discrimination ©2000 South-Western College Publishing.
Chapter 21 Income Inequality, Poverty, and Discrimination Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution.
1 Net Worth over $2.3 billion Copyright ACDC Leadership 2015.
Economic Challenges Chapter 13 Section 3 Poverty.
 What is the difference between wealth & Income?  How do you measure wealth?  What are assets & debts?  What does it mean to be wealthy but little.
CONTEMPORARY ECONOMICS© Thomson South-Western 3.4Providing a Safety Net  Determine why incomes differ across households, and identify the main source.
McGraw-Hill/Irwin Chapter 11: Income Inequality and Poverty Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.
© 2007 Thomson South-Western. Income Inequality and Poverty A person’s earnings depend on the supply and demand for that person’s labor, which in turn.
Income distribution and poverty
Overview of Income Redistribution Programs
21 C H A P T E R INCOME INEQUALITY AND POVERTY.
20a – Income Inequality This web quiz may appear as two pages on tablets and laptops. I recommend that you view it as one page by clicking on the open.
Income Inequality and Poverty
32 Income Inequality and Poverty.
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Poverty.
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Unemployment What are the different types of unemployment?
Poverty and Economic Inequality
Poverty (cont.) Individuals classified as living in poverty have incomes that fall below the poverty threshold. Simplified poverty thresholds appear as.
Chapter 12 Income Distribution, Poverty, and Discrimination
Presentation transcript:

Income Inequality and Poverty Please listen to the audio as you work through the slides.

Income Inequality and Poverty Learning Objectives: 1.The factors that have contributed to increased income inequality since The causes of growing income inequality 3.How this trend might be halted 4.How discrimination reduces domestic output and income, 5.How to demonstrate the loss in domestic output and income using production possibilities analysis. 6.Social Insurance Programs and Public Assistance Programs.

Income Inequality And Poverty The richest 1 percent of Americans now take home almost 24 percent of income, up from almost 9 percent in 1976

Income Inequality And Poverty Wealth The wealthiest 1 percent of families owns roughly 34.3% of the nation's net worth, The top 10% of families owns over 71%, and The bottom 40% of the population owns way less than 1%.

Income Inequality And Poverty Some Questions What are the causes of income inequality? Is income inequality rising or falling? Is the US making progress in the war on poverty? What are the major income maintenance programs in the US? Has welfare reform succeeded?

Distribution of U.S. Income by households, 2006 Personal Income Category Percentage of All Households are in This Category Under $10,000 $10,000 - $14,999 $15,000 - $24,999 $25,000 - $34,999 $35,000 - $49,999 $50,000 - $74,999 $75,000 - $99,999 $100,000 and above Facts about Income Inequality Average household income in the US for $66,570

graphically... Distribution of household income by quintile 2006 Percentage of Total Income Upper Income Limit $20,035 37,774 60,000 97,032 No limit Facts about Income Inequality Quintile Lowest 20% Second 20% Third 20% Fourth 20% Highest 20% Total Source; Bureau of Census, census.gov

Percent of Families Percent of Income Perfect Equality Complete Inequality The Lorenz Curve – degree of income inequality

Percent of Families Percent of Income Perfect Equality Complete Inequality Lorenz Curve (actual distribution) Area between the lines shows the degree of income inequality The Lorenz Curve – degree of income inequality

Percent of Families Percent of Income Perfect Equality Complete Inequality Lorenz Curve (actual distribution) Area between the lines shows the degree of income inequality Gini Ratio Numerical Measure of Overall Dispersion of Income Area Between Lorenz Curve and Diagonal Total Area Below the Diagonal Gini Ratio = The Lorenz Curve – degree of income inequality

Percent of Families Percent of Income Perfect Equality Complete Inequality Lorenz Curve (actual distribution) Area between the lines shows the degree of income inequality Limitations due to: Income Mobility The Time Dimension – Income churning over longer time periods is evident The Lorenz Curve – degree of income inequality

Percent of Families Percent of Income Perfect Equality Complete Inequality Lorenz Curve (actual distribution) Area between the lines shows the degree of income inequality Effect of government redistribution of cash and noncash transfers The Lorenz Curve – degree of income inequality

Percent of Families Percent of Income Perfect Equality Complete Inequality Lorenz Curve (actual distribution) Area between the lines shows the degree of income inequality Lorenz curve after taxes and transfers The Lorenz Curve – degree of income inequality

1. Ability Differences Mental, physical, talents, Education and Training Elementary and secondary education differences In quality of education delivered In attitude toward minority students In funding levels College or no college Access to training on the job self acquired Causes of Income Inequality

2. Discrimination and Institutional Racism in: Education – segregation, defacto segregation –The school to prison pipeline Hiring – illegal, but now more subtle Training – access, quality Promotion – pass over Housing – access to education and other services Criminal justice – profiling, sentencing, legal representation, license to kill Causes of Income Inequality

3. Preferences and Risks Preference for market work vs. leisure Professions involving risk –Relationship between risk and financial reward 4. Unequal Distribution of Wealth Wealth is more unequally distributed than income which leads to unequal distribution of: Rent, interest, and dividends which lead to unequal distribution of income Older people typically have more wealth than young people Causes of Income Inequality

5. Market Power Resource markets – –unions (diminishing power), –professional groups Insiders 6. Luck, Connections, and Misfortune Being in the right place at the right time The GOB / GOG (good ole boy / girl) network Misfortune – had to drop out of school for some reason. Health issues Causes of Income Inequality

Trends in Income Inequality 1929 – 1947 (The Great Depression thru WW2) Significant reduction in income inequality. What was going on? New deal Economic Recovery Efforts WW2 Presence of shortage of labor, Rising productivity and real wages

Trends in Income Inequality 1947 – 1969 (Post WW2 period) Less inequality but at a slower pace. What was going on? Labor Shortage Ending Productivity Increasing Technology Advancing

Trends in Income Inequality 1969 – Today (the gap widens) More unequal since 1969 What has been going on? Computerization replaces workers 90% of the income gains went to the top 1% Greater concentration of wealth Productivity increases Anti-union movement takes off Average wages stagnated Labor surplus

1.Greater Demand for Highly Skilled Workers 1.Information technology 2.Financial Services 3.Health Care 4.Shortage of skilled workers 2.Demographic Changes 1.Baby boomer generation retirement (and or re-entry) 2.Two worker families 3.Single mom families 4.Greater population diversity 3.International Trade, Immigration, Decline in Unionism 1.Foreign competition reduces demand for low skill jobs 2.Transfer of jobs to other countries 3.Falling union membership 4.The Great Recession of The hollowing out of the American Economy (outsourcing) Causes of Growing Inequality

Income Equality versus efficiency The Case for Income Equality Maximizing Total Utility The Case for Income Inequality Incentives and Efficiency Tradeoff Between Equality and Efficiency Which one is winning?

The Economics of Poverty Poverty Defined – 2006 A condition in which a person or family does not have the means to satisfy basic needs for food, clothing, shelter, and transportation. Means – current earned income, transfer payments, past savings, and property owned

2011 HHS Poverty Guidelines Persons in Family 48 Contiguous States and D.C.AlaskaHawaii 1$10,890$13,600$12, ,710 18,38016, ,53023,16021, ,350 27,94025, ,17032,72030, ,99037,50034, ,81042,28038, ,63047,06043,270 For each additional person, add 3,8204,7804,390 SOURCE: Federal Register, Vol. 76, No. 13, January 20, 2011, pp

Poverty By race/ethnicity and family status Among married families: 5.8% lived in poverty. This number varied by ethnicity with 5.4% of White persons, 8.3% of Black persons, and 14.9% of Hispanic persons (of any nationality) living in poverty.

Among single parent families: 26.6% lived in poverty. This number varied by ethnicity with 30% of White persons, 40% of Black persons, and 30% of Hispanic persons (of any nationality) living in poverty. Poverty By race/ethnicity and family status

Poverty by Race The US Census declared that in % of the general population lived in poverty: 9.9% of all non-Hispanic white persons 12.1% of all Asian persons 26.6% of all Hispanic persons (of any nationality) 27.4% of all Black persons. About half of those living in poverty are non-Hispanic white (19.6 million in 2010), but poverty rates are much higher for blacks and Hispanics. Non-Hispanic white children comprised 57% of all poor rural children

The Economics of Poverty Incidence of Poverty Poverty Trends: R ise and fall but trend is upward Who are the “Invisible” Poor? Short-Periods of Time Geographic Isolation Politically Invisible – Are Easy to Ignore

Why the growth in the number of people in poverty? Education – Unequal distribution of quality education – Drop out rate The Great Recession of 2007 – Massive job losses – Jobs leaving the country The hollowing out of America – Composition of the job market More low wage jobs – fewer high wage jobs

Why the growth in the number of people in poverty? Decrease in Union Membership – Puts downward pressure on wages Lower median income – People falling out of the Middle Class Growth in single parent households Lack of preparation for retirement Rising health care costs

How can we reduce the number of people in poverty? Improve distribution of quality education National focus on creation of better paying jobs. National focus on creating sustainable growth. National focus on driving down health care costs. Better retirement planning. Support collective bargaining. What else?

The Income-Maintenance System 1.Social Insurance Programs OASDHI = social security $695 Billion in 2010 Medicare – added to OASDHI in 1965 $453 Billion in 2010 Unemployment Compensation $32 Billion Entitlement Programs

The Income-Maintenance System 2. Public Assistance Programs Supplemental Security Income (SSI) $35 Billion ($29 Billion in 1999) Temporary Assistance for Needy Families $14 Billion ($23 Billion in 1999) Food stamps $20 Billion ($20 Billion in 1999) Medicaid $207 Billion ($290 Billion in 2010) Earned-Income Tax Credit (EITC) $55 Billion ($30 Billion in 1999) Entitlement Programs

Entitlement Programs Impact of decreasing funding Social Insurance Programs – Lower social security payments = lower incomes – Reduced Medicare / Medicaid spending = reduced access to health care, higher death rates Public Assistance Programs – Reduced incomes – Increased homelessness – Increased health care costs Higher Social Costs in general

Common Features Minimum Annual Income Benefit-Reduction Rate Conflicts Among Goals Eliminating Poverty Maintaining Work Incentives Holding Down Costs Welfare: Goals and Conflicts

Welfare Reform Problem - Growing Government Dependence Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (welfare reform) Temporary Assistance to Needy Families (new name) 5-Year Lifetime Limit Must Work After 2 Years Reduced Food-Stamp Eligibility Tightened Some Definitions 5-Year Waiting Period on New Legal Immigrants Welfare: Goals and Conflicts

Another good Information Source The State of Working America’s Wealth, 2011 Through volatility and turmoil, the gap widens B y S y l v i a A. A l l e g r e t t o Information sshttp://

income inequality Lorenz curve Gini Ratio income mobility noncash transfers equality-efficiency tradeoff poverty rate entitlement programs social insurance programs OASDHI Medicare unemployment compensation public assistance programs Supplemental Security Income (SSI) Temporary Assistance for Needy Families (TANF) food stamp program Medicaid earned-income tax credit (EITC)