Why are some people rich and some people poor?

Lesson Focus Income Distribution

Divide into Groups of 4 Come up with name for country ___________ Household Income Cards > Each Group 20 Households in the country Each card states the income for one household

Household Income Activity 1. Rank the household incomes from the lowest to the highest. 2. Determine the aggregate (total) income for the country. 3. Determine the median and the mean income for the country. 4. Divide the households into five equal groups. 5. Determine the aggregate income for each group. 6. Determine the percent of income each group has of the aggregate or total income. (Divide the aggregate income of each group by the overall aggregate income of all households.) *Can Use Calculators

Mean=Average. To calculate the mean income for all households, divide the aggregate income by the number of households (20) Median=exact middle number in a sequence of numbers. If there is an even number, as there is in the fictitious country’s number of households, add the middle two numbers and divide by two

Household Distribution of Income Fictitious Country Aggregate (total) household income = Ranking of Household Groups Aggregate Income by Group Percent Distribution of Aggregate Income Lowest Second Third Fourth Highest

What is the mean income in this country? $70,850

What is the median income for this country $49,500

Mean would rise, median would stay the same What would happen to the mean and median income for this country if the highest income were increased by $20,000? Mean would rise, median would stay the same

Income Distribution The way in which the nation’s income is divided among families, individuals, or other designated groups

What does the data tell you about the distribution of income for households in this fictitious country? The top fifth has the greatest share of the total income in this country

Quintile Each group of income in this data set is called a quintile. A quintile is 20 percent or 1/5 of the population

We will be looking at U.S. income distribution during different time periods

Distribute 14.3 1/Student

Mean Household Income (in dollars) Received by Quintiles Year Lowest Quintile Second Quintile Third Quintile Fourth Quintile Highest Quintile 1970 10,512 28,475 45,852 64,633 114,421 1980 11,435 28,459 46,961 69,186 123,358 1990 12,204 30,706 50,718 76,468 148,397 2000 13,543 33,815 56,311 87,537 189,692 2010 11,578 30,047 51,777 83,065 178,384 What happened to the mean household income between 1970 and 2010?

Share of Aggregate Income Received by Quintiles Year Percent Distribution of Aggregate Income Lowest Quintile Second Quintile Third Quintile Fourth Quintile Highest Quintile 1970 4.1 10.8 17.4 24.5 43.3 1980 4.2 10.2 16.8 24.7 44.1 1990 3.8 9.6 15.9 24.0 46.6 2000 3.6 8.9 14.8 23.0 49.8 2010 3.3 8.5 14.6 23.4 50.3 Source: U.S. Census Bureau, Statistical Abstract of the United States: 2012 (131st edition) Washington, DC, 2011; http://www.census.gov/compendia/statab/

What about the highest quintile? 50.3% In 2010 what percentage of total income did households in the lowest/poorest quintile earn? 3.3% What about the highest quintile? 50.3%

Quintiles 1-4 decreased; the fifth increased What happened to the % of aggregate income that households earned in each quintile between 1970-1980? Quintiles 1-4 decreased; the fifth increased

How does this data support the statement that the U. s How does this data support the statement that the U.s. has an increased income gap between rich and poor?

Day 2 Pass out Activity 14.4 Get into groups again

Make a generalization about Each of the following categories Type of Household Age of Household Head Number of Household Earners Work Experience Mean Income Education Attainment Overall what generalization can be made of the lowest quintile compared to the highest.

How does investment in ones human capital matter to that person?

Average Earnings of Full-time, Year-round Workers as a Proportion of the Average Earnings of High School Graduates by Educational Attainment: 1975 to 2013 FPO

How might the increasing income gap affect the education success of higher-income and lower income students?

Activity 14.5 Read together and answer Q’s as a group

Redistribute Income using Transfer Payments One Goal of Government Redistribute Income using Transfer Payments Transfer Payments-income payments to those for which no services are performed Eg. Taxation, spending, assistance programs, programs designed to provide training to workers, or to encourage investment in human capital (education)

What are some examples of transfer payments that you can think of? SNAP, housing assistance, free/reduced lunches, Social Security Payments, Temporary assistance, unemployment.

Why does the government Redistribute Income? Promote Fairness, assist low income families, and provide health care, food, housing (basic needs)

How does this end up decreasing the income gap?

How do you feel about taxation to redistribute wealth?

Final Questions How has the mean income from 1970-2000 changed in the US? How has income inequality changed over the last 40 years? Why do some people earn more income than others? How do skills and education affect income inequality? In some level of inequality beneficial? What is a transfer payment and how are they used?