Econ
- 1. Chapter Twenty Sandeep Arakali Susan Dong 4th hour
- 2. ~Mary Colum
- 3. How much inequality is there in our society? How many people live in poverty? What problems arise in measuring the amount of inequality? How often do people move among income classes?
- 4. Section One
- 6. The percentage of people and households that are earning in each bracket.
- 7. 1950 1960 1970 1980 1990 2000 2004 $17,07 Overall Male $22,051 $28,100 $27,206 $28,439 $31,089 $30,513 6 Female $6,333 $6,815 $9,424 $10,683 $14,112 $17,619 $17,629 White/ $18,00 Male $23,219 $30,536 $28,939 $29,668 $32,684 $31,335 European 1 Female $7,044 $7,307 $9,546 $10,741 $14,459 $17,637 $17,648 Black/ African Male $9,775 $12,215 $17,513 $17,390 $18,034 $23,411 $22,740 American Female $3,150 $4,524 $8,691 $9,944 $11,671 $17,420 $18,379 Asian Male NA NA NA NA $27,179 $33,820 $32,419 Female NA NA NA NA $15,536 $19,038 $20,618 Working Americans 15 years or older, adjusted for 2004 inflation
- 13. THE POVERTY RATE THE POVERTY LINE A commonly used gauge of Set by the federal the distribution of income government The percentage of the Three times the cost of population whose family providing an adequate diet income falls below an Adjusted every year to absolute value (the poverty account for changes in the line) level of prices Depends on family size
- 15. Section Two
- 16. Through government programs and various non-profit organizations, the poor receive many nonmonetary items These could include food stamps, housing vouchers and medical services If in-kind transfers were to be included in income at their market value, the number of those in poverty would be 10% lower
- 17. The regular pattern of income variation is called the life cycle The Life Cycle A young worker has a low income Income rises as the worker gains maturity and experience Income peaks at around age 50 and then falls sharply when the worker retires at around 65
- 18. The standard of living in any year depends on more than lifetime income rather than that specific years income Young people borrow money to pay for school or a new home Older people repay those loans when their incomes rise Large income declines after retirement do not affect the standard of living Inequality in the distribution of annual income, but does not represent true inequality in living standards
- 19. TRANSITORY INCOME PERMANENT INCOME An unexpected natural The average income, based disaster or other on the transitory incomes uncontrollable force could Smoothens out the bumps cause prices of goods to rise within transitory income or fall A familys ability to buy This contributes to varying goods and services depends incomes for households largely on this yearly
- 20. The US is one of the countries most well- known for the citizens abilities to be born poor and die rich The opposite, of course, is just as likely to occur Some mobility reflects transitory variation in income, others reflect more persistent changes in income
- 21. Many of those who live below the poverty line only do so for a temporary period In a 10 year period, 1 in 4 families fall below the poverty line in at least 1 year. Fewer than 3% of families are poor for 8 or more years The temporarily poor and the persistently poor face different problems
- 22. Ifa father earns 20% above his generations average income, his son will earn 8% above his own generations average income In the US economy, four of five millionaires are self-made
- 23. Section 3
- 24. Utility: level of happiness and satisfaction you receive Utilitarians maximize utility by taking money from the rich and giving it to the poor (law of diminishing marginal utility) DO NOT believe in equal income for everyone Leaky bucket story John Stuart Mill: guy who thought up of utilitarianism
- 25. Liberals aim to bring the poorest person in society up to a certain standard (maximum criterion) Developed by John Rawls and his veil of ignorance theory Liberalism acts as social insurance if you become poor
- 26. Libertarians believe government should enforce the laws but NOT redistribute income Inequality is okay because income will distribute itself naturally based on peoples abilities Trade is okay; stealing is not
- 27. Section 4
- 28. Minimum wage is a Wage S legal limit on the minimum salary any Min. Wage worker can receive Salary Increase Same as a binding price floor for the labor market Effect of minimum wage is to decrease employment but D increase wages for Q workers who keep their Jobs Q Workers jobs Lost
- 29. SUPPORTERS OPPONENTS Claim that minimum wage Critics say that labor helps the poor by increasing demand is more elastic salary especially in the long run so Argue that demand for labor more jobs are lost is inelastic so not that many Also most minimum wage jobs are lost when you workers are teens who dont impose a minimum wage really need the money so minimum wage doesnt really help the poor
- 30. Welfare refers to government programs that supplement the incomes of the needy Welfare benefits have declined since 1970s and the law was revised in 1996 so people could not stay on welfare forever You cant qualify for welfare just because you have a low salary; you must have some other need such as small children or a disability
- 31. SUPPORTERS OPPONENTS Welfare helps the people in Welfare drives people to society living a difficult life become needy which in and are unable to rise up turn breaks up families such as working single Encourages illegitimate mothers births because of the Anti-poverty measure that welfare programs that exist reduces homelessness due for single parents to supplemented income Worsens the problem it was meant to cure
- 32. High-income families would pay a tax while low-income families would receive a subsidy Example: Taxes owed = (1/3 of income) $10,000 Poor family earning $21,000 a year would receive subsidy of $3,000 Rich family earning $60,000 a year would pay tax of $10,000
- 33. SUPPORTERS OPPONENTS Does not encourage Lazy people are being illegitimate births or break rewarded up families like welfare Does not alleviate poverty programs due to a specific cause such Proof of need is not as illness, disability, or absolutely necessary to unemployment receive a subsidy Similar program is already in place
- 34. There are pros and cons to every solution proposed by lawmakers to reduce poverty Supporters of anti-poverty legislation are concerned about equality Opponents care about efficiency and claim that anti-poverty measures reduce incentive to work because they hurt the rich and give to the poor