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Chapter 32. Income Inequality and Poverty. Poverty Rate (14.7%). The % of the population living in poverty. Poverty Rates Among Selected Population Groups,2004. 0 10 20 30. Female-Householders African-Americans Hispanics - PowerPoint PPT Presentation
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Income Inequality and Poverty
The % of the population living in povertyPersons in family Poverty guideline
1 $10,830
2 14,570
3 18,310
4 22,050
5 25,790
6 29,530
7 33,270
8 37,010
For families with more than 8 persons, add $3,740 for each additional person.
Female-HouseholdersAfrican-Americans
HispanicsForeign-Born (Not Citizens)
Children Under 18Women
Total PopulationMen
WhitesAsian
Persons 65 or OlderMarried-Couple Families
Full-Time Workers
0 10 20 30
24.721.9
21.417.8
13.912.711.5
10.89.89.8
5.52.8
28.4
Poverty Rates Among Selected Population Groups,2004
A curve showing the distribution of income in an economy.
**the farther the Lorenz Curve sags away from the diagonal, the > the income inequality
Lorenz CurveThe Lorenz Curve
20 40 60 80 100
20
40
60
80
100
0
Perfect Equality
Lorenz Curve(Actual Distribution)
Complete Inequality
A B
ab
c
d
e
f
Percentage of Households
Perc
enta
ge o
f Inc
ome
W 32.1
G 32.1
Effect of Government Redistribution
20 40 60 80 100
20
40
60
80
100
0
Lorenz CurveBefore Taxes and
Transfers
Percentage of Households
Perc
enta
ge o
f Inc
ome
Lorenz CurveAfter Taxes and
Transfers
Impact of Government Taxes and Transfers
measure of the overall dispersion of income among households, families, or individuals
Divide the area between the diagonal line and the Lorenz Curve by the entire area below the diagonal line
Gini Ratio =Area A
Area A + Area B
US is approximately .45 The Gini coefficient for complete income
equality is zero and for complete inequality is one
Average Household Income $60,258- Among the Highest in the World
(1)Personal
Income Category
(2)Percentage of All
Households 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
Distribution of U.S. Income by Households
8.76.7
12.911.914.818.311.015.7
100.0Source: Bureau of the Census
Division Into 5 Equal Groups
(1)Quintile
(2)Percentage ofTotal Income
Lowest 20%Second 20%Third 20%Fourth 20%Highest 20%Total
Distribution by Quintiles
3.48.7
14.722.250.1
100.0Source: Bureau of the Census
(3)Upper
Income Limit
$18,50034,73855,33188,029
No Limit
The extent to which income receivers move from one part of the income distribution to another over some period of time
Specific goods or services rather than cash Ex- Medicare, Medicaid, housing subsidies,
school lunches, and food stamps
1. Ability 2. Education and Training 3. Discrimination 4. Preferences and Risks 5. Unequal Distribution of Wealth 6. Market Power 7. Luck, Connections, and Misfortune
Since the 1970’s income inequality has grown:
1. Greater demand for highly skilled workers
2. Demographic Changes (baby boomers) 3. International Trade
Greater income equality (through redistribution of income) comes at the opp. Cost of reduced production and income
Greater production and income come at the expense of less equality of income
Government programs that guarantee particular levels of transfer payments or noncash benefits to all that fit the programs’ criteria
1. social insurance 2. public assistance (welfare) Ex- food stamps, Medicare, Medicaid,
military retirement, VA benefits
Programs that replace earnings lost when people retire or are temporarily unemployed
viewed as earned rights not charity Paid by workers and employers Ex- SS, Unemployment compensation, and
Medicare
Federal Pension Program funded by compulsory taxes on workers and employers
Retire at 65 (62 with reduced benefits) In case of death, the benefits go to the
survivors ****avg. $995 per month pay-out6.2% tax on most workers up to $106,000
Federal insurance program for those 65 and older or disabled
$303 billion in coverage paid in 2006 Shrinking funds due to the “baby boomers” Workers pay 1.45% of income
Workers may receive benefit payments after being unemployed for a specified amount of time (varies by state)
Generally benefits are up to 33% of wages up to a given amount
(welfare) benefits to people who are unable to earn an income because of permanent handicaps or who have no or very low income and also have dependent children
Uniform nationwide minimum income for the aged, blind, and disabled who don’t qualify for SS
Average monthly payment was $579 in 2005
Cash assistance to families with children and helps find work so people don’t become dependent on the system
Vouchers for low-income families to use to purchase food paid through EBTs (Electronic Benefit Transfer) debit cards
Aka. SNAP (Supplemental Nutritional Assist. Program
Federal insurance program that provides medical benefits to those covered by SSI and TANF
Reduces the Federal income tax paid by low-income families with or without children
For 2011, earned income and AGI must be less than: $43,998 ($49,078 married filing jointly) with 3 or more qualifying children $40,964 ($46,044 married filing jointly) with 2 qualifying children; $36,052 ($41,132 married filing jointly) with 1 qualifying child; or $13,660 ($18,740 married filing jointly) with no qualifying children.
Government assistance for housing Tenants pay up to 30% of their income on
housing… the government provides vouchers for the rest
“Project-based”- live in specific projects “Tenant-based”- choose where to live
