Chapter 20: Income Inequality, Poverty, and Discrimination

Income inequality

How income is distributed around the average

Lorenz curve

Displays quintile distribution of personal income

Govt

________ redistributes income from high to low income households.

Gini ratio

Numerical measure of the overall dispersion of income

Income mobility

Movement of individuals + households between income quintiles

Non-cash transfers

Provide goods/services rather than cash

Equality-efficiency trade-off

Greater income equality (achieved through redistribution of income) comes at the opportunity cost of reduced production and income

Poverty rate

Percent of population living in poverty

Entitlement programs

Social insurance + welfare; eligible persons ensured to benefits in programs

Social insurance programs

Partially replace earnings that have been lost due to retirement, disability, or temporary unemployment; they also provide health insurance for the elderly

Social Security

Federal pension program that replaces part of the earnings lost when workers retire, become disabled, or die

Medicare

Federal insurance program that provides health insurance benefits to those 65 or older and people who are disabled

Unemployment compensation

Social insurance program that makes income available to workers who are unemployed

Public assistance programs

Provide benefits to people who are unable to earn income because of permanent disabling conditions or who have no or very low income and also have dependent children

Supplemental Security Income (SSI)

Provides a uniform nationwide minimum income for the aged, blind, and disabled who are unable to work and who do not qualify for Social Security aid

Temporary Assistance for Needy Families (TANF)

Basic welfare program for low-income families in the United States

Food stamp program

Federal program (financed through general tax revenues) that permits eligible low-income persons to obtain vouchers that can be used to buy food

Medicaid

Federal program (financed by general tax revenues) that provides medical benefits to people covered by the SSI and TANF (basic welfare) programs

Earned income tax credit (EITC)

Refundable Federal tax credit provided to low-income wage earners to supplement their families’ incomes and encourage work

Income inequality

How income is distributed around the average

Distribution by quintiles (fifths)

Dividing into 5 equal groups + examining % of total personal income of each quintile

Lorenz curve

Displays quintile distribution of personal income

Gini ratio

Numerical measure of the overall dispersion of income

Income mobility

Movement of individuals + households between income quintiles

Non-cash transfers

Provide goods/services rather than cash

Case for equality

Income equality maximizes total consumer satisfaction (utility) from any particular level of output and income

Case for inequality

Income distribution determines amount of output/income produced + available to distribute

Equality-efficiency trade-off

Greater income equality (achieved through redistribution of income) comes at the opportunity cost of reduced production and income

Poverty rate

Percent of population living in poverty

Entitlement programs

Social insurance + welfare; eligible persons ensured to benefits in programs

Social insurance programs

Partially replace earnings that have been lost due to retirement, disability, or temporary unemployment; they also provide health insurance for the elderly

Social Security

Federal pension program that replaces part of the earnings lost when workers retire, become disabled, or die

Medicare

Federal insurance program that provides health insurance benefits to those 65 or older and people who are disabled

Unemployment compensation

Social insurance program that makes income available to workers who are unemployed

Public assistance programs

Provide benefits to people who are unable to earn income because of permanent disabling conditions or who have no or very low income and also have dependent children

Supplemental Security Income (SSI)

Provides a uniform nationwide minimum income for the aged, blind, and disabled who are unable to work and who do not qualify for Social Security aid

Temporary Assistance for Needy Families (TANF)

Basic welfare program for low-income families in the United States

Food stamp program

Federal program (financed through general tax revenues) that permits eligible low-income persons to obtain vouchers that can be used to buy food

Medicaid

Federal program (financed by general tax revenues) that provides medical benefits to people covered by the SSI and TANF (basic welfare) programs

Earned income tax credit (EITC)

Refundable Federal tax credit provided to low-income wage earners to supplement their families incomes and encourage work

Discrimination

Practice of according people inferior treatment (for example, in hiring, occupational access, education and training, promotion, wage rate, or working conditions) on the basis of some factor such as race, gender, or ethnicity

Taste for discrimination model

Views discrimination as resulting from a preference or taste for which the discriminator is willing to pay

Discrimination coefficient

Amount of disutility

Statistical discrimination

People are judged on the basis of the average characteristics of the group to which they belong, rather than on their own personal characteristics or productivity

Occupational segregation

Crowding of women, African Americans, and certain ethnic groups into less desirable, lower-paying occupations

Discrimination

Practice of according people inferior treatment (for example, in hiring, occupational access, education and training, promotion, wage rate, or working conditions) on the basis of some factor such as race, gender, or ethnicity

Taste for discrimination model

Views discrimination as resulting from a preference or taste for which the discriminator is willing to pay. The model assumes that, for whatever reason, prejudiced people experience a subjective or psychic cost—a disutility—whenever they must interact with those they are biased against

Discrimination coefficient

Amount of disutility

Statistical discrimination

People are judged on the basis of the average characteristics of the group to which they belong, rather than on their own personal characteristics or productivity

Occupational segregation

Crowding of women, African Americans, and certain ethnic groups into less desirable, lower-paying occupations