Studied by 1 person
economic inequality
who is rich and who is poor and how we measure the inequality or difference between these two categories
operationalizing
turning abstract concepts into measurable observations
Dunning-Kruger Effect
cognitive bias whereby people with limited knowledge or competence in a given intellectual or social domain greatly overestimate their own knowledge or competence in that domain
consumer price index
measures inflation each month
sets inflation based on the price of a typical basket of goods
what does the basket of goods include?
food and shelter
household operations
furnishings and equipment
clothing and footwear
transportation
health and personal care
recreation/education/reading
why is adjusting for inflation important?
because incomes have to rise just to keep pace with inflation
How is average household income adjusted for inflation?
by using the consumer price index
what are the two types of typical income measures?
average income
median income
average income
add up all scores and divide by the total number of scores
what is the issue with using average income?
it is highly influenced by high scores
not a good measure of income
median income
ranking all the scores from highest to lowest and reporting the middle number
what are the different types of income?
active income
passive income
active income
income gained by exchanging time for money usually through a paid job or self-employment
passive income
income that is not tied to active labour, income you do not exchange time for and may not actually require no time at all
in the form of investing money in the stock market or real estate market
how do companies raise money ?
selling parts or shares of the company
bonds
fancy way of saying a loan
buying one is basically giving a loan to a company or business that agrees to pay you interest
how do the rich stay rich?
through passive income
The Matthew Effect
advantage accumulates in ways that allow the rich to get richer
when one comes from advantage they don’t need to take loans or pay interest but instead invest to earn more
ascribed status
attributes, advantages and disadvantages assigned at birth
achieved status
attributes, advantages and disadvantages developed throughout life as a result of effort and skill
Income quintiles
divides population into 5 groups
top 20% of earners
above average earners 20%
middle or average 20%
Below average 20%
bottom 20% of earners
Before tax or market income
all of the income earned by a household or person
after tax income
measure of income after taxes and transfers are paid
better measure of the changes in inequality
progressive tax system
the more someone earns, the more tax they pay
GINI coefficient
a way to measure inequality
indicates that income is perfectly distributed in the country
every citizen of the country has an equal income and overall income is perfectly shared equally between everyone
scores closer to zero: indicate the country is equal
scores closer to 1 or 100: the country is quite unequal
why did inequality grow so much in Canada?
the very rich became much much richer
workers lost bargaining power
corporate consolidation means less small business owners
corporate consolidation
big companies forcing smaller companies to sell to them or go out of business
why have workers lost bargaining power over their employers?
due to the loss of unions as a product of globalization
results in lower wages
Why have the rich gotten richer?
due to rising CEO pay
top income earners have gained a greater share of income
workers have less leverage due to greater competition with workers in other countries because of globalization
increases corporate profit and decreases worker shares of profit
how is the decline of unions tied to globalization?
you lose leverage over your employer when they can move to another country quite easily
what is the reason that some unions still exist despite globalization?
because they are essential services
ex: teachers, fire fighters, nurses, etc
why has cooperate consolidation caused a decline in small business owners?
corporations have grown more powerful due to globalization
they can put smaller businesses out of business or threaten to so they are forced to sell to them because they have more ressources
oligopoly
when a market is dominated by a small number of large sellers/producers and it often results in competitors price-matching in mutually beneficial ways
leads to higher prices goods for the average person and less money for them to spend on other things
main takeaways
inequality has grown so much that Canada is one of the more unequal developed countries
children of the very rich stay rich because of the Matthew effect and passive income
inequality has grown because of globalization
what are the three main components of wealth?
assets
liabilities
net worth
what are the 2 main reasons for inequality growing with little response?
most homes gained gained an extra income earner and this was not seen as unfair but rather progress towards women’s rights
access to loans and debt has grown a lot allowing access to goods we want/need despite not having the money
increases Matthew Effect
net worth
total assets minus liabilities
assets
real estate value, vehicle value, cash on and or in bank account, investments, retirement funds, value of other possessions
liabilities
typically just different kinds of debt such as mortgage, auto mobile, student loan, credit card debt
invisible inequality
rising debt is a form of it
an inequality that exists but is impossible to see unless someone tells you what their debt load is
how do we measure poverty?
absolute poverty
relative poverty
extreme poverty
absolute poverty
lack of resources necessary for material well being
food, water, land and health care
relative poverty
a deficiency in material and economic resources compared with some other population
extreme poverty
living on less than 1.25 a day
15% of the world
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