Efficiency - Week 10

Lorenz curve

Shows the cumulative percentage of income earned by each percentage of the population. Top 25% at the bottom of the graph represents the top portion of high income earners (jointly earning) where cumulative income shoots up from 20% to 100%

Gini coefficient

area A/ area A + area B

Percentile wage

Estimates the value of a wage which a certain percent of workers fall (belong)

Factors affecting skilled and less skilled workers

• there has been a rise in the rate of return on education

• there has been a rise in the number of educated

• the supply of and demand for less skilled workers have declines

• skilled labour market experienced both higher wages and higher employment

Key findings on income inequality

• 43% of adults pay no tax income

• the top 1% of income taxpayers are male, middle aged and london based

• these patterns become more pronounced at even higher income levels

• the top 1% of income taxpayers are not a stable group- a quarter of those in the top 1% in one year will not be there in five years