Information Economy & Income Distribution — Key Points
Information Economy
The information economy consists of the jobs and businesses that produce and use computers and equipment powered by computer chips.
It is highly visible in daily life; technology enables capital to replace labor.
Technology replacing labor
ATMs replace bank tellers: invented ~50 years ago; originally bank-only and limited functionality; in the last decade, ATMs spread to corner stores and allow cash access and balance checks from almost anywhere.
Wave and Pay: smartphones used at store terminals to complete payments quickly, substituting capital for labor.
Labor displacement and job creation
Fewer shop clerks and bank tellers, but new technologies create jobs in making, programming, installing, and repairing machines.
Who do we produce for? (Income and purchasing power)
Incomes determine how much goods and services people can buy.
Incomes come from the services of factors of production:
Rent for land, wages for labor, interest for capital, profit (or loss) for entrepreneurship.
Functional distribution of income
The question: What are the shares of the four factor incomes in the United States? Which factor gets the largest share?
In 2017, wages accounted for of total income; rent, interest, and profit together accounted for . These shares are remarkably stable over time.
Personal distribution of income
The distribution of income among households (2017) shows pronounced inequality.
Richest 20% earn of total income.
Poorest 20% earn of total income.
The distribution has become more unequal: the rich have become richer, but the poor have not necessarily become poorer—just not keeping up as fast.
Notes on figures and review
Figure 2.1a illustrates the functional distribution (factor shares).
Figure 2.1 shows the personal distribution (household shares).
Checkpoint 2.1 prompts to describe what, how, and for whom goods and services are produced and distributed.