Economic Inequality Overview

  • Explores income and wealth distribution in the U.S.

  • Analyzes trends and sources of economic inequality.

  • Discusses government income redistribution.

Income Distribution

  • Mode Income: Most common range ($15,000 - $20,000).

  • Median Income: Half of households earn below $59,036.

  • Mean Income: Average income is $83,143.

  • Skewness: U.S. income distribution is positively skewed (mean > median > mode).

  • Quintile Shares (1970 - 2018): Shows distribution trends.

Wealth Distribution

  • Wealth Definition: Total value of owned assets.

  • Distribution Comparison: Wealth is more unequally distributed than income.

  • Lorenz Curve: Indicates inequality; further from equality line = more unequal.

  • Human Capital Exclusion: Wealth distribution does not consider human capital thus is less accurate for inequality assessment.

Inequality Measurement

  • Gini Ratio: Indicator of income inequality; closer to 1 = more inequality.

  • 2012 U.S. Gini Ratio: 0.47, indicating rising inequality since 1972.

Poverty

  • Definition: Income insufficient for basic needs; poverty line for a family of four in 2016: $24,424.

  • Demographics: Unequal poverty rates by race:

    • 11% White

    • 19% Hispanic

    • 22% Black

  • Poverty Trends: Steady historical rates despite recent increases.

Global Inequality

  • Global income distribution is more unequal than that within any individual country.

  • Poverty Statistics: 50% live on $2.50/day or less; 80% are very poor.

  • Global Gini Ratio: Decreasing inequality globally as poorer countries grow faster.

Sources of Economic Inequality

  • Human Capital: More means more income.

  • Demand & Supply: High-skilled labor earns more due to higher demand.

  • Technological Change: Reduces demand for low-skilled labor, increases for high-skilled labor, widening wage gaps.

  • Globalization: Increases demand for high-skilled labor, lowers for low-skilled labor.

  • Discrimination: Bias leads to wage gaps despite identical qualifications.

  • Specialization Differences: Life roles affect women's earnings.

Wealth Disparity

  • Superstar Phenomenon: Top earners vastly outpace average income.

  • Prizes for Contest: Higher rewards induce greater effort in competitive environments.

  • Wealth Sources: Life-cycle savings and intergenerational transfers increase inequality.

Income Redistribution

  • Methods: Income taxes, maintenance programs, subsidized services.

  • Tradeoff: Redistribution; balancing equity and efficiency.

  • Efficiency Losses: Resource use, tax-induced deadweight loss, altered labor incentives.