20Income Inequality and Poverty.docx

1、20 Income Inequality and PovertyI N C O M E I N E Q U A L I T Y A N D P O V E R T Y “The only difference between the rich and other people,” Mary Colum once said to Ernest Hemingway, “is that the rich have more money.” Maybe so. But this claim leaves many questions unanswered. The gap between rich a

2、nd poor is a fascinat- ing and important topic of studyfor the comfortable rich, for the struggling poor, and for the aspiring and worried middle class.From the previous two chapters you should have some understanding about why different people have different incomes. A persons earnings depend on th

3、e supply and demand for that persons labor, which in turn depend on natural abil- ity, human capital, compensating differentials, discrimination, and so on. Because labor earnings make up about three-fourths of the total income in the U.S. econ- omy, the factors that determine wages are also largely

4、 responsible for determining how the economys total income is distributed among the various members of so- ciety. In other words, they determine who is rich and who is poor.IN THIS CHAPTER YOU WILL . . .Examine the degr ee of economic inequality in our society Consider some pr oblems that arise when

5、 measuring economic inequality See how political philosophers view the gover nments r o le in r edistributing income Consider the various policies aimed at helping poor families escape pover ty 437 In this chapter we discuss the distribution of income. As we shall see, this topic raises some fundame

6、ntal questions about the role of economic policy. One of the Ten Principles of Economics in Chapter 1 is that governments can sometimes im- prove market outcomes. This possibility is particularly important when consider- ing the distribution of income. The invisible hand of the marketplace acts to a

7、llocate resources efficiently, but it does not necessarily ensure that resources are allocated fairly. As a result, many economiststhough not allbelieve that the government should redistribute income to achieve greater equality. In doing so, however, the government runs into another of the Ten Princ

8、iples of Economics: Peo- ple face tradeoffs. When the government enacts policies to make the distribution of income more equitable, it distorts incentives, alters behavior, and makes the al- location of resources less efficient.Our discussion of the distribution of income proceeds in three steps. Fi

9、rst, we assess how much inequality there is in our society. Second, we consider some dif- ferent views about what role the government should play in altering the distribu- tion of income. Third, we discuss various public policies aimed at helping societys poorest members.THE MEASUREMENT OF INEQUALIT

10、Y We begin our study of the distribution of income by addressing four questions of measurement: How much inequality is there in our society? How many people live in poverty?“As far as Im concerned, they can do what they want with the minimum wage, just as long as they keep their hands off the maximu

11、m wage.” What problems arise in measuring the amount of inequality? How often do people move among income classes?These measurement questions are the natural starting point from which to discuss public policies aimed at changing the distribution of income.U.S. INCOME INEQUALITY There are various way

12、s to describe the distribution of income in the economy. Table 20-1 presents a particularly simple way. It shows the percentage of families that fall into each of seven income categories. You can use this table to find where your family lies in the income distribution.For examining differences in th

13、e income distribution over time or across coun- tries, economists find it more useful to present the income data as in Table 20-2. To see how to interpret this table, consider the following thought experiment. Imag- ine that you lined up all the families in the economy according to their annual in-

14、come. Then you divided the families into five equal groups: the bottom fifth, the second fifth, the middle fifth, the fourth fifth, and the top fifth. Next you computed the share of total income that each group of families received. In this way, you could produce the numbers in Table 20-2.These numb

15、ers give us a way of gauging how the economys total income is dis- tributed. If income were equally distributed across all families, each one-fifth of fam- ilies would receive one-fifth (20 percent) of income. If all income were concentrated among just a few families, the top fifth would receive 100

16、 percent, and the other fifths would receive 0 percent. The actual economy, of course, is between these two extremes. The table shows that in 1998 the bottom fifth of all families received 4.2 percent of all income, and the top fifth of all families received 47.3 percent of all in- come. In other wo

17、rds, even though the top and bottom fifths include the same num- ber of families, the top fifth has about ten times as much income as the bottom fifth.The last column in Table 20-2 shows the share of total income received by the very richest families. In 1998, the top 5 percent of families received

18、20.7 percent of total income. Thus, the total income of the richest 5 percent of families was greater than the total income of the poorest 40 percent.Table 20-2 also shows the distribution of income in various years beginning in1935. At first glance, the distribution of income appears to have been r

19、emarkablystable over time. Throughout the past several decades, the bottom fifth of familiesLess than $15,00011.7%THE DISTRIBUTION OF INCOME I NTHE UNITED STATES : 1998$15,000-$24,99912.3$25,000-$34,99912.7$35,000-$49,99916.8$50,000-$74,99921.5$75,000-$99,99911.7$100,000 and over13.3Source: U.S. Bur

20、eau of the Census.ANNUAL FAMILY INCOME PERCENT OF FAMILIESTable 20-1 Table 20-2 INCOME INEQUALITY IN THE YEARBOTTOMFIFTHSECONDFIFTHMIDDLEFIFTHFOURTHFIFTHTOPFIFTHTOP5 PERCENTUNITED STATES . This tableshows the percent of total before-19984.2%9.9%15.7%23.0%47.3%20.7%tax income received by families1990

21、4.610.816.623.844.317.4in each fifth of the income19805.211.517.524.341.515.3distribution and by those19705.512.217.623.840.915.6families in the top 5 percent.19604.812.217.824.041.315.919504.512.017.423.442.717.319354.19.214.120.951.726.5Source: U.S. Bureau of the Census.has received about 4 to 5 p

22、ercent of income, while the top fifth has received about40 to 50 percent of income. Closer inspection of the table reveals some trends in thedegree of inequality. From 1935 to 1970, the distribution gradually became moreequal. The share of the bottom fifth rose from 4.1 to 5.5 percent, and the share

23、 ofthe top fifth fell from 51.7 percent to 40.9 percent. In more recent years, this trendhas reversed itself. From 1970 to 1998, the share of the bottom fifth fell from 5.5percent to 4.2 percent, and the share of the top fifth rose from 40.9 to 47.3 percent.In Chapter 19 we discussed some of the rea

24、sons for this recent increase in in-equality. Increases in international trade with low-wage countries and changes intechnology have tended to reduce the demand for unskilled labor and raise the de-mand for skilled labor. As a result, the wages of unskilled workers have fallen rel-ative to the wages

25、 of skilled workers, and this change in relative wages hasincreased inequality in family incomes.CASE STUDY THE WOMENS MOVEMENT AND THE INCOME DISTRIBUTIONOver the past several decades, there has been a dramatic change in womens role in the economy. The percentage of women who hold jobs has risen fr

26、om about 32 percent in the 1950s to about 54 percent in the 1990s. As full-time homemakers have become less common, a womans earnings have become a more important determinant of the total income of a typical family.Although the womens movement has led to more equality between men and women in access

27、 to education and jobs, it has also led to less equality in fam- ily incomes. The reason is that the rise in womens labor-force participation has not been the same across all income groups. In particular, the womens move- ment has had its greatest impact on women from high-income households. Women f

28、rom low-income households have long had high rates of participation in the labor force, even in the 1950s, and their behavior has changed much less.In essence, the womens movement has changed the behavior of the wives of high-income men. In the 1950s, a male executive or physician was likely to marr

29、y a woman who would stay at home and raise the children. Today, the wife of a male executive or physician is more likely to be an executive or physician herself. The result is that rich households have become even richer, a pattern that raises inequality in family incomes.As this example shows, ther

30、e are social as well as economic determinants of the distribution of income. Moreover, the simplistic view that “income inequal- ity is bad” can be misleading. Increasing the opportunities available to women was surely a good change for society, even if one effect was greater inequality in family in

31、comes. When evaluating any change in the distribution of income, pol- icymakers must look at the reasons for that change before deciding whether it presents a problem for society.EQUALITY FOR WOMEN HAS MEANT LESS EQUALITY FOR FAMILY INCOMES.CASE STUDY INCOME INEQUALITY AROUND THE WORLDHow does the amount of income inequality in the United States compare to that in other countries? This question is interesting, but answering it is problematic. For many countries, data are