Earnings / Discrimination / Income / Inequality / Poverty Ch. 19 and 20 in Text Supplemented with “5 Steps to A 5”

Ch 19 •Read pg 417 through “The Superstar

Phenomenon” (ends on 426) •Pg 426 “The Economics of

Discrimination” through the end of the chapter.

Ch 20 •Read introduction 437-38•442 “The Poverty Rate” through

“Problems in Measuring Inequality” (ends on top of 444)

•446 “The Political Philosophy of Redistributing Income” through the end of the chapter

5 Steps to a 5 •Reading selection on F.I.S. •Pg 162-168

Ch 19 Earnings and Discrimination Labor – Abide by same laws of Supply and Demand

Who Supplies Labor?

Who Demands Labor?

At W* - each worker is paid the value of their marginal contribution to the economy’s production of goods and services

•So why do we have such variations in earnings?

•Must analyze S + D for different types of labor

A.Compensating Differentials: i.Non- monetary characteristics

easy/hard, safe/dangerour, fun/boringii. Which would you rather do?

Supply of labor for easy /safe / fun jobs

The rest of this power point comes from “5 Steps to a 5”

Distribution of Income

LORENZ CURVE - Hypothetical line of perfect equality – the farther the Lorenz CurveLies below the line of perfect equality, the more UNEQUAL the distribution of income.

The distance between perfect equality and the Lorenz Curve is calculated by the “GINI RATIO (COEFFICIENT)”

A / (A+B) : the closer it is to “ 0 “ , the more equal the distribution the closer it is to “ 1 “, the more unequal the distribution

What do you think are the sources of income inequality?

Can Income be “REDISTRIBUTED”?

TAXES •There are three main types of taxes

related to income •Proportional •Regressive •Progressive

Proportional Regressive Progressive ???????

Proportional Regressive Progressive ???????

Proportional Regressive Progressive ???????

Which one is most fair? •Equity is in the eye of the beholder

Married filing jointly10% on $18,15015% on $55,550 = $8,332.50

$75,050 x 25% =$18,762.50

If you make $148,850 and pay $28,925 in Taxes = 19% of total income If you make $457,600 and pay

$127,962 in taxes = 28%

2014 Tax Brackets: filing single