What is Income? What is Wealth?

Income Distribution Article Reasons

Of Wealth http://www.pbs.org/newshour/bb/business/july-dec11/makingsense_08-16.html

Distribution of Income Who has all the Money?

Income Distribution Free markets focus on EFFICIENCY not EQUALITY United States has enormous wealth but tremendous inequality record gap between the rich and poor

Wealth vs. Income Top 1% has 19% of Income Top 1% has 39% of Wealth Numbers YOU should know for Final Exam Wealth vs. Income Top 1% has 19% of Income Top 1% has 39% of Wealth Bottom 40% has less than 1% Wealth

Top 1%

Top 1% versus Top 0.1% Top 1%: Top 0.1%: Income: Over $350,000 per year 1.5 million households Top 0.1%: Income: $1.4 million per year Only 146,000 households

Where do YOU want to live? Country A Average Income = $20,000 per year (mean income) Country B Average Income = $60,000 per year (mean income) Which country do YOU want to live in? Population = 100,000 Each person earns $20,000 GDP = 2 billion or $20,000 per capita Population = 100,000 400 people earn $15 million 99,600 earn $1,000 per year GDP = 6 billion or $60,000 per capita

Lorenz Curve Introduction Lorenz Curve illustrates distribution of income A much more accurate measure than average income Gini Index measures the degree of inequality in a Lorenz curve Gini Index is a number between 0  1 0 (zero) means perfect EQUALITY 1 means perfect inequality As the Gini Index increases from 0  1 inequality increases

Lorenz Curve Analysis France: .34 USA: .46 Line of perfect Income equality Gini Coefficient 0 - 1 USA: .46

Gini Index by Country Sweden = .23 Germany = .28 England = .36 France = .32 USA = .46 Japan = .25 South Africa = .58

USA Distribution of Income Widens 2007 Gini Index Income: .46 Gini Index WEALTH: .82