1. Why are some people rich and some people poor?

2. Lesson Focus
Income Distribution

3. Divide into Groups of 4
Come up with name for country ___________
Household Income Cards > Each Group
20 Households in the country
Each card states the income for one household

4. Household Income Activity
1. Rank the household incomes from the lowest to the highest. 2. Determine the aggregate (total) income for the country. 3. Determine the median and the mean income for the country. 4. Divide the households into five equal groups. 5. Determine the aggregate income for each group. 6. Determine the percent of income each group has of the aggregate or total income. (Divide the aggregate income of each group by the overall aggregate income of all households.) *Can Use Calculators

5. Mean=Average. To calculate the mean income for all households, divide the aggregate income by the number of households (20)
Median=exact middle number in a sequence of numbers. If there is an even number, as there is in the fictitious country’s number of households, add the middle two numbers and divide by two

6. Household Distribution of Income
Fictitious Country
Aggregate (total) household income =
Ranking of Household Groups
Aggregate Income by Group
Percent Distribution of
Aggregate Income
Lowest
Second
Third
Fourth
Highest

7. What is the mean income in this country?
$70,850

8. What is the median income for this country
$49,500

9. Mean would rise, median would stay the same
What would happen to the mean and median income for this country if the highest income were increased by $20,000?
Mean would rise, median would stay the same

10. Income Distribution
The way in which the nation’s income is divided among families, individuals, or other designated groups

11. What does the data tell you about the distribution of income for households in this fictitious country?
The top fifth has the greatest share of the total income in this country

12. Quintile
Each group of income in this data set is called a quintile. A quintile is 20 percent or 1/5 of the population

13. We will be looking at U.S. income distribution during different time periods

14. Distribute 14.3
1/Student

15. Mean Household Income (in dollars) Received by Quintiles
Year
Lowest Quintile
Second Quintile
Third Quintile
Fourth Quintile
Highest Quintile
1970
10,512
28,475
45,852
64,633
114,421
1980
11,435
28,459
46,961
69,186
123,358
1990
12,204
30,706
50,718
76,468
148,397
2000
13,543
33,815
56,311
87,537
189,692
2010
11,578
30,047
51,777
83,065
178,384
What happened to the mean household income between 1970 and 2010?

16. Share of Aggregate Income Received by Quintiles
Year
Percent Distribution of Aggregate Income
Lowest Quintile
Second Quintile
Third Quintile
Fourth Quintile
Highest Quintile
1970
4.1
10.8
17.4
24.5
43.3
1980
4.2
10.2
16.8
24.7
44.1
1990
3.8
9.6
15.9
24.0
46.6
2000
3.6
8.9
14.8
23.0
49.8
2010
3.3
8.5
14.6
23.4
50.3
Source: U.S. Census Bureau, Statistical Abstract of the United States: 2012 (131st edition) Washington, DC, 2011;

17. What about the highest quintile? 50.3%
In 2010 what percentage of total income did households in the lowest/poorest quintile earn?
3.3%
What about the highest quintile?
50.3%

18. Quintiles 1-4 decreased; the fifth increased
What happened to the % of aggregate income that households earned in each quintile between ?
Quintiles 1-4 decreased; the fifth increased

19. How does this data support the statement that the U. s
How does this data support the statement that the U.s. has an increased income gap between rich and poor?

20. Day 2
Pass out Activity 14.4
Get into groups again

21. Make a generalization about Each of the following categories
Type of Household
Age of Household Head
Number of Household Earners
Work Experience
Mean Income
Education Attainment
Overall what generalization can be made of the lowest quintile compared to the highest.

22. How does investment in ones human capital matter to that person?

23. Average Earnings of Full-time, Year-round Workers as a Proportion of the Average Earnings of High School Graduates by Educational Attainment: 1975 to 2013
FPO

24. How might the increasing income gap affect the education success of higher-income and lower income students?

25. Activity 14.5
Read together and answer Q’s as a group

26. Redistribute Income using Transfer Payments
One Goal of Government
Redistribute Income using Transfer Payments
Transfer Payments-income payments to those for which no services are performed
Eg. Taxation, spending, assistance programs, programs designed to provide training to workers, or to encourage investment in human capital (education)

27. What are some examples of transfer payments that you can think of?
SNAP, housing assistance, free/reduced lunches, Social Security Payments, Temporary assistance, unemployment.

28. Why does the government Redistribute Income?
Promote Fairness, assist low income families, and provide health care, food, housing (basic needs)

29. How does this end up decreasing the income gap?

30. How do you feel about taxation to redistribute wealth?

31. Final Questions
How has the mean income from changed in the US?
How has income inequality changed over the last 40 years?
Why do some people earn more income than others?
How do skills and education affect income inequality?
In some level of inequality beneficial?
What is a transfer payment and how are they used?