1. Econ 3690 This presentation is based on Economic Issues: A Canadian Perspective by C.M. Fellows, G. Flanagan, and S. Shedd 1

2.  Many CED organizations target specific groups 2

3.  “Poverty amidst plenty”  A problem of income distribution 3

4. The way in which society deals with issues of poverty is determined largely by their view of the poor 1. “lazy leeches who simply want a handout” 2. “individuals who are poor because of unfortunate circumstances, who therefore deserve society’s unquestioning support.” 4

5.  There is no single, universally accepted standard definition of poverty.  People living in and out of poverty, community groups and policy makers hold many different views on the definition of poverty, its causes and possible solutions. 5

6. 1. We examine poverty in terms of absolute income levels 2. We study income in terms of relative income. 6

7. The poor tend to become trapped with little chance of breaking out of their life of poverty. Possible explanations:  a lack of motivation to advance their economic position in society  content living off low-income support programs  no opportunity to lift themselves and their families out of poverty 7

8. Consider the circular flow diagram 8

9.  Households sell or rent their resources to earn income.  We need to investigate the factors which determine the prices paid for labour, capital, and natural resources and what determines the quantities that can be employed. 9

10.  Workers are paid according to their worth to employers.  Economists refer to this worth as the marginal revenue product of labour (MRP l ).  MRP l is the change in total revenue resulting from the addition of one additional worker. 10

11.  The demand for labour curve shows what employers are willing to pay for different quantities of labour.  The supply of labour curve shows the quantity of labour that workers are willing to make available at different wage rates.  There is only one wage where the labour market is in equilibrium. 11

12.  In a competitive market, the price of capital is determined using the demand-supply model.  The prices of natural resources are determined in the same way. 12

13.  The distribution of income depends on the distribution of resources ownership and the prices paid for resources of different kinds in different employments.  The ownership pattern is unequally distributed among individuals and families, leading to unequally distributed income. 13

14. 1. Brains and brawn 2. Skill levels 3. Capacity utilization rate  Capacity utilization rate= actual earnings/ earnings capacity  Utilization rates vary among people  preferences for income and leisure  responsiveness to taxes or transfer payments  labour supply barriers 14

15. 1. Inheritance 2. Luck 3. Propensity to accumulate 15

16.  small quantities and low qualities of resources  market places low value on services they provide  less education and training, bad luck, relatively small inheritances and discrimination  the vicious cycle of poverty is difficult to escape. 16

17. “Discrimination exists when equals are treated unequally or when unequals are treated equally” In economic terms, discrimination imposes a cost on society. 17

18. Market discrimination occurs when two conditions are satisfied: 1.power to discriminate 2.desire to discriminate 18

19.  Monopoly power can exist on the selling and purchasing side of the market.  A firm with monopsony power in the labour market has the power to discriminate.  Workers may be exploited when wage rates are below their marginal revenue product. 19

20.  “Deliberate discrimination exists because individuals have a taste for discrimination. Such individuals have a preference to associate with a particular group or to avoid associating with a particular group. If necessary, these individuals will pay to discriminate” 20

21.  What is wage discrimination? ◦ “Equal pay for equal work” 21

22. “In 2011full-time working women earned, on average, about 80 percent of what full-time working men earned.” 22

23.  Suppose a man and woman complete their accounting degrees at the same time and place, have identical grades in the same courses and equally good recommendations, are hired by the same accounting firm as entry-level staff accountants, and differ in one respect - the man is paid $40,000 a year and the woman is paid $36,000 a year 23

24.  The existence of wage discrimination in an economy indicates that the market is not working efficiently in allocating resources among alternative uses.  If employers or workers have prejudices, the labour market is not competitive. 24

25.  When the best person is not hired for the job simple because his or her skin is a different color, society bears a cost. 25

26.  Discrimination results in an economy producing within the production possibilities curve. GDP is lost due to lower output levels due to unnecessary low levels of economic efficiency.  The elimination of discrimination leads to a higher standard of living for society as a whole. 26