1. How free markets create & divide wealth
Income Distribution
How free markets create & divide wealth

2. Distribution of Income
Egalitarian Society-
equal society
Free markets focus on efficiency not equality
Free markets produce tremendous wealth but also a large gap between rich & poor
record gap between the rich and poor in USA today
Globalization has exacerbated this trend

3. The Rich get Richer

5. Wealth vs. Income Top 1% has 21% of Income Top 1% has 40% of Wealth
Bottom 40% has less than 1% of wealth

6. Do we need a more Progressive Income Tax?
Tax Rate
Single
10%
$0 – $8,350
15%
$8,351– $33,950
25%
$33,951 – $82,250
28%
$82,251 – $171,550
33%
$171,551 – $372,950
35%
$372,951+

7. Where do YOU want to live?
Country A
GDP per capita = $20,000 per year
Country B
GDP per capita = $60,000 per year
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

8. Measuring Income Inequality
How do you best measure income inequality?
Average income
Median income
Lorenz curve precisely measures income inequality.
Straight line represents “perfect” income equality
Flawed measures of income gap

9. Lorenz Curve

10. Gini Index Summary
Measures the distance from line of “perfect equality” to Lorenz Curve
Gini Index ranges from Zero to 1
An index of 0 (zero) means perfect EQUALITY (on line)
As the Gini Index moves from 0  1 inequality increases

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

12. Gini Index by Country Sweden = .23 Germany = .28 England = .36
France = .32
USA = .46
Japan = .25
Brazil = .59
South Africa = .58

13. Gini Coefficient of WEALTH = .82

14. Income Distribution Rising
Why Now?