IV

Chapter 33

Causes of Income Inequality
     A. Personal endowments differ (mental, physical, personal abilities)
     B. Human capital investments differ (education and training)
      C. Job characteristics cause people to accept differing amounts of
           compensation (white vs. blue collar, job prestige, job risk)
      D. Wealth generates income
      E. Market power (unions, associations such as AMA, ABA, and AARP)
      F. Discrimination
      G. Willingness to assume risk
      H. Recently, 2001-2202, (like 1991, and 1980) was not a great time to be graduating
           from college and seeking a job. A worse time was 1929 -1938. My dad graduated
           from Tufts College in 1933.He got his first real job in 1937 and because of WWII,
            he didn't get his first new car until 1947
       I. Power CEOs have the power and no one can stop them.
E. Understanding poverty
     1. Poverty threshold (Chart) Originally set at three times a family's minimum food
         requirement, it is now adjusted for inflation Business Week, 2/26, 07 p 44
     2. The poverty rate is decreasing.
           a. 32.0% of the population lived in poverty in 1950.
           b. Just over 11% was the poverty rate through the early 1970's.
           c. 15.2% of the population during 1981-82 recession which is the most recent poverty rate peak.
          d. 14.2% of the population (35.7 million people) in 1991 lived in poverty.
           e. Between 1970 and 1990 the percentage of children living in poverty
               increased from 14.9% to 19.9% with the corresponding increases for
               white, black, and Hispanic children being 10.5% to 15.1%, 41.5% to
               44.2%, and NA to 33.9% respectively.
       3. Federal programs to help the poor
           a. Payroll tax programs
               1. Old Age, Survivors, and Disability Health Insurance (social security)
               2. Medicare pays medical costs for social security recipients
               3. Unemployment Compensation (paid by employers)
           b. Programs financed from general revenues
               1. Supplemental Security Income (elderly and disabled)
               2. Aid to Families with Dependent Children (AFDC)
               3. Food Stamps
               4. Medicaid pays health care costs for the poor