Chapter 33 Distributing Income  
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I. Market Income Data for Many is Stagnating       II. Income is Not an Appropriate Measure of Well-being      III. Stagnation Started After Second Oil Embargo    

IV. Analyzing the Distribution of Income with Lorenz Curves and Gini Index          V. Causes of Income Inequality      

VI. U.S. Government Defined Poverty and Created Safety Net        VII. Effectiveness of Government Poverty Programs          VIII. Additional Information


I. Market Income Data for Many is Stagnating

Median Income

household income percentile 2011


Mean Income


Middle Class: A Candle Burning at Both Ends 

According to the Pew Research Center, the national median household income based on four person occupancy is $68,274.  To be considered middle class an individual's household income needs to fall between 66.7 and 200 percent of this national median.  

Since 1971 the overall share of the middle-class as a population has dropped from 61 to 51 percent.  To further segment the class into upper, middle, and lower incomes identifies an increasing divergence from the center.  Since 1971 the upper tier's share has risen from 14 to 20 percent; at the same time the lower tier rose from 25 to 29 percent econintersect 8/30/12




See Income Inequality in America
Capitalism in the Twenty-First Century Book Review
Income,  Poverty, and Health Insurance Coverage In the United States: 2010 Census Bureau September of 2011
World of Class Warfare The Poor's Free-Ride-Is-Over and the Fox Network look at raising taxes on the poor
Taxes, Transfers and USA vs., Eurozone
People's Budget of UK in 1911 started the redistribution process.

Americas income-who has it? 2012 Social Security data is comprehensive
Household income in the United States from Wikipedia
Middle Class Squeeze Continues  from The Big Picture Blog.
According to one 2006 study**, by Dirk Krueger of the University of Pennsylvania and Fabrizio Perri of New York University, consumption inequality
as barely budged for several decades, despite a sharp upswing in income inequality.
Does Income Inequality Lead to Consumption Inequality? Evidence and Theory
    II. Income is Not an Appropriate  Measure of Well-being.
       A. Many goods, especially since the digital revolution, provide more satisfaction than their cost indicates.
           Much of the value provided by a smart phone was not available 25 years ago and those that were
           each cost thousand's of dollars. Movie camera that doesn't need developing that will send results anywhere in the world.
       B. Government makes our lives better in ways not measured by individual income.
           Curing childhood disease and limiting pollution are just two.
       C. Successful government fosters peace allowing the elimination of a peacetime draft.
       D. Interesting Opinions
           1. Conservative Thomas Sowell - Is "Income Stagnation" an Economic Myth?
           2. Liberal The Sad But True Story of Wages in Americans

   III. Stagnation Started after Second Oil Embargo Data From April 26, 2009--The U-Turn as printed in economics principles. com

The Daily Show on Class Warfare

  See The top 1/10 of one-percent not the top 1% are getting more and more of the wealth




Bottom 99% Down Dramatically


IV. Analyzing the Distribution of Income with Lorenz Curves and Gini Index

A. A Lorenz curve depicts income inequality 
    by plotting the percentage of income (Y) 
    received by different percentages of the
    population. A 45-degree line represents
    perfect equality as 10% of the population
    receive10% of the income and 35% of the
    population receive 35% of the income,
    etc. Perfect inequality would be close to the
    x-axis as 99% of the population receive no
B. The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It has found application in the study of inequalities in disciplines as diverse as The Gini coefficient is a measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 maximal inequality. It has found application in the study of inequalities in disciplines as diverse as economics, health science
, chemistry and engineering. from 

of Wikipedia
   1. CIA World Factbook Gini rank order
   2. Gini in a Bottle: Facts on Income Inequality
   3. Transfers payments and taxes decreases inequality CBO 2011
















Economist Magazine  1/22/11





from 20 Sept 2012


      C. American thoughts on
           Income Inequality from
Wall Street Journal's  Real Time Economics Blog

Timothy Noah points to a study that shows Americans underestimate income inequality. “The richest 1 percent account for 35 percent of the nation’s net worth; subtract housing, and their share rises to 43 percent. The richest 20 percent (or “top quintile”) account for 85 percent; subtract housing and their share rises to 93 percent. But when Norton and Ariely surveyed a group whose incomes, voting patterns, and geographic distribution approximated that of U.S. population, the respondents guessed that the top quintile accounted for only 59 percent of the nation’s wealth… Norton and Ariely also asked respondents what they thought the ideal distribution of wealth should be, and found, again, little difference among income groups, or between Bush voters and Kerry voters. Most favored a wealth distribution resembling that in … Sweden! But when you examine Norton and Ariely’s method, that particular finding gets a little shaky. They showed respondents three unlabeled pie charts. One depicted utopian equality, with wealth distributed equally among five groups. The second depicted the United States, with wealth distributed very unequally among five groups (one of which gobbled up 85 percent—Norton and Ariely put it at 84 percent, but let’s not quibble). The third depicted Sweden, where the top quintile accounts for 35 percent of the nation’s wealth. Neither the Swedish pie chart nor the U.S. pie chart was identified by nation. Norton and Ariely were astonished that 47 percent of respondents—remember these were all Americans—chose the pie chart depicting Sweden. But surely most survey-takers, when presented with two extreme options and one that lies in the middle, will instinctively gravitate, like Goldilocks, toward the middle option. More surprising to me was that second place went to Utopia (43 percent). Only 10 percent voted for the pie chart depicting the country the respondents actually live in.”

      D. Income Inequality and It's Costs

Left axis is link between fathers' and sons' earnings. Bottom axis is Income inequality (Gini Coefficient).
Gini coefficient - Wikipedia

V. Causes of Income Inequality
      A. Personal endowments differ (mental, physical, and 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. Luck 
          1. Recently, 2001-2202, (like 1991, and 1980) was not a great time to be
              graduating from college and seeking a job. 
          2 .The worst 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.
Business Week, 2/26/07 p 44
 J. Taxes
K. Equality Denial  from takes a different view.
      L. Visit The L-Curve: A Graph of the US Income Distribution for an interesting of
           income distribution in the United States.
Emmanuel Saez, economist, Berkley, studies income distribution of many countries.
Income Distribution by country


Inequality and parenting style

by on October 15, 2014 at 1:50 pm in Data Source, Economics | Permalink

- See more at:

Inequality and parenting style

by on October 15, 2014 at 1:50 pm in Data Source, Economics | Permalink

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Inequality and parenting style

by on October 15, 2014 at 1:50 pm in Data Source, Economics | Permalink

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Inequality and Parenting Style

inequality and parenting style

Top Tax Rates Have Gone Down

dcj graphic 5/31/23


VI. U.S. Government Defined Poverty and Created Safety Net
A. 1990 Poverty threshold
          1. Originally set at three times a family's minimum food requirement, it is now 
              adjusted for inflation
          2. $13,359 annually for a family of four
          3. $6,652 annually for a single person
     B. By 2005, the Department of Health and Human Services reported higher 

     C. The poverty rate was decreasing.
         1. 32.0% of the population lived in poverty in 1950.
         2. Just over 11% was the poverty rate through the early 1970's.
         3. 15.2% of population during 81-82 recession which is the most
               recent poverty rate peak.
         4. 14.2% of the population (35.7 million people) in 1991 lived in poverty.
         5. 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.
     D. The Great Recession has poverty on the increase but government programs
           have helped.
           See Trends in Poverty with an Anchored Supplemental Poverty Measure

     E. Poverty Demographics



46.2 Million People in Poverty for 2010  Robert Oak on Tue, 09/13/2011 - 14:13
" The Census released a comprehensive report on poverty, income and health insurance 
coverage in the United States for 2010. There were 46.18 million people living in poverty, 
in the United States. The Census population for 2010 was 305,688,000. This means that 
15.1% of people in the United States are below the poverty thresholds, or one in 6.6 people.

This is the highest number of people living in poverty for 52 years. To really grasp how dire the situation is, one needs to know the United States poverty levels, shown in the table below."

Year Millions of Poor People Percent White Black Hispanic Family of Four Poverty Income Median Couples 
Family Income
Wife Not in the Labor Force, Current Dollars
% increase Wife In 

% increase

1959 39.5 22.4% 18.1% 55.1% NA $2,973        
1970 25.4 12.6 9.9 33.5 NA $3,968 $9,304      
1980 29.3 13.0 10.2 32.5 25.7 $8,414 $18,972 100%    
1990 33.6 13.5 10.7 31.9 28. $13,359 $30,265 60% $46,777  



     11.3 9.4 22.1 21.2












Note: The ratio of nonwhite to white median family income while improving some in the 1960's,  is back to approximately the .55 level it was in the early 1950's. 1992 and 2003 Statistical Abstract of the United States and 2001 Census Bureau Data
from Institute for Research on Poverty: "In 2001 the number of poor and the poverty rate both rose as economic difficulties moved into recession, and the rate has continued to rise; in 2003, 35.8 million people were poor by the official measure of poverty. In 2004, the number rose to 37 million people (12.7 percent of the population)."

Table 699 of the 
2011 Statistical Abstract of the United States


     F. Federal programs to help the poor
          1. Payroll tax programs
              a. Old Age, Survivors, and Disability Health
(social security) pays retirement
                   and disability income
              b. Medicare pays medical costs for social
                  security recipients 
              c. Unemployment Compensation
(paid by employers)
         2. Programs financed from general revenues
             a. Supplemental Security Income
 (elderly and disabled)
             b. Aid to Families with Dependent Children
             c. Food Stamps
             d. Medicaid pays health care costs for the poor
See Trends in Poverty with an Anchored Supplemental Poverty Measure

Editors Note: I'm not sure the UN or US does a good job of measuring exactly what US poor people receive.

Graphic shows annual Social Security cost-of-living adjustments; 2c x 3 inches; 96.3 mm x 76 mm;

From Yahoo News


VII. Effectiveness of Government Poverty Programs
      A. Is Government Redistribution enough?  from Historical Trends in Income Inequality  12/5/13


Market Income Plus Transfer
Payments and Minus Federal Taxes

Quintile 1st 2nd 3rd 4th 5th
1979        7,707        19,131        26,596        35,708     78,520
1989        7,392        19,324        28,663        40,254   104,318
1999        8,709        22,344        32,688        46,157   139,325
2007        9,290        24,374        35,985        51,379 166,871
 Change        1,584          5,243          9,390        15,672     88,351
% Change 21% 27% 35% 44% 113%

 Transfers payments and taxes decreases inequality CBO 2011

see 1979-2011 after-tax income for top 1 grew at 3.5%,bottom 20% by 1.2%


Social Security and Medicare Helped Elderly Have Constantly Improved

VII. Saez income redistribution by taxation video  see Emmanuel Saez and The World Top Income Database



   B. Social Security payouts in Major Industrial Countries Editors Note: Countries at top are dropping fast.

Country Share of
 Replacement Income
for Average Workers
Age for Full Benefits Tax rate to finance pensions Share of GDP Analysis In Great Britain Attitudes toward
welfare vary by generation. 6/1/13

Greece 96% 65 20% 11.9 Bar far the most generous benefits
Italy 65 men, 51 women 66,62 32.7 14.1 Paying as they go?
France 49 65 16.7 12.5 Chasing Greece for first place
Germany 42 67 19.9 20.7 About the same as US
U.S. 39 66 12.4 4.2 Don't cost much so can afford very expensive military and health care.
UK 32 68 General Fund 5.4 Is reason that pensions must compete with other programs for funds?
data source chart  from


   C. Current Data The War on Poverty at Fiftieth Anniversary is extensive 1/7/14

   D.  Understanding Poverty in America states that America's poor are not that poor. 1/5/04

VIII. Additional Information
     1. Income - Home for census bureau data and reports.
     2. Millions-of-americans-live-in-extreme-poverty-heres-how-they-get-by
     3. Fight Poverty in the U.S.
from save the children
     4. The Bell Curve and Social Stability: from Shrink Wrapped Blog, A Psychoanalyst Attempts to Understand Our World
     5. The Capitalism They Hate  by  Anthony de Jasay
         A. Part I  
The Inequality Machine
         B. Part II.
Indecent Earnings
Coming Collapse of Middle Class - Elizabeth Warren The UC Berkeley Graduate Council 1/31/08
  7. Americas-class-system-across-life-cycle has lots of data. 3/25/14
8. A second opinion of economic well-being of America's middle class
. Burkhauser, Jeff Larrimore, and Kosali I. Simon, National Tax Journal) This should be    compared to the very poor "analysis" discussed yesterday (Manhattan Institute: The Myth of Increasing Income Inequality by Diana Furchtgott-Roth). In this case a careful analysis reveals that such things as changes in tax codes, in-kind benefits (such as employer-provided health insurance) and inclusion of household make-up show less of an income disadvantage for the middle class over the last 30 years than simply looking at pre-tax tax unit analysis. But there still is a degradation, not just as much. from econintersection
    9. Income Inequality: A Question With No Easy Answer

  Author's editorial! from when he started this project.

       A September 3, 1992 Wall Street Journal editorial by Robert Rector, a policy analyst for the Heritage Foundation in Washington, D.C.,
       reported the following concerning 1990 government spending on poverty:

       "Out of a total of $184 billion in welfare spending..." "...Census counted only $32.5 billion as income."

     This means that the actual income of those living in poverty is substantially understated. It is difficult to lower the number of people
     living on poverty income if much of the money given them does not count as income! Approximate per capita understatement would
     be calculated as follows:

Administrative costs must be subtracted therefore not all of the $4,328.57 per person was given in direct aid.

Note: Most poverty programs have a finite qualifying amount. A family receiving substantial aid that is not counted as income
may just qualify for aid while another family may earn just above the qualifying amount and receive no aid.

Chapter 33 Class Discussion Questions
Chapter 33 Homework Questions
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C. Other Data
This Bureau of Labor Statistics and Census Bureau have interesting data. Over the last five years the percentage of young people are working has declined as has their real pay. This has happened even though they are investing more time and money  in education. Data from page 13 of the
July 2, 2007 issue of Business WeekU.S. Census Bureau  


3. Why Not a Negative Income Tax   and
   Against-negative- income-tax-jim-manz

4. Social Mobility is Low Everywhere and Always will be 2/14


Because households can be one person and families can have two workers, this households declined much more than the family stagnation.

From America’s Discouraging Income Story



seekingalpha 4/23/13

The recovery of the stock market after 9/11 and the most  recent housing boom has household wealth up 40%.

Economist Magazine, April 4, 2009 page 11

The Decade Ended Poorly

figure 1-6