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CHAPTER THIRTY-FOUR INCOME INEQUALITY AND POVERTY INSTRUCTIONAL OBJECTIVES After completing this chapter, students should be able to: 1. Describe in general terms the extent of income inequality in the United States. 2. Describe changes in inequality through the 1929-47, 1947-69, and 1969-96 periods. 3. Explain how a Lorenz curve is used to describe income inequality. 4. Explain the broadened concept of income, which includes the effects of taxes and transfer payments, and how this affects the extent of inequality of income and poverty in the U.S. 5. Discuss the impact of income mobility on income distribution data. 6. List seven causes of an unequal income distribution. 7. State and evaluate the cases for and against income inequality, using the equality vs. efficiency argument. 8. Identify the rate of poverty in the U.S., the incidence of poverty for blacks, Hispanics, female- headed families, and the relationship between education and poverty. 9. Identify the “invisible” poor and give three reasons for this invisibility. 10. Contrast social insurance and public assistance (welfare) programs. 11. Describe the major social insurance programs. 12. Describe and evaluate the major public assistance (welfare) programs. 13. Describe and evaluate the goals and conflicts inherent in public assistant programs. 14. Describe and evaluate the criticisms of the welfare system and the Personal Responsibility Act recently passed by Congress. 15. Define and identify terms and concepts listed at the end of the chapter. LECTURE NOTES I. Income inequality facts A. 36 million Americans— over 13 percent of the population —live in poverty; 500,000 are estimated to be homeless; yet, Steven Spielberg earned 283 million in 1997. B. Personal income distribution is shown in Tables 34-1 and 34-2. 1. Average family income in 1996 was $56,674. 2. At the bottom, one in 7 families has less than $ 15,000 annual income. 3. The top 20 percent earned nearly half (47 percent) of all income and more than ten times as much as the lowest 20 percent of families. 4. At the top, 10 percent of families received over $100,000 per year. 5. Figures demonstrate considerable and growing income inequality in U.S. B. Trends in inequality. 427
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Income Inequality and Poverty 1. Income has risen in absolute dollar amounts over time. 2. The degree of inequality is examined by dividing the population into fifths, or quintiles, and looking at the shares of income going to each of these groups over time. The text, using Table 34-2, examines selected years: 1929, 1935-36, 1947, 1955, 1969, 1985 and 1996. a. During the 192947 time period, income inequality decreased as share going to bottom fifth grew slightly, and share going to top fifth declined significantly from 54 to 43 percent. b.
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