L6 Sept 20

L6 Sept 20 - Poverty and the Economy 1 Real GDP per capita and poverty 1959 to 2007 45 25 20 35 30 15 25 20 10 15 10 5 5 0 0 1959 1964 1969 1974

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Poverty and the Economy 1
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Real GDP per capita and poverty, 1959 to 2007 0 5 10 15 20 25 30 35 40 45 1959 1964 1969 1974 1979 1984 1989 1994 1999 2004 Real GDP per capita ($1000) 0 5 Percent of people in poverty Real GDP per capita ($1000s) % of people in poverty 2
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Real GDP per c 0 5 10 15 20 25 30 35 40 45 1959 1964 1969 1974 Real GDP per capita ($1000) Real GDP per c 1960s: Strong economic expansion and dramatic decline in poverty 3
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per capita and poverty, 1959 to 2007 0 5 10 15 20 25 Percent of people in poverty per capita ($1000s) % of people in poverty POVERTY 1973-1993: Fluctuated 1993-2000: Big 2000-2007: Slight 4
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Link between poverty and economy Tied to Growth in employment Changes in wages Distribution of both 5
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Decline in Wages Among Low-Wage Workers Three explanations Demand factors Technological change International trade Supply factors Education of workers Immigration Institutional factors (non-market) Decline in unions Decline in minimum wage 6
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Labor Market Supply (workers in the labor market) Q W Demand (jobs available) Employment level Wage 7
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Labor Market Supply Q W Demand Employment level Wage Economic growth Wage* E* 8
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Skilled and Unskilled Jobs Demand shifts S Q W D E W a g e S Q W D E W a g e Unskilled Skilled 9
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Skilled and Unskilled Jobs Supply Shifts S Q W D E W a g e S Q W D E W a g e Unskilled Skilled 10
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Economic Growth and Poverty Why has economic growth failed to reduce poverty? Labor market factors matter (it’s the wages, stupid) What explains most (over 80%) of the variation in poverty? Median male earnings Male earnings at the bottom of the distribution (10 th percentile) 11
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Real GDP per capita and real average weekly earnings, 1963 to 2007 0 5 10 15 20 25 30 35 40 45 1963 Real GDP per capita ($1000s) 300 350 400 450 500 550 Real weekly earnings Real GDP per capita ($1000s) Real average weekly earnings Economic growth has not always lead to higher earnings 12
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This note was uploaded on 09/07/2011 for the course ECON 375 taught by Professor Staff during the Fall '10 term at Maryland.

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L6 Sept 20 - Poverty and the Economy 1 Real GDP per capita and poverty 1959 to 2007 45 25 20 35 30 15 25 20 10 15 10 5 5 0 0 1959 1964 1969 1974

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