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Up Coming Stuff

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  1. Up Coming Stuff GHS English Dept. GHS English Dept. • Quiz Chapter 5 Friday, 10/14 • Bonus Work Chapter 5 Monday, 10/17 • All homework Chapters 4 & 5 Tuesday, 10/18 • Review Wednesday, 10/19 • Test on Chapter 4 & 5 – Thursday, 10/20!

  2. Pure Capitalism to Mixed Economy. • If you could choose anywhere in the world to live where would it be and why???? • If you had to rate countries in the world in terms of their standards of living what characteristics would you use and why? • The next chapter begins to look at how the government intervenes in an economic system to allocate resources. • Chapter 5 gets us into some debatable issues dealing with tax rates, subsidies, social equality etc.. Does the government hurt or help?? • While watching the video look for those issues we have talked about with reference to how a capitalist economy works best. • Also look for the policies of the government that lead to inefficiencies.

  3. THE CIRCULAR FLOW REVISITED $ COSTS $ INCOMES RESOURCE MARKET RESOURCES INPUTS Tax Payments GOVERNMENT BUSINESSES subsidy HOUSEHOLDS FICA GOODS & SERVICES GOODS & SERVICES PRODUCT MARKET $ REVENUE $ CONSUMPTION

  4. Key Ideas Chap 4 private property freedom of enterprise freedom of choice self-interest competition roundabout production specialization division of labor medium of exchange barter money Five Fundamental Questions economic costs normal profit economic profit expanding industry declining industry consumer sovereignty dollar votes derived demand guiding function of prices “invisible hand”

  5. CHAPTER FIVE The Mixed Economy: Private and Public Sectors

  6. The Seven Roles of Government: 1. Maintain Competition 2. Protect Private Property (Life & Liberty) 3. Stabilize the Economy 4. Provide Public Goods: (Pure Private, Common Pool, Toll Goods, Pure Public) 5. Control Externalities/Spillovers: (Pollution Control v Schools) 6. Taxes – Redistribute Income

  7. HOUSEHOLDS AS INCOME RECEIVERS FUNCTIONAL DISTRIBUTION WAGES RENT INTEREST PROFIT/LOSS

  8. HOUSEHOLDS AS INCOME RECEIVERS FUNCTIONAL DISTRIBUTION WAGES RENT INTEREST PROFIT/LOSS PERSONAL DISTRIBUTION SHOWS ALLOCATION OF INCOME AMONG INDIVIDUAL HOUSEHOLDS

  9. I. How to measure economic activity? • A. Functional Distribution of Income • 1. Measures wages, profits, interest and rent. • 2. Profits are divided into two categories. • - proprietors income – profits of those self-employed, doctors, lawyers, farmers. • - Capitalist income or corporation income/ profits.

  10. HOUSEHOLDS AS INCOME RECEIVERS FUNCTIONAL DISTRIBUTION WAGES $7,103 Billion 71% PROPRIETOR’S INCOME 900 Billion 8% CORPORATE PROFITS 1,400 Billion 12% INTEREST 700 Billion 7% RENTS 200 Billion 2%

  11. HOUSEHOLDS AS INCOME RECEIVERS FUNCTIONAL DISTRIBUTION WAGES $7,103 Billion 70% PROFITS $2,349 Billion 21% INTEREST $750 Billion 7% RENT $200 Billion 2% $10,402 Billion WEASEL PUSS IS RED! 2004 GDP

  12. I. How to measure cont… • B. Personal Distribution of Income • 1. Indicates how much total income is divided among household units. • 2. The government uses this as a reference to how equitable or inequitable income is distributed in the U.S. • 3. The Lorenz Curve is a mathematically derived index of income inequality.

  13. HOUSEHOLDS AS INCOME RECEIVERS 4.2% Lowest 20% Income Group 10.0% Second 20% Income Group Middle 20% Income Group 14.8% Fourth 20% Income Group 22.1% 49.8% Highest 20% Income Group PERSONAL DISTRIBUTION Personal Income Received (Percent) 2004 US Census Bureau

  14. Share of Income - Historically

  15. The Lorenz Curve 100 80 60 40 20 Perfect Equality Percent of Income Complete Inequality 0 20 40 60 80 100 Percent of Families Copyright McGraw-Hill, Inc. 1999

  16. The Lorenz Curve 100 80 60 40 20 Lorenz Curve (actual distribution) Perfect Equality Percent of Income Complete Inequality 0 20 40 60 80 100 Percent of Families Copyright McGraw-Hill, Inc. 1999

  17. The Lorenz Curve 100 80 60 40 20 Lorenz Curve (actual distribution) Perfect Equality Percent of Income Area between the lines shows the degree of income inequality Complete Inequality 0 20 40 60 80 100 Percent of Families Copyright McGraw-Hill, Inc. 1999

  18. The Lorenz Curve Two Adjustments: Taxes Cash Transfer Payments 100 80 60 40 20 Lorenz Curve (actual distribution) Perfect Equality Percent of Income Area between the lines shows the degree of income inequality Complete Inequality 0 20 40 60 80 100 Percent of Families Copyright McGraw-Hill, Inc. 1999

  19. GLOBAL PERSPECTIVE Percentage of total income earned by top fifth of income receivers 30 40 50 60 70 Brazil South Africa Guatemala Mexico United Kingdom United States Japan Norway

  20. GLOBAL PERSPECTIVE Percentage of total income earned by top 20% of income receivers 30 40 50 60 70 Brazil South Africa Guatemala Mexico United States United Kingdom Japan Norway Executive Pay in some US. Industries is 300 Times Higher than an Average Worker’s Salary.

  21. Causes of Growing Inequality 1 - Demand for Highly Skilled Workers 2 - Demographic Changes 3 - International Trade & Pressures - Immigration + Illegal Immigration - Union Decline The Lorenz Curve AP Test 2004 graphically...

  22. Wage Data 138,000,000US Workers • 100,000,000 full time US workers in 2001 earned less than $35,000/yr. • 84% earned less than $65,000 • 10% earned between $65,000 and $100,000 • 5.7% earned more than $100,000 US News and World Report

  23. US News and World Report Wage Data – Median Incomefor a Person • Median Income: $33,636 • Only 32.8% of all US jobs paid over $45,000 • Two-thirds of all wage earners work two jobs • Two-thirds of all mothers with children now work • Median paycheck for working wives: $18,000

  24. Median Household Income: 2003 • USA Median Household Income: $42,409 • Half of US households earn more and half of US households earn less • 1999 Peak Median US Income: $43,915 • Wisconsin: $45,985 • Half of WI households earn more and half of WI households earn less Source: US Census Bureau

  25. Working Mothers • 71.1 percent of mothers work • 53.7 percent of mothers with children under 1 year work • Unemployment Rate for unmarried mothers with children under age 18:10.3% • Jobless Rate 20.5% Vote Kerry Bush

  26. Working Poor • Of the 46,000,000 Americans who are not yet married, median earnings $17,000 • For single women-head of households, median income: $18,472

  27. 39,000,000 Working Poor • One in five full time 40 hr./week US jobs pays below the poverty-line $18,244 for a family of four • 20,000,000 children live in families with incomes below the poverty line Milwaukee Journal

  28. 28,000,000 Jobs • 28,000,000 service jobs pay less than $8.84 • $8.84 is the hourly rate that matches the poverty-line $18,244 Milwaukee Journal

  29. Helping the 39,000,000 Working Poor • Suggested Solutions??? • Adult Education! • Job Training • Increased Minimum Wage • Subsidize Child Care for low income workers Help is On the Way? Milwaukee Journal

  30. $36,388 – Low Income Family • A family of four living on an annual income of $36,388 is considered to be a low income family • A family of four living on an annual income of $18,244 is considered to be living in poverty. Milwaukee Journal

  31. Median Incomes US Families • White: $47,800 • Hispanic: $33,000 • African American: $29,600 Milwaukee Journal

  32. Median Family Net Worths • White Families: $88,000 up 17% since 1996 • Hispanic Families: $8,000 up 14% since 1996 • African American Families: $6,000 down 16% since 1996 Milwaukee Journal

  33. The Lorenz Curve 100 80 60 40 20 Lorenz Curve (actual distribution) Perfect Equality Percent of Income Area between the lines shows the degree of income inequality Complete Inequality 0 20 40 60 80 100 Percent of Families Copyright McGraw-Hill, Inc. 1999

  34. CAUSES OF INCOME INEQUALITY 1 - Ability Differences 2 - Education and Training 3 - Discrimination 4 - Tastes and Risks 5 - Unequal Distribution of Wealth 6 - Market Power 7 - Luck, Connections, and Misfortune EQUALITY-EFFICIENCY TRADEOFF

  35. Labor Market TheoryThe Real World Will Get You! • Human Capital • Education = Income • Sorting Mechanism • Hoops • Radical View • Rich Dad Poor Dad 1 out of 8 US Workers Has worked or works for? • Dual Labor Market • Good Job v Bad Job Market

  36. 1 out of 8 US Workers Has worked or works for?

  37. New US Workers Hired by Mc Donalds in 2003-4 1,000,000: #1 in USA

  38. Family Income USA • 9.8% $100,000+ • 8.9% $75-99,999 • 19% $50-74,999 • 16.3% $35-49,999 • 13% $25-34,999 • 14.4% $15-24,999 • 18.6% <$15,000

  39. Family Income Distribution2001 • $355,000 • Top 1% • $130,600 • Top 5% • $93,800 • Top 10% • 60,800 • Top 25% • 33,400 • Top 50%

  40. Poverty in America How many poor people are there??? 38,500,000+: Men, Women, and Children(13.1%) Describe the typical poor person in the US! • The typical poor person in the US: • Single Mom with Kids! • White unemployed female under forty • Found everywhere including Ozaukee County (2200+)!

  41. What is the Poverty Line??? $18,810 for a family of four! $12,015 for a family of two! $9,573 for a single person!! Of the 200 largest US counties Waukesha with 3.0% of its residents in Poverty ranked second lowest in the US. Of all 5,700+ US counties Ozaukee with 2.2% of its Residents in Poverty ranked third lowest in the US.

  42. Wisconsin Poverty • 528,000 people or 9.8% of WI residents • WI residents without health insurance 593,000 • National rank 36th lowest poverty in poverty rate

  43. Poverty in America: 2003 Data • 37.6 Million Americans • Up 1.7 million from 2002 • 12.1 million are children • 12.1% of Americans • Wisconsin’s poverty rate 2003: 8.2% • Poverty Line 2003: • $18,244 for a family of 4 • $9,359 for a single person Source: US Census Bureau, Journal/Sentinel

  44. State Rankings on PovertyFamilies Living Below the Poverty Line • Mississippi 16.0% • Louisiana 15.8% • New Mexico 14.5% • West Virginia 13.9% • Kentucky 12.7% 46. Iowa 6.0% 47. Connecticut 5.6% 48. Wisconsin 5.5% 49. Minnesota 5.1% 50. New Hampshire 4.3% Total US Poor: 32,500,000 Average Per State: 9.2%

  45. State Rankings on Families Receiving Welfare • Alaska 8.7% • Hawaii 7.2% • Oklahoma 5.1% • California 4.9% • New York 4.9% 46. Maryland 2.4% 47. Kansas 2.36% 48. Nevada 2.35% 49. Alabama 2.24% 50. Wisconsin 1.71% Total Welfare Recipients: Less than 22,000,000

  46. HELP WANTED The Working Poor • Income less than $8.00/Hour • Yearly incomes less than $25,000 for a family of 4 • 30% of Americans: 74,000,000 people! • Uninsured Americans 58,000,000

  47. The Working Poor • Hourly wages needed to afford a One Bedroom Apartment • $8.89 • Chance of a Welfare Recipient getting a $8.89/Hour Forty Hour/Week Job? • 97 to 1 Want Ads Annual Salary at $8.89/hr = $17780 Data: National Coalition for the Homeless

  48. Functional Distribution of Income How is the 10.4 Trillion Dollars earned in the Economy?

  49. HOUSEHOLDS AS INCOME RECEIVERS 4.2% Lowest 20% Income Group 10.0% Second 20% Income Group Middle 20% Income Group 14.8% Fourth 20% Income Group 22.1% 49.8% Highest 20% Income Group PERSONAL DISTRIBUTION Personal Income Received (Percent) How is that income allocated??? What is in societies best interest???