chapter 31 income, poverty, and health care. slide 31-2 introduction the price of health care...
TRANSCRIPT
Chapter 31
Income, Poverty, and Health Care
Slide 31-2
Introduction
The price of health care services is continually growing more quickly than
the overall rate of inflation.
Does this mean that there is a health care crisis? Is government financing of
health care necessary?
Slide 31-3
Learning Objectives
Describe how to use a Lorenz curve to represent a nation’s income distribution
Identify the key determinants of income differences across individuals
Discuss theories of desired income distribution
Slide 31-4
Learning Objectives
Distinguish among alternative approaches to measuring and addressing poverty
Recognize the major reasons for rising health care costs
Describe alternative approaches to paying for health care
Slide 31-5
Income
Determinants of Income Differences
Theories of Desired Income Distribution
Poverty and Attempts to Eliminate It
Health Care
Chapter Outline
Slide 31-6
Did You Know That...
During the 2001-2002 recession, both the highest-income households and the lowest-income households experienced declines in income?
The result was that the U.S. distribution of income became relatively more equal?
Slide 31-7
Income
Income sources– Payment for a factor of production
– Gifts
– Government transfers
Distribution of Income– The way income is allocated among the
population
Slide 31-8
Income
Lorenz Curve
– A geometric representation of the distribution of income
– A Lorenz curve that is perfectly straight represents complete income equality
– The more bowed a Lorenz curve, the more unequally income is distributed
Slide 31-9
The Lorenz Curve
Figure 31-1
100
75
50
2825
100
Completeequality
Inequalitygap
Actual moneyincomedistribution
7550
45°
250
Cumulative Percentage of Households
Cum
ula
tive
Pe
rce
nta
ge o
f M
oney
Inc
om
e
Slide 31-10
Income
Criticisms of the Lorenz curve
– It does not include income in kind.• Income received in the form of goods and
services
– It does not account for the differences in size of households or the number of wage earners households contain.
Slide 31-11
Income
Criticisms of the Lorenz curve
– It does not account for age differences.
– It ordinarily reflects money income before taxes.
– It does not measure unreported income.
Slide 31-12
Lorenz Curves of Income Distribution, 1929 and 2005
Figure 31-2
100
80
60
40
20
100806040200
Cumulative Percentage of Households
Completeequality
1929
2005
Cum
ula
tive
Pe
rce
nta
ge o
f M
oney
Inc
om
e
Slide 31-13
Percentage Share of Money Incomefor Households Before Direct Taxes
Table 31-1
Slide 31-14
International Example:Income Inequality in the U.S.
Figure 31-3
Slide 31-15
The Distribution of Wealth
The distribution of income is not the same thing as the distribution of wealth.
Income is a flow variable; wealth is a stock.
Income can be viewed as a return on wealth.
Slide 31-16
Determinants of Income Differences
Age
– Age-Earnings Cycle• The regular earnings profile of an individual
throughout his or her lifetime
Slide 31-17
Determinants of Income Differences
Age-earnings cycle
– At age 18, earnings from wages are relatively low.
– Earnings gradually rise until they peak at about age 50.
– Earnings then fall until retirement, when they become zero.
Slide 31-18
Typical Age-Earnings Profile
Figure 31-5
6555453518 250
Age
(Rea
l) A
nnua
l Ear
ning
s
Slide 31-19
Determinants of Income Differences
Marginal productivity
– Talent
– Experience
– Training
– Investment in human capital
Slide 31-20
Determinants of Income Differences
Inheritance
– 10 percent of inequality traced to inheritance
Discrimination
– Different pay for equal MRP
– Equal pay for different MRP
Slide 31-21
Determinants of Income Differences
Access to education
– Non-white urban males income is reduced 23 to 27 percent because of low quality education• Discrimination
Slide 31-22
Example: The Urban-Rural Income Gap in China
The best primary and secondary schools in China are located in the major cities.
The rural schools lag behind in quality.
As a result, the human capital acquired by students in rural areas is declining relative to what is being accumulated by residents of the major cities.
Slide 31-23
Determinants of Income Differences
Doctrine of Comparable Worth
– The belief that women should receive the same wages as men if the levels of skill and responsibility in their jobs are equivalent
Slide 31-24
Theories of Desired Income Distribution
Productivity
– “To each according to what he or she produces.”
Equality
– “To each exactly the same.”
Slide 31-25
Poverty and Attempts to Eliminate It
Mass poverty can no longer be said to be a problem in the Western world.
The U.S. engages in a fair amount of income redistribution.
There is always a need to assess whether the programs are successful.
Slide 31-26
Official Number of Poor in the United States
Figure 31-6 Source: U.S. Department of Labor