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Chapter 15: Q.27 (page 378)

What are the main reasons economists give for the

increase in inequality of incomes?

Short Answer

Expert verified

-Change in the household structure

-The shift in an allotment of pay

-Education

Step by step solution

01

Step 1. Meaning

Income inequality

Income inequality is difference in distribution of income among individuals within country.

02

Step 2. Reason

Change in the household structure

The involvement of married women in the labor workforce leads the trend of more households having two earners.

two high earners tended to increase the proportion of high-earning households. these also lead to single-parent households & changed household structure that leads to inequality of income.

03

Step 3. Reason

The shift in an allotment of pay

High skilled workforce outdated low skilled workforce,

the earnings of high skilled labor increased as compared to low skilled labor because high skilled laborers have the advantage of an understanding of technology that enhances their earing.

04

Step 4. Reason

Education

Educationis essential in every aspect, the population with better education gets a better opportunity with better income as compared to any person with less education.

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Most popular questions from this chapter

Consider two of the income security programs in the United States: Temporary Assistance for Needy Families (TANF) and the Earned Income Tax Credit (EITC).

a. When a woman with Children and very low income earns an extra dollar, she receives less in TANF benefits. What do you think is the effect of this feature of TANF on the labor-supply of low-income women? Explain.

b. The EITC proves greater benefits as low-income workers earn more income (up to a point). What do you think is the effect of this program on the labor-supply of low-income individuals? Explain.

c. What are the disadvantages of eliminating TANF and allocating the savings to EITC?

Explain how you would create a government

program that would give an incentive for labor to

increase hours and keep labor from falling into the

poverty trap.

How has the inequality of income changed in the

U.S. economy since the late 1970s?

Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table

from question 1 to account for this change in policy. Draw Jonathan鈥檚 labor-leisure opportunity sets, both for before

this welfare program is enacted and after it is enacted.

This problem uses the analogy of a 鈥渓eaky bucket鈥� to explain one constraint on the redistribution of income.

a. What elements of the U.S. system for redistributing income create the leaks in the bucket? Be specific.

b. Between Republicans and Democrats, who do you think generally believes that the bucket used for redistributing income is leaky? How does that belief affect their views about the amount of income redistribution that the government should undertake?
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