Look at the chart on page 404 in Mankiw.Compare U.S. income inequality to at least 2 other high income countries countries on the chart and 2 low income countries on the chart.Mankiw indicates there are problems measuring income inequality on page 407.What are they and what are other measures of income inequality?Use the data in chart to support your comparisons.
Chapter 20: The Economics of Labor Markets: Income Inequality and Poverty Group All persons White, not Hispanic Poverty Rate 14.8% rate. The Black alls below Hispanic 10.1 TABLE 3 26.2 he federal Asian diet. This Children (under age 18) 23.6 Who Is Poor? 12.0 This table shows that the pov- ranges in Elderly (over age 64) Married-couple families 21.1 erty rate varies greatly among Female household, no spouse present 10.0 different groups within the population. for 2014. 6.2 632, and 33.1 Source: U.S. Buman of the Census. Data are for 2014. 4.8 per- families n. You percent , Poverty is correlated with age. Children are more likely than average to be justed poor . members of poor families, and the elderly are less likely than average to be pov- ushed . Poverty is correlated with family composition. Families headed by a single utior mother are about five times as likely to live in poverty as families headed by a married couple. oats not OV- These three facts have described American society for many years, and they show v in which people are most likely to be poor. These effects also work together: Almost ily, half the children in black and Hispanic female-headed households live in poverty. his 20-1d Problems in Measuring Inequality Although data on the income distribution and the poverty rate give us some idea about the degree of inequality in our society, interpreting these data is not always straightforward. The data are based on households' annual incomes. What people care about, however, is not their incomes but their ability to main- tain a good standard of living. For at least three reasons, data on the income dis- standards. tribution and the poverty rate give an incomplete picture of inequality in living In-Kind Transfers Measurements of the distribution of income and the poverty rate are based on families' monetary income. Through various government pro- grams, however, the poor receive many nonmonetary items, including free food, housing vouchers, and medical services. Transfers given to the poor in the form of goods and services rather than cash are called in-kind transfers. Standard mea- in-kind transfers surements of the degree of inequality do not include these in-kind transfers. transfers to the poor Because in-kind transfers are received mostly by the poorest members of given in the form of society, the failure to include in-kind transfers as part of income greatly affects goods and services rather the measured poverty rate. According to a study by the Census Bureau, if in-kind than cash transfers were included in income at their market value, the number of families in poverty would be about 10 percent lower than the standard data indicate. The Economic Life Cycle Incomes vary predictably over people's lives. A young life cycle worker, especially one in school, has a low income. Income rises as the worker the regular pattern of gains maturity and experience, peaks at around age 50, and then falls sharply income variation over a when the worker retires at around age 65. This regular pattern of income variation person's life is called the life cycle. 407
