Question

Instructions:

This assignment is about income inequality.

Select an economy, it can be a country, a state, a city (you can use the data of a US city or a US state, but not the US national data).

Find a chart of the Gini coefficients of that economy over the years. (Income inequality is measured by Gini coefficient, with the value between 0 and 1. Higher value represents greater income inequality.)

Discuss the reason(s) for a high/low level of income inequality.

Discuss how such level of income inequality will affect the society in the future.

Remember to include links, graphs and pictures in your assignment.

Example:

Hong Kong Gini coefficient (1971 - 2011)

Income inequality in Hong Kong is 0.539 in 2016, which is the second highest in the world following New York City.

There are several reasons behind this huge gap between the rich and the poor.

1. There is not a comprehensive retirement system for the elderly. Also, the safety net system for the needy is not well developed.

2. Skyrocketing housing prices also create a substantial divide between those who own a property and those who do not.

Due to the ever-rising housing prices, buying is not an option for most people, and most of the income each month goes to rent payment.

How income inequality will affect Hong Kong

Rising income inequality can lead to social unrest. In 2013, there was a peaceful protest “Occupy Central” (similar to the protest, “Occupy Wall Street”). One of the primary concerns expressed by protesters is the income inequality and astronomical housing prices.

Answer 1

Selected State: Florida

Chart of Gini Coefficient of Florida (Year 2008-Year 2015):

In 2011, The Gini Index for Florida was at 0.540.

Income Inequality in Florida:

In Florida, the gap between the rich and poor is relatively wider than the rest of the nation; only 6 states have a more unequal distribution of income. On the eve of the Great Recession, the richest 20 percent of Florida families had average incomes 2.8 times as large as the middle 20 percent of families and 7.5 times as large as the poorest 20 percent of families. The very richest families — top 5 percent — had average incomes that were 12.6 times as large as the poorest 20 percent. This already-large gap between the rich and everybody else has also grown faster than many other states; Florida’s income inequality has grown at the 20th-fastest rate. Between 1986 and 2006, the incomes of the richest families (top 5 percent) rose nearly four times as fast as the poorest fifth’s and three and a half times as fast as the middle 20 percent.

Florida ranks fifth for income inequality in the country,according to a study recently published by the Economic Policy Institute.

It looks at the gap between what the top 1 percent and what the bottom 99 percent make nationwide.

Florida’s top earners take home almost 35 times as much money as the rest.

Reasons for this high/low level of income in Florida:

• Florida has so much income inequality is because wealthy people want to live here.
• Wages are not growing in the years following the Great Recession.
• Less union Density
• Slower Economic Growth.
• Technology is having a bigger impact on the loss of middle class income as jobs are being both outsourced to other countries and robo-sourced (jobs replaced by advanced automation.)
• Instead of the unemployed in the middle income bracket regaining employment in middle management, mid-skill, mid-wage jobs, the unemployed middle class was forced into lower-paying jobs.

How income inequality will affect Florida:

Increases in the level of income inequality lead to lower transitional GDP per capita growth. Increases in the level of income inequality have a negative long-run effect on the level of GDP per capita. Increases in income inequality significantly increase human capital (measured by the average years of schooling and share of the population with a secondary and tertiary education) in poor countries. On the other hand, in high- and middle-income countries increases in income inequality reduce human capital.