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In: Economics

Why does the actual distribution of income and wealth vary in the U.S? Consider the statistical...

Why does the actual distribution of income and wealth vary in the U.S? Consider the statistical data indicating higher annual income for households with a higher education level. As we close-out this term, and look forward to our continuing studies here at NAU, reflect back to your posting to Discussion 2.2: Your Production Possibilities Frontier, where you described your forgone leisure-time as a tradeoff for a higher GPA score, and a higher education.

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Expert Solution

There are many factors that are responsible for wide income inequality in the United States. These factors include the level of education achieved, gender based and statistical based discrimination at the job, skill requirement for different kinds of jobs, and this implies that there is a white cap in the income levels of different strat as of the society.

It has been found that the income earned by people with professional degrees is 6 times the income of the people who were not graduate from high school. It can be concluded that the better educated a particular member of a household is the chances of a bright and a high paid job. The mean earnings of a doctorate is 10300 $0 while that of a non-high school graduate is $20,000. This reflects that people with higher level of education can earn more than people with lower level of education and this becomes one of the main reasons for income inequality.

Distribution of income in a nation depends on the growth rate of Gross Domestic product, the level of education of the workforce in the country, the skill base of the population, poverty rate, health status of the country etc. The data suggests that the higher education level is associated with the higher level of income. The countries having high literacy rates also have high per capita income. This is because educated workforce provide a skilled work force base which adds to the country's GDP and efficiency.

The Kuznets’s curve describes the relation between economic inequality and income per capita. This curve states that initially economic inequality rises with the increase in income per capita and then it falls. It is inverted U shaped curve. Thus, as income per capita rises in the economy economic inequality will initially rise but after a certain point the trickledown theory will apply and it will fall. Considering, the level of education and economic inequality, it can be stated that as education level rises in a country, the economic inequality will fall.


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