Crash Course Economics: Economic Inequality

Introduction

• Hosts: Jacob Clifford and Adriene Hill
• Focus: Economic inequality
• Types of Inequality: racial, gender, health, education, political, and economic

Types of Economic Inequality

• Wealth Inequality: Distribution of accumulated assets minus liabilities.
• Income Inequality: Distribution of new earnings added to wealth.

Global Wealth Distribution

• Global wealth estimated at $260 trillion.
• Unequal distribution: North America & Europe (67% of wealth) with <20% of the population.
• China holds 8% of wealth, India & Africa share only 2% with almost 30% of the population.
• Income distribution: Disproportionate share of $100 (richest 20% get $83, poorest 20% get $1).

Historical Context of Economic Inequality

• Economic Big Bang: Industrial Revolution increased income gaps.
• 1820: Richest countries (GB & Netherlands) were 3 times richer than poorest (India & China).
• Today, gap is 100:1 between richest and poorest nations.
• Globalization and trade have accelerated the gap.

Causes of Growing Inequality

• Skill-biased Technological Change: Technology-based jobs require new skills.
  • Skilled workers prosper, unskilled workers fall behind.
• Job Market Shift: Manufacturing moves overseas, leaving only low-skill low-pay and high-skill high-pay jobs.
• Education Disparities: College graduates’ salaries grow, high school graduates’ incomes decline.

Additional Factors

• Reduced Union Influence
• Tax Policies favoring the Wealthy
• Disparities in CEO vs. Employee Salaries
• Race and Gender Inequality

US Income Inequality Data

• Lorenz Curve: Visual representation of income inequality.
  • 2010: Poorest 20% earn 3.3% of income; richest 20% earn 50%.
  • Trends show increasing inequality since 1970.
• GINI Index: Measure of income equality; US has high inequality among Western nations.

Perspectives on Income Inequality

• Some believe everyone is earning more but at different rates.
• Income inequality harms societal welfare (violence, drug abuse, political inequality).
• Bill Gates: Inequality is inherent to capitalism; the challenge is finding an acceptable level.

Solutions to Income Inequality

• Education: Better education can reduce the income gap.
• Minimum Wage Increase
• Social Safety Nets and Childcare Access
• Tax Code Adjustments: Increased taxes on rich, closing loopholes.
• Reducing Regulation: Some argue deregulation over taxation.

Conclusion

• Extreme income inequality needs addressing.
• Motivation can come from desire to help or fear of social unrest.
• Adam Smith: Societal welfare is tied to economic prosperity of the majority.

Outro

• Thanks to supporters and contributors of Crash Course Economics.
• Encourage support through Patreon.