America’s Inequality Problem Just Improved for the First Time in a Generation

EconEye Admin

4 years ago

The bottom 50% of households now hold the largest share of wealth they’ve had for 20 years. In the last 12 months, wages have risen most in the lowest quarter of the workforce, almost three points more than for the best-paid quartile.—bloomberg.com

Answer the following questions to check your understanding of the story.

1) How does the Lorenz curve for wealth illustrate the change in the distribution of wealth in the last 12 months?

a) The Lorenz curve is moving from below the line of equality to above it.

b) The Lorenz curve is below the line of equality but moving closer to it.

c) The Lorenz curve is below the line of equality but moving farther from it.

d) The Lorenz curve is stationary, but the distribution of wealth is moving up along it.

Wrong! - How is the distribution of wealth changing? What does the position of the Lorenz curve in relation to the line of equality tell us? Is the Lorenz curve shifting?

That's Right! - The distribution of wealth is becoming more equal. As the distribution becomes more equal, the Lorenz curve moves closer to the line of equality. So, the Lorenz curve is below but moving closer to the line of equality.

2) How is the Gini ratio changing?

The Gini ratio is ______________.

a) becoming smaller

b) not changing

c) becoming larger

d) moving closer to the line of equality

Wrong! - In the past 12 months, did income become more or less equally distributed? What happened to the Lorenz curve for income? Did the Gini ratio change?

That's Right! - A fall in the Gini ratio tells us that incomes are becoming more equal. In the last 12 months, wages in the lowest quarter of the workforce increased by a greater percentage than wages in the highest quarter of workforce, so income is becoming more equally distributed and the Gini ratio is becoming smaller.

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