Pros And Cons Of Income Inequality

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Derived demand for labor depends on the market value or product price of the good or service (McConnell, Brue, & Flynn, 2011). The demand for labor depends on productivity of the market value of goods produced (McConnell, Brue, & Flynn, 2011). The production of products is done by laborers, or the labor demand, and the derived demand is from the demanded product that is done by the same laborers. The concept helps determine the demand for the labor of specific goods, what is needed, how much is needed and more (McConnell, Brue, & Flynn, 2011). A farmer would have to determine how much hay a herd of cows would need each day for feeding. The farm hands would have to collect the hay, place it in the troughs and bring in the cows to eat. So …show more content…
Income inequality is the extent income is distributed in an uneven manner among the population (McConnell, Brue, & Flynn, 2011). For more than 30 years, in the U.S., the income inequality has been on a steady rise. The gap between the very rich and everyone else is a gargantuan proportion, by every major statistical measure. In today’s reports, the top 10% of the U.S. population is making an average of nine times the income as the entire bottom 90%, averaging 38 times more income (Inequality.org, 2017). Before 1980, the lower-income earners owned a larger portion of the total U.S. income than they do today. Since 1979, the before-tax income of the top 1% of American households have increased more than four times faster than the bottom 20% (Inequality.org, 2017). This means that the top wage earners are increasing their income extremely faster than everyone else. The measurements are most popularly done on a Lorenz curve using the Gini coefficient15,16,17,18 to show the percentage of income earned by a cumulative percent of the population (De Maio, 2006). There are many things which have caused the income inequality in the US, including education, ability to work, discrimination, preferences and risks, unequal distribution of wealth, market power, and more. Employers are looking for workers who are higher skilled, educated, and able …show more content…
The concept of Comparative Advantage refers to one country producing more of a certain good (or export) and fewer of other goods (or imports). Nations specialize in certain materials and trade them with others that have goods they need in exchange (Amadeo, 2017). The comparative advantage can be of a good or service, such as when a call center relocates to India because it is cheaper than relocating in America. Goods can be the advantage of cloth made in England and wine in Spain. England does not make wine and Spain doesn’t have the materials to make cloth (Amadeo, 2017). Many nations specialize in certain goods making trade necessary. Specialization and exchange result in greater overall output and income (McConnell, Brue, & Flynn, 2011). In the US, imports are far greater than exports so U.S. labor and other resources are more focused in the imports than the exports industries (McConnell, Brue, & Flynn, 2011). Using the Comparative Advantage, the U.S. has the ability to produce goods and services at a lower opportunity cost than other counties (Amadeo,

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