Economic fairness and the distribution of economic rewards

I. Read and memorize the following words, word-combinations and word-groups:

aggregate income – сукупний прибуток

E.g. The percentage of aggregate income received by each fifth of the population is relatively constant through time.

family's real income – реальний прибуток сім'ї

E.g. Suppose, for example, that every family's real income quadrupled in the next year.

median income – середній прибуток

E.g. A family is in poverty if its income is less than one half the median income.

poverty – бідність

E.g. Using the U.S. Government's definition of poverty, the percentage of black persons below the poverty line, although declining since 1964, remains above 35 percent.

official poverty line – офіційна межа бідності

E.g. About 35 percent of those families headed by women are below the official poverty line.

lack of mobility – недостатня мобільність

E.g. Earnings differ because of the lack of mobility.

progressive taxation – прогресивне оподаткування

E.g. A tax is progressive if persons with higher incomes pay a higher fraction of their income in taxes than do persons with lower incomes.

proportional taxation – пропорційне оподаткування

E.g. A tax is proportional if persons with higher incomes pay the same fraction of their income in taxes as do persons with lower incomes.

in turn – у свою чергу

E.g. Transfers, in turn, may be either progressive or regressive.

in-kind transfer – допомога натурою

E.g. Transfers may be in cash or in goods and services.

The latter are referred to as in-kind transfers.

cash transfer – допомога грішми

E.g. Once a society has made a decision to transfer income to the poor, it is better for the poor if the transfer is in cash rather than in-kind.

negative income tax – негативний прибутковий «податок» (виплата з бюджету особам з низьким рівнем доходу)

E.g. The rate at which the transfer benefits decline is the negative income tax.

II. Give English equivalents of the following:

бути поза економічною системою підвищувати заробіток

забезпечення товарами та послугами створювати стимул до праці

підвищення матеріального добробуту розподіл економічних благ

реальний сімейний прибуток гостра, невідкладна проблема нашої епохи

нерівність у розподілі прибутків бути поза офіційною межею бідності

III. Fill in the blanks with appropriate words:

always distributing differences to increase intensive difficult

money inequality different

1. It should be clear that differences in individual characteristics are closely connected with _______ in income.

2. Lack of mobility may occur because individuals choose not to make changes in order _______ their earnings.

3. There is an _______ network of transfers to income those with lower incomes.

4. That is much of the welfare system in the U.S. is based on _______ goods and services.

5. _______ in income is about the same now as it was just following World War II.

6. Making the market _______ more fair also makes it less efficient.

7. Comparing the distributions of income among economies is _______ because each country defines income in a _______ way.

8. Give _______ and give it in such way that the recipient _______ has an incentive to work.

IV. Read and translate the text:

The central task of any economy is providing for and enhancing the material well-being of those who live within it. There are two aspects to this task: the production of more and better goods and services, and the distribution of those goods and services in a fair manner.

In a market economy some are rewarded handsomely while others are perhaps not rewarded at all. How a society is to deal with those who are, in a sense, outside of the economic system is one of the pressing problems of our era, our economy, and our society.

Notice that the percentage of aggregate income received by each fifth of the population is relatively constant through time. This stability or constancy is one of the surprising facts about the U.S. economy: the distribution of income has been relatively stable for a long time. Indeed, inequality in income, as measured this way, is about the same now as it was just following World War II.

France and the United States appeared to have the greatest inequality in the distribution of income when compared with other industrialized nations.

There will, of course, always be bottom 20 or 10 or 5 percent of any distribution. Suppose, for example, that every family's real income quadrupled in the next year. Would it be useful to think of the bottom of the distribution as a group in poverty? For example, «A family is in poverty if its income is less than one-half the median income».

Who are the poor? Using the U.S. Government's definition of poverty, the percentage of black persons below the poverty line, although declining since 1964, remains above 35 percent. Similarly, about 35 percent of those families headed by women are below the official poverty line.

It should be clear that differences in individual characteristics are closely associated with differences in income.

Earnings differ because of the lack of mobility. Lack of mobility may occur because individuals choose not to make changes in order to increase their earnings; because individuals are not allowed to make changes in order to increase their earnings (for instance, discrimination); or because individuals have abilities that differ which cannot be easily obtained by others who would like to increase their earnings (special talents).

A tax is proportional if persons with higher incomes pay the same fraction of their income in taxes as do persons with lower incomes. A tax is progressive if persons with higher incomes pay a higher fraction of their income in taxes than do persons with lower incomes.

Transfers, in turn, may also be either progressive (transfers to those lower incomes) or regressive (transfers to those with higher incomes). In addition, transfers may be in cash or in goods and services. The latter are referred to as in-kind transfers.

There are two ideas behind the negative income tax proposed to which economists are strongly attached. First, once a society has made a decision to transfer income to the poor, it is better for the poor if the transfer is in cash rather than in-kind. Second, once a society has made the decision to transfer income to the poor, it is better for the poor if the transfer system provides positive incentives to increase transfer plus market income in the market. Put simply, «Give cash and give it in such a way that the recipient always has incentive to work».

V. Answer the following questions:

1. What is the central task of any economy?

2. How is the society to deal with those who are outside of the economic system?

3. What is the definition of the word «poverty»?

4. What is a lack of mobility? When may it occur?

5. What is the way to change distribution in the society?

6. Is there any difference between cash transfers and in-kind transfers?

7. What can you say about the poorest recipient?

VI. Define the terms:

median income

welfare programme

official poverty line

poverty

proportional taxation

cash transfer

lack of mobility

network of transfers

VII. Translate into English:

1. Нерівність у доходах майже така сама, якою вона була відразу після другої світової війни. 2. У Франції та Америці, виявляється, Існує найбільша нерівність у розподілі прибутків порівняно з іншими країнами. 3. Стабільність в одержанні певного відсотка сукупного прибутку кожною п'ятою частиною населення є одним із вражаючих фактів американської економіки. 4. Оподаткування пропорційне, якщо особи з більш високим прибутком сплачують у вигляді податків таку саму частку прибутків, як особи з меншими прибутками. 5. Для бідних краще одержувати допомогу грішми, ніж товарами. 6. Давайте гроші таким чином, щоб той, хто одержує, завжди мав стимул працювати.

VIII. Read and dramatize the following dialogue:

A.: Tell me please, why do we know much less about the distribution of wealth than we do about the distribution of income?

D.: We know much less about it because the data on wealth holdings are not readily available. Indeed, most of the evidence we have on wealth distribution for the U.S. economy is based on work done in the early 1960s.

A.: Subsequent calculations based on data available in 1969 provide essentially the same picture of the distribution of wealth. The top 0, 5% of the population held about 23% of the wealth and the top 1% of the population about 30% of the wealth.

D.: What is the situation in the U.S. economy concerning the effects of sex discrimination?

A.: On average, working women earn only $ 0.70 for every $ 1.00 earned by working men. What accounts for this difference?

D.: Two economists studied this question using data from the mid 1970s. At that time, the differences could be accounted for in the following way. First, the work history of women differs considerably from that of men.

A.: Yes, it does. It's a fact of common knowledge that while most men enter the work force shortly after completing school and continue to work full time thereafter, women have more varied work experience.

D.: The average white male has spent only six months out of the labor force, most of that time immediately after completing school; in contrast, the average white female takes almost a six-year break in mid-career, usually to raise children.

A.: All of these and other factors combined still leave women with wages $ 174 lower than men.

D .: What does this mean?

A.: It suggests that markets do not necessarily reward workers just on the basis of productivity and that some sort of discrimination may exist.

IX. Make up your own dialogue using the following expressions:

median income o be rewarded

aggregate income to be headed by

in-kind transfer to be referred to

distribution of goods official poverty line