Lesson 24 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 yearmedian 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 «пода­

ток» (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 послу­ створювати стимул до прагами ці підвищення матеріального доб­ розподіл економічних благ робуту реальний сімейний прибу­ гостра, невідкладна проблема на­ ток шої епохи нерівність у розподілі при­
бути поза офіційною межею бід­ бутків ності III. Fill in the blanks with appropriate words:
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 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 if in such way that the reci­pient ... has an incentive to work.	always distributing differences to increase intensive difficult income money inequality different

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 sence, 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, «А 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» (pp. 413—437).

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 пропорцій не, 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	to be rewarded
aggregate income	to be headed by
in-kind transfer	to be referred to
distribution of goods	official poverty line

X. Paraphrase the sentences using Subjunctive II as in the model:

M o d e l : A family is not in poverty if its income is more than one-half the median income.

If a family were in poverty, its income wouldn't be more than one-half the median income.

1. Individuals choose not to make changes in order to increase their earnings, so lack of mobility occurs. 2. They don't earn a lot of money, so they are given a cash transfer.

3. There is sex discrimination, so men and women don't receive the same amount of money. 4. People have no wide range of possibilities to obtain a job, so many families live below the official poverty line,

XI. Complete the following sentences:

1. if all workers were rewarded handsomely ... . 2. The transfer would be in-kind if . . . . 3. If they had lower incomes ... . 4. A society would not make a decision to transfer income to the poor if ... . 5. If the distribution of income had been relatively stable . . . .

XII. Translate into English:

1 . Якби не бракувало мобільності, доходи різних осіб не відрізнялися б. 2. Якби прибутки розподілялися справді рівномірно, чи був би тоді сенс говорити про якусь групу працівників як таку, що живе в бідності. 3. Якби еони жили та працювали в більш розвиненій країні, вони мали б вищі прибутки. 4. Якби не було дискримінації за статтю, жінки отримували б таку саму заробітну плату, як і чоловіки, виконуючи однакову роботу.

XIII. Communicative situations:

1. Should people who work in riskier jobs earn higher incomes?

If your answer is yes, is the inequality necessarily «bad». Explain why.

2. What does it mean to say that a person is «living in po­verty»? Explain your reasoning.

3. If luck were more important than education in determining one's income, would the distribution of income be «fair»?

Discuss it.

4. What can you say about cash transfer in this country?