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Created with Fabric.js 1.4.5 THE MEASUREMENT OF INEQUALITY - How much inequality is there in our society?- How many people live in poverty?- What problems come about when measuring amounts of poverty?- How often do people move along income classes? FACT!! FACT!! FACT!! Significant increase in international trade with the lower wage countriesand changes in technology is reducing the demand for unskilled labour and heightening the demand for more skilled labour. Resulting in falling wages of unskilled workersrelative to that of skilled workers, this in turn has increased inequality in family incomes. PROBLEMS MEASURING INEQUALITY - Sometimes data gives an incomplete picture of inequality in living standards Some of these problems include - 1) The Economic Life Cycle The life cycle = young worker/student has a low income. Income rises with experience. It peaks at 50 and thendrops at 65 (retirement). The standard of living depends on lifetime income because borrowing and saving smooths out life cycle. However this data is not readily available. 2) Temporary Versus Permanent Income Income varies because of random and transitory forces. Borrowing and smoothing is a factor. A family will save and borrow in preparation for temporary changes in income. However the families ability to buy goodsand services will depend on its permanent income. Permanent is better than annual to measure becauseit excludes transitory changes and is more equally distributed. ECONOMIC MOBILITY - It is the movement of people among income classes. Economics mobility is so good that poverty is long term for few. Temporary poor and persistently poor face different problems.
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