(a) The following chart which illustrates the changes to all income groups in the USA since 1980.  Describe what has happened to the incomes of the different wage earners in the country and describe the impact that this had on the level of income inequality in the economy?

(b) Watch the following short youtube video, which features an interview with former president Barack Obama and then summarise why he believes that inequality grew in this period, including when he was President.

(c) Describe the social and economic costs associated with increased inequality?

(d) So in conclusion, does income inequality matter providing that everyone is getting a little richer?

Activity 1: The impact of taxation on income inequality in the USA

Watch the following youtube video, from economist David Weissel, on the impact of taxation on income inequality in the USA.  After watching the video read explain the extent to which progressive taxes and transfer payments by governments contribute to a more equal distribution of income.

Activity 6: So is progressive taxation fairer?

Watch the following short video and then decide for yourself.

The answer to this question depends entirely on an individuals perception of fair?  On one hand it could be argued that progressive tax systems on income are entirely fair.  This is because the amount of tax paid depends on someone’s ability to pay.  Individuals with little or no income would pay no tax. 

On the other hand some economists disagree with this assertion and state instead that all individuals should pay the same amount of tax.  After all, why should a hard working and successful person pay more tax simply to subsidise payments for low income households, who may be making little attempt to find work themselves. 

Of course this assertion makes the assumption that all wealthy people are hard working and similarly all those on low incomes are lazy and choose not to work – a statement that is clearly untrue