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Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.38,0:00:02.88,Default,,0000,0000,0000,,Jacob: Welcome to Crash Course Economics,\NI'm Jacob Clifford...
Dialogue: 0,0:00:02.88,0:00:07.84,Default,,0000,0000,0000,,Adriene: ...and I'm Adriene Hill. The world\Nis full of inequality. There's racial inequality,
Dialogue: 0,0:00:07.84,0:00:14.04,Default,,0000,0000,0000,,gender inequality, health, education, political\Ninequality, and of course, economic inequality.
Dialogue: 0,0:00:14.04,0:00:18.76,Default,,0000,0000,0000,,Some people are rich, and some people are\Npoor, and it can seem pretty impossible to fix.
Dialogue: 0,0:00:18.76,0:00:20.02,Default,,0000,0000,0000,,Jacob: Well, maybe not.
Dialogue: 0,0:00:20.02,0:00:28.88,Default,,0000,0000,0000,,[Theme Music]
Dialogue: 0,0:00:28.88,0:00:34.76,Default,,0000,0000,0000,,Jacob: So there are two main types of economic\Ninequality: wealth inequality and income inequality.
Dialogue: 0,0:00:34.76,0:00:39.26,Default,,0000,0000,0000,,Wealth is accumulated assets, minus liabilities\Nso it's the value of stuff like savings, pensions,
Dialogue: 0,0:00:39.26,0:00:43.44,Default,,0000,0000,0000,,real estate, and stocks. When we talk about\Nwealth inequality, we're basically talking
Dialogue: 0,0:00:43.44,0:00:47.33,Default,,0000,0000,0000,,about how assets are distributed. Income is\Nthe new earnings that are constantly being
Dialogue: 0,0:00:47.33,0:00:51.28,Default,,0000,0000,0000,,added to that pile of wealth. So when we talk\Nabout income inequality, we're talking about
Dialogue: 0,0:00:51.28,0:00:55.76,Default,,0000,0000,0000,,how that new stuff is getting distributed. Point is,\Nthey're not the same. Let's go to the Thought Bubble.
Dialogue: 0,0:00:55.76,0:01:00.22,Default,,0000,0000,0000,,Adriene: Let's look at both types of inequality\Nat the global level. Global wealth today is
Dialogue: 0,0:01:00.23,0:01:06.56,Default,,0000,0000,0000,,estimated at about 260 trillion dollars, and\Nis not distributed equally. One study shows
Dialogue: 0,0:01:06.56,0:01:11.39,Default,,0000,0000,0000,,that North America and Europe, while they\Nhave less than 20% of the world's population,
Dialogue: 0,0:01:11.39,0:01:17.13,Default,,0000,0000,0000,,have 67% of the world's wealth. China, which\Nhas more people than North America and Europe
Dialogue: 0,0:01:17.13,0:01:23.55,Default,,0000,0000,0000,,combined, has only about 8% of the wealth.\NIndia and Africa together make up almost 30%
Dialogue: 0,0:01:23.55,0:01:29.31,Default,,0000,0000,0000,,of the population, but only share about 2%\Nof the world's wealth. We're teaching economics,
Dialogue: 0,0:01:29.31,0:01:34.10,Default,,0000,0000,0000,,so we can focus on income inequality. These\Nten people represent everyone on the planet,
Dialogue: 0,0:01:34.10,0:01:38.69,Default,,0000,0000,0000,,and they're lined up according to income.\NPoorest over here and richest over here. This
Dialogue: 0,0:01:38.69,0:01:44.09,Default,,0000,0000,0000,,group represents the poorest 20%, this is\Nthe second poorest 20%, the middle 20%, and
Dialogue: 0,0:01:44.09,0:01:50.09,Default,,0000,0000,0000,,so on. If we distributed a hundred dollars\Nbased on current income trends, this group
Dialogue: 0,0:01:50.09,0:01:55.71,Default,,0000,0000,0000,,would get about 83 of those dollars, the next\Nrichest would get 10 dollars, the middle gets
Dialogue: 0,0:01:55.71,0:02:01.80,Default,,0000,0000,0000,,four, the second poorest group would get two dollars\Nand the poorest 20% of humans would get one dollar.
Dialogue: 0,0:02:01.81,0:02:07.40,Default,,0000,0000,0000,,Branko Milanovic, an economist that specializes\Nin inequality, explained all this by describing
Dialogue: 0,0:02:07.40,0:02:12.69,Default,,0000,0000,0000,,an "economic big bang" - "At first, countries'\Nincomes were all bunched together, but with
Dialogue: 0,0:02:12.69,0:02:17.67,Default,,0000,0000,0000,,the Industrial Revolution the differences\Nexploded. It pushed some countries forward
Dialogue: 0,0:02:17.67,0:02:22.63,Default,,0000,0000,0000,,onto the path to higher incomes while others\Nstayed where they had been for millennia."
Dialogue: 0,0:02:22.63,0:02:27.32,Default,,0000,0000,0000,,According to Milanovic, in 1820, the richest\Ncountries in the world - Great Britain and
Dialogue: 0,0:02:27.32,0:02:33.11,Default,,0000,0000,0000,,the Netherlands - were only three times richer\Nthan the poorest, like India and China. Today,
Dialogue: 0,0:02:33.11,0:02:39.74,Default,,0000,0000,0000,,the gap between the richest and poorest nations is like\N100:1. The gaps are getting bigger and bigger.
Dialogue: 0,0:02:39.74,0:02:46.56,Default,,0000,0000,0000,,Thanks, Thought Bubble. The Industrial Revolution\Ncreated a lot of inequality between countries but today
Dialogue: 0,0:02:46.56,0:02:52.44,Default,,0000,0000,0000,,globalization and international trade are accelerating it.\NMost economists agree that globalization has
Dialogue: 0,0:02:52.44,0:02:58.53,Default,,0000,0000,0000,,helped the world's poorest people, but it's\Nalso helped the rich a lot more. Harvard economist
Dialogue: 0,0:02:58.53,0:03:04.58,Default,,0000,0000,0000,,Richard Freeman noted, "The triumph of globalization\Nand market capitalism has improved living
Dialogue: 0,0:03:04.58,0:03:10.60,Default,,0000,0000,0000,,standards for billions while concentrating\Nbillions among the few." So, it's kind of
Dialogue: 0,0:03:10.60,0:03:17.56,Default,,0000,0000,0000,,a mixed bag. The very poor are doing a little better, but\Nthe very rich are now a lot richer than everybody else.
Dialogue: 0,0:03:17.56,0:03:21.68,Default,,0000,0000,0000,,There are other reasons inequality is growing.\NEconomists point to something called "skill-biased
Dialogue: 0,0:03:21.69,0:03:27.28,Default,,0000,0000,0000,,technological change." The jobs created in\Nmodernized economies are more technology-based,
Dialogue: 0,0:03:27.28,0:03:31.43,Default,,0000,0000,0000,,generally requiring new skills. Workers that\Nhave the education and skills to do those
Dialogue: 0,0:03:31.43,0:03:36.49,Default,,0000,0000,0000,,jobs thrive, while others are left behind.\NSo, in a way, technology's become a complement
Dialogue: 0,0:03:36.49,0:03:41.86,Default,,0000,0000,0000,,for skilled workers but a replacement for\Nmany unskilled workers. The end result is
Dialogue: 0,0:03:41.86,0:03:46.31,Default,,0000,0000,0000,,an ever widening gap between not just the\Npoor and the rich, but also the poor and the
Dialogue: 0,0:03:46.31,0:03:51.53,Default,,0000,0000,0000,,working class. As economies develop and as\Nmanufacturing jobs move overseas, low skill
Dialogue: 0,0:03:51.53,0:03:57.84,Default,,0000,0000,0000,,low pay and high skill high pay work are the\Nonly jobs left. People with few skills fall
Dialogue: 0,0:03:57.84,0:04:03.08,Default,,0000,0000,0000,,behind in terms of income. In the last thirty\Nyears in the US, the number of college-educated
Dialogue: 0,0:04:03.08,0:04:09.11,Default,,0000,0000,0000,,people living in poverty has doubled from\N3% to 6%, which is bad! And then consider
Dialogue: 0,0:04:09.11,0:04:14.06,Default,,0000,0000,0000,,that during the same period of time, the number\Nof people living in poverty with a high school
Dialogue: 0,0:04:14.06,0:04:21.54,Default,,0000,0000,0000,,degree has risen from 6% to a whopping 22%.\NOver the last fifty years, the salary of college
Dialogue: 0,0:04:21.54,0:04:26.81,Default,,0000,0000,0000,,graduates has continued to grow while, after\Nadjusting for inflation, high school graduates'
Dialogue: 0,0:04:26.81,0:04:30.59,Default,,0000,0000,0000,,incomes have actually dropped. It's a good\Nreason to stay in school!
Dialogue: 0,0:04:30.59,0:04:35.47,Default,,0000,0000,0000,,There are other reasons the income gap is\Nwidening. The reduced influence of unions,
Dialogue: 0,0:04:35.47,0:04:39.82,Default,,0000,0000,0000,,tax policies that favor the wealthy, and the\Nfact that somehow it's okay for CEOs to make
Dialogue: 0,0:04:39.82,0:04:45.06,Default,,0000,0000,0000,,salaries many, many times greater than those\Nof their employees. Also, race and gender
Dialogue: 0,0:04:45.06,0:04:48.69,Default,,0000,0000,0000,,and other forms of inequality can exacerbate\Nincome equality.
Dialogue: 0,0:04:48.69,0:04:52.97,Default,,0000,0000,0000,,Jacob: Let's dive into the data for the United\NStates. We'll start by mentioning Max Lorenz,
Dialogue: 0,0:04:52.97,0:04:57.35,Default,,0000,0000,0000,,who created a graph to show income inequality.\NAlong the bottom we have the percent of households
Dialogue: 0,0:04:57.35,0:05:01.83,Default,,0000,0000,0000,,from 0-100% and along the side we have the\Npercent share of income. By the way, we're
Dialogue: 0,0:05:01.83,0:05:05.39,Default,,0000,0000,0000,,using households rather than just looking\Nat individuals because many households have
Dialogue: 0,0:05:05.39,0:05:10.58,Default,,0000,0000,0000,,two income earners. So this straight line\Nright here represents perfect income equality.
Dialogue: 0,0:05:10.58,0:05:14.54,Default,,0000,0000,0000,,So every household earns the same income.\NAnd while perfect income equality might look
Dialogue: 0,0:05:14.54,0:05:19.34,Default,,0000,0000,0000,,nice on the surface, it's not really the goal.\NWhen different jobs have different incomes,
Dialogue: 0,0:05:19.34,0:05:23.21,Default,,0000,0000,0000,,people have incentive to become a doctor or\Nan entrepreneur or a YouTube star - you know,
Dialogue: 0,0:05:23.21,0:05:28.41,Default,,0000,0000,0000,,the jobs society really values. So this graph, called\Nthe Lorenz curve, helps visualize the depth of inequality.
Dialogue: 0,0:05:28.41,0:05:34.18,Default,,0000,0000,0000,,Now, for 2010, the US Census Bureau found\Nthat the poorest 20% of Americans made 3.3%
Dialogue: 0,0:05:34.18,0:05:39.26,Default,,0000,0000,0000,,of the income. And the richest 20% made over\N50% of the income. So that's pretty unequal
Dialogue: 0,0:05:39.26,0:05:43.46,Default,,0000,0000,0000,,but has it always been like this? Well, in\N1970, the bottom group earned 4.1% of the
Dialogue: 0,0:05:43.46,0:05:49.90,Default,,0000,0000,0000,,income and the top earned 43.3%. By 1990,\Nthings were even less equal so the 2010 numbers
Dialogue: 0,0:05:49.91,0:05:53.38,Default,,0000,0000,0000,,are just a continuation of the trend. And\Nit isn't just the poorest group that's losing
Dialogue: 0,0:05:53.38,0:05:58.55,Default,,0000,0000,0000,,ground. Over those 40 years, each of the bottom\Ngroups or 80% households earned smaller and
Dialogue: 0,0:05:58.55,0:06:00.19,Default,,0000,0000,0000,,smaller shares of the total income.
Dialogue: 0,0:06:00.19,0:06:04.20,Default,,0000,0000,0000,,Now, from the Lorenz curve we can calculate\Nthe most commonly used measure of income equality
Dialogue: 0,0:06:04.20,0:06:09.02,Default,,0000,0000,0000,,- the GINI Index. Now without jumping into\Ntoo much of the math, it's basically the size
Dialogue: 0,0:06:09.02,0:06:12.66,Default,,0000,0000,0000,,of the gap between the equal distribution\Nof income and the actual distribution. Now,
Dialogue: 0,0:06:12.66,0:06:17.96,Default,,0000,0000,0000,,0 represents complete equality and 100 represents\Ncomplete inequality. Now, you might be surprised
Dialogue: 0,0:06:17.97,0:06:22.24,Default,,0000,0000,0000,,to learn the US doesn't have the highest income\Ninequality, but it does have the highest among
Dialogue: 0,0:06:22.24,0:06:25.49,Default,,0000,0000,0000,,Western industrialized nations. The UK has\Nthe highest in the EU.
Dialogue: 0,0:06:25.49,0:06:30.55,Default,,0000,0000,0000,,Adriene: The debate over income equality isn't\Nabout whether it exists. It obviously does.
Dialogue: 0,0:06:30.55,0:06:34.58,Default,,0000,0000,0000,,The fight is over whether it's a problem and\Nwhat should be done about it. Let's start
Dialogue: 0,0:06:34.58,0:06:38.58,Default,,0000,0000,0000,,with those who don't think it's a big deal.\NThey tell you that the data suggests that
Dialogue: 0,0:06:38.58,0:06:41.94,Default,,0000,0000,0000,,the rich are getting richer and the poor are\Ngetting poorer, but that might not be the
Dialogue: 0,0:06:41.94,0:06:46.14,Default,,0000,0000,0000,,case. Instead, it could be that all the groups\Nare making more money but the rich's share
Dialogue: 0,0:06:46.14,0:06:50.91,Default,,0000,0000,0000,,is just growing faster. Like, let's say you\Nown an apple tree and we pick 10 apples. You
Dialogue: 0,0:06:50.91,0:06:57.93,Default,,0000,0000,0000,,keep 6 and give me 4. A week later we pick\N20 apples, you take 15 and give me 5. So my
Dialogue: 0,0:06:57.93,0:07:05.20,Default,,0000,0000,0000,,share of the total went down from 40% to 25%\Nbut each of us still got more apples. So it's
Dialogue: 0,0:07:05.20,0:07:10.92,Default,,0000,0000,0000,,true that people in the lowest income bracket have\Nearned a little more money in the last 40 years, but in
Dialogue: 0,0:07:10.92,0:07:18.08,Default,,0000,0000,0000,,the last 20 years, that average income has been falling.\NMeanwhile, the rich have continually gotten richer.
Dialogue: 0,0:07:18.09,0:07:23.24,Default,,0000,0000,0000,,So, what's the richest guy on earth have to\Nsay about it? Bill Gates said, "Yes, some
Dialogue: 0,0:07:23.24,0:07:28.74,Default,,0000,0000,0000,,level of inequality is built in to capitalism.\NIt's inherent to the system. The question
Dialogue: 0,0:07:28.74,0:07:34.14,Default,,0000,0000,0000,,is, what level of inequality is acceptable?\NAnd when does inequality start doing more
Dialogue: 0,0:07:34.15,0:07:39.05,Default,,0000,0000,0000,,harm than good?" There's a growing group of\Neconomists who believe income inequality in
Dialogue: 0,0:07:39.05,0:07:45.30,Default,,0000,0000,0000,,the US today is doing more harm. They argue\Nthat greater income inequality is associated
Dialogue: 0,0:07:45.30,0:07:49.56,Default,,0000,0000,0000,,with a lot of problems. They point to studies\Nthat show countries with more inequality have
Dialogue: 0,0:07:49.56,0:07:56.30,Default,,0000,0000,0000,,more violence, drug abuse and incarcerations.\NIncome inequality also dilutes political equality,
Dialogue: 0,0:07:56.30,0:08:01.11,Default,,0000,0000,0000,,since the rich have a disproportionate say\Nin what policies move forward, and the rich
Dialogue: 0,0:08:01.11,0:08:04.49,Default,,0000,0000,0000,,have an incentive to promote policies that\Nbenefit the rich.
Dialogue: 0,0:08:04.49,0:08:08.78,Default,,0000,0000,0000,,So, how do we address this inequality? There's\Nnot a lot of agreement on this. Some argue
Dialogue: 0,0:08:08.78,0:08:13.78,Default,,0000,0000,0000,,that education is the key to reducing the\Ngap. Basically, workers with more and better
Dialogue: 0,0:08:13.78,0:08:18.15,Default,,0000,0000,0000,,education tend to have the skills that earn\Nhigher income. Some economists push for an
Dialogue: 0,0:08:18.15,0:08:21.75,Default,,0000,0000,0000,,increased minimum wage, which we're going\Nto talk about in another episode. There's
Dialogue: 0,0:08:21.75,0:08:27.05,Default,,0000,0000,0000,,even an argument that access to affordable,\Nhigh quality childcare would go a long way.
Dialogue: 0,0:08:27.05,0:08:31.74,Default,,0000,0000,0000,,And some think governments should do more\Nto provide a social safety net, focus on getting
Dialogue: 0,0:08:31.74,0:08:35.95,Default,,0000,0000,0000,,more people to work and adjust the tax code\Nto redistribute income.
Dialogue: 0,0:08:35.95,0:08:39.81,Default,,0000,0000,0000,,Jacob: Some economists call for the government\Nto increase income taxes and capital gains
Dialogue: 0,0:08:39.81,0:08:44.32,Default,,0000,0000,0000,,taxes on the rich. Income taxes in the US\Nare already somewhat progressive, which means
Dialogue: 0,0:08:44.32,0:08:48.56,Default,,0000,0000,0000,,that there are tax brackets that require the\Nrich to pay a higher percent of income. Right
Dialogue: 0,0:08:48.56,0:08:54.09,Default,,0000,0000,0000,,now, it peaks at around 40% but some economists\Ncall for increases up to 50 or 60%. One idea
Dialogue: 0,0:08:54.09,0:08:59.38,Default,,0000,0000,0000,,is to fix loopholes that the rich use to avoid\Npaying taxes. Other economists argue that taxing
Dialogue: 0,0:08:59.38,0:09:04.44,Default,,0000,0000,0000,,the rich won't be as effective as reducing regulation\Nand bureaucratic red tape. It's unclear which path
Dialogue: 0,0:09:04.44,0:09:09.86,Default,,0000,0000,0000,,we're going to take but extreme income inequality\Nat the national and global level needs to be addressed.
Dialogue: 0,0:09:09.86,0:09:15.10,Default,,0000,0000,0000,,Motivation to improve income inequality may come\Nfrom a genuine desire to help people and level the
Dialogue: 0,0:09:15.10,0:09:21.30,Default,,0000,0000,0000,,playing field, or the fear of Hunger Games-style social\Nupheaval. But either way, the issue can't be ignored.
Dialogue: 0,0:09:21.30,0:09:27.16,Default,,0000,0000,0000,,Adriene: Even Adam Smith, the most classical\Nof classical economists, said, "No society
Dialogue: 0,0:09:27.16,0:09:33.03,Default,,0000,0000,0000,,can surely be flourishing and happy of which\Nthe far greater part of the members are poor
Dialogue: 0,0:09:33.03,0:09:37.28,Default,,0000,0000,0000,,and miserable." Thanks for watching, we'll\Nsee you next week.
Dialogue: 0,0:09:37.28,0:09:40.61,Default,,0000,0000,0000,,Jacob: Thanks for watching Crash Course Economics.\NIt was made with the help of all of these
Dialogue: 0,0:09:40.61,0:09:45.36,Default,,0000,0000,0000,,nice people. You can help keep Crash Course\Nfree for everyone forever by supporting the
Dialogue: 0,0:09:45.36,0:09:50.43,Default,,0000,0000,0000,,show at Patreon. Patreon is a voluntary subscription\Nservice where you can support the show with
Dialogue: 0,0:09:50.43,0:09:53.90,Default,,0000,0000,0000,,monthly contributions. We'd like to thank\Nour High Chancellor of Learning, Dr. Brett
Dialogue: 0,0:09:53.90,0:09:59.18,Default,,0000,0000,0000,,Henderson and our Headmaster of Learning,\NLinnea Boyev, and Crash Course Vice Principal
Dialogue: 0,0:09:59.18,0:10:02.60,Default,,0000,0000,0000,,Cathy and Kim Philip. Thanks for watching,\NDFTBA.