| Teacher's Notes |
The distribution of income around the world is uneven. Its consequences impact on us all. This case study gives students an understanding of global income and income distribution, its measurement, the recent indicators and the connection with poverty and human development.
Level
Middle to Upper secondary
Curriculum Links
Victorian Certificate of Education (VCE)
Economics Unit 2 (Year 11) Australia and the Global Economy - Area of Study 3 - Other Economies - Global distribution of Income and Wealth - the Role of Australian Aid.
Victorian Curriculum Standards Framework (CSF) II - Studies of Society and Environment (SOSE).
Goals - Civics and Citizenship, environmental awareness, global understandings, the economy and economic literacy.
Skills - Communication, investigation and information technologies Level 6 (Years 9 and 10) Strand - Economy and Society in particular Outcome 6.1 - Describe the management of the Australian economy in an international context.
National curriculum
SOSE (learning area), Resources (concept strand) - Use of Resources (concept strand organiser), investigation, communication and participation (process strand).
Outcomes
Students should be able to:
Materials
Approaches to using the case study
Ask students to indicate their understanding of the concept of individual income and what makes up an individual's income. Raise the issue of how incomes vary in Australia.
The discussion should identify income in terms of the money people have access to. Highlight to students that from an economic perspective income is the return to the factors of production for the supply of their services, for example, for supplying your labour you receive a wage or salary.
Students should be able to identify that there is considerable variation in income between different individuals in Australia. It is also important to highlight that equitable income distribution does not mean equal but what might be considered reasonable or fair.
Ask students how we might measure the total income of a nation. Provide an explanation of GNP/GDP as the measure used by economists to determine a country's output and income. Details of the difference between these measures are not significant for this case study.
Students read Section 1 Introduction. Using Table One ask students to rank the countries from highest to lowest based on total output. Ask students why these figures don't provide a useful basis for comparison.
Students should be able to identify that population is the decisive factor. Total figures don't indicate how many people have to share the country's total income. Highlight that Australia's GNP is larger than Switzerland's but our per capita outcome is considerably smaller. Australia's population was 19 million in 1998 whereas Switzerland's was 7 million. Similarly while Vietnam's total GNP is much less that Bangladesh it has only a slightly smaller per capita GNP. Bangladesh's population was 126 million and Vietnam's 78 million.
Students read Section 2 and 3 - Measurement and Measurement Issues. Students need to understand the necessity of having a standard unit of income to enable a comparison to take place. For example how would you compare people's heights if some were in centimetres and some in inches? Ask students to look at Australia's and Vietnam's GNP in Figure One. Can a comparison be made? Using the current exchange rate, convert Vietnam's GDP into $AUD. Can a comparison be made now?
The purchasing power parity dollar (PPP$) concept is quite difficult for students at this level. Teachers may like to simply point out that PPP$ are a statistical creation to provide a better means of comparing what income per capita actually means in terms of purchasing power. With students working at a higher level teachers might take students through the following example to highlight how PPP$ take account of the different relative prices that operate in countries especially in relation to the prices of non traded goods. Using a standard currency, for example, $US, to compare income per capita assumes that the exchange rate will buy the same living standard as $US 1. Consider this example relating to India and using the $US as the currency of exchange. A hair cut in the USA might cost $10 if the exchange rate is 10 rupees to the dollar a haircut in India should be 100 rupees but in it may actually only be 25 rupees. Therefore in relation to haircuts the value of the rupee is underestimated by a factor of 4. The PPP$ for haircuts is $10, 25 rupees or $1 = 2.5 rupees. Thus the income of India based on PPP$ would actually be 4 times higher than one based on $US. (Source of this example is A. P. Thirwall, Growth and Development (Macmillan Press Ltd 1999) P25-36).
Students read Section 4 - Global Statistics and complete Task One: Visual Display Task. The most recent GNP per head data is available on the World Bank website. The best starting point is http://www.worldbank.org/data/ from here you can access selected data through a range of links from both the latest World Development Report and World Development Indicators.
GNP per capita data can be accessed at: http://www.worldbank.org/data/wdi2000/worldview.htm.
Teachers may need to assist students with the calculation of distribution figures by using a specific example.
Ask students to describe their standard of living, do they think they would be better or worse off than a person living in Ethiopia. How do they know? Students complete Task Two: Brainstorm Task.
You can take this task further by attempting to agree on a ranking of indicators. The number of times a factor is mentioned by a group may indicate its relevance and importance. Students may not have considered environmental conditions, eg air pollution and political freedom as indicators of human development. Ask students if they think such factors should be taken into account. Students complete Task Three: Comparing Countries Performance. A range of indicators is available on both the World Bank and United Nations Human Development Program sites. The best starting point is the section of the World Bank site giving various statistics http://www.worldbank.org/data/ from here there are links to data by both topic and country.
Students read Section 5 and complete Task Four: Human Development Index Ranking. The 1999 UNDP Human Development Report can be found at: http://www.undp.org/hdro/99.htm and from here access to range of information about the ranking and statistical material is available.
It is important for students to understand that countries with the same income may have different levels of human development and living standards. Ask students what would lead to this. It may prove difficult for students to identify factors, suggest some of the following: income distribution within nations differs, level of public spending by governments on basic resources, crises facing particular nations eg drought, HIV AIDS, conflict/civil strife and level of foreign debt may all impact on the way income is translated into living conditions for the population.
Students complete Task Five: Surviving on $1 and $2 per day. Teachers should undertake the task themselves, purchasing the products and bringing them to class to provide a visual of the type and quantities of goods that can be bought. Teachers should point out that the tasks only give an approximation of the access to food provided by $1 and $2 a day in low income countries. The cost of basic food items may well be less in low income countries due to subsidies and that people may actually purchase little food but rely to a great extent on home grown food.
Resources
Thirwall A. P.: Growth and Development (Macmillan Press Ltd 1999)
United Nations Childrens Fund (UNICEF) State of the World's Children 1999 (Oxford University Press 1999)
UNICEF Website: http://www.unicef.org/apublic/
United Nations Development Programme: Human Development Report 1999 (Oxford University Press)
United Nations Development Programme Website: http://www.undp.org/
The World Bank: World Development Indicators 1999/2000(World Bank 1999)
The World Bank Website: http://www.worldbank.org/
Teachers may also like to look at the Students and Teacher section to access a variety of information and activities http://www.worldbank.org/htm/schools/
New Internationalist Magazine - covers a range of development issues, of particular interest is March 1999 issue on World Poverty.
New Internationalist: A-Z of World Development Book/CD Rom
New Internationalist Website: http://www.oneworld.org/ni/
* Further information and resources can be obtained from the Professional Development Providers.
© Commonwealth of Australia