Distribution of income and wealth, poverty and
inequality
The distribution of income and wealth
Wealth is defined as a stock of assets e.g. house, shares, land + savings.
Wealth inequality is the unequal distribution of these assets.
Income is money received on a regular basis e.g. wages, benefits, interest or
dividends. Income inequality is when income is unevenly distributed across
a nation.
Measurements of income inequality:
The Lorenz curve
Measures the distribution of income and wealth in a country. The richest
20% own a higher proportion of income than the poorest.
The Gini coefficient
Gives a numerical value for inequality and is derived from the Lorenz curve.
It is calculated by the areas:
A value of 0 indicates perfect equality.
, 1 is perfect inequality.
In this context:
Equality refers to equal distribution.
Equity refers to fairness or acceptable distribution - could be subjective.
Causes of these inequality:
Inequality in wages
More flexible employment leaves people underemployed + limits their
earnings.
On average, those with a degree earn more over their lifetime. The wage gap
between skilled and unskilled workers has increased. Public sector tend to
pay less than jobs in the private sector.
Even with equal pay laws, women still earn less on average + are less likely
to get promotions.
Workers might be discriminated against due to age, disabilities, gender and
race.
Welfare payments and taxes
State pensions and welfare payments tend to increase less than wages,
even though they are index-linked to inflation.
Regressive taxes bear a larger burden on lower income earners.
Unemployment
This can cause poverty + reliance on state benefits.
Changes to the UK tax system
The UK has gradually switched towards indirect taxes - more regressive.
The top + basic income tax rates have fallen which disproportionately
favours the rich.
Inequality between countries
Partly caused by excluding marginalised groups based on ethnicity, gender,
etc.
Some countries have been held back by wars, droughts, famines +
earthquakes. Across Africa, population issues are complicating efforts to
reduce poverty.
Inequality of opportunity is where the difference between life expectancies
of countries is significant. In Japan - 87, Sierra Leone - 46. Recently,
developing countries are catching up with the developed world. Most of
economic development happened in the Western world. Britain experienced
the Industrial Revolution whilst exploiting the poor through colonialism.
inequality
The distribution of income and wealth
Wealth is defined as a stock of assets e.g. house, shares, land + savings.
Wealth inequality is the unequal distribution of these assets.
Income is money received on a regular basis e.g. wages, benefits, interest or
dividends. Income inequality is when income is unevenly distributed across
a nation.
Measurements of income inequality:
The Lorenz curve
Measures the distribution of income and wealth in a country. The richest
20% own a higher proportion of income than the poorest.
The Gini coefficient
Gives a numerical value for inequality and is derived from the Lorenz curve.
It is calculated by the areas:
A value of 0 indicates perfect equality.
, 1 is perfect inequality.
In this context:
Equality refers to equal distribution.
Equity refers to fairness or acceptable distribution - could be subjective.
Causes of these inequality:
Inequality in wages
More flexible employment leaves people underemployed + limits their
earnings.
On average, those with a degree earn more over their lifetime. The wage gap
between skilled and unskilled workers has increased. Public sector tend to
pay less than jobs in the private sector.
Even with equal pay laws, women still earn less on average + are less likely
to get promotions.
Workers might be discriminated against due to age, disabilities, gender and
race.
Welfare payments and taxes
State pensions and welfare payments tend to increase less than wages,
even though they are index-linked to inflation.
Regressive taxes bear a larger burden on lower income earners.
Unemployment
This can cause poverty + reliance on state benefits.
Changes to the UK tax system
The UK has gradually switched towards indirect taxes - more regressive.
The top + basic income tax rates have fallen which disproportionately
favours the rich.
Inequality between countries
Partly caused by excluding marginalised groups based on ethnicity, gender,
etc.
Some countries have been held back by wars, droughts, famines +
earthquakes. Across Africa, population issues are complicating efforts to
reduce poverty.
Inequality of opportunity is where the difference between life expectancies
of countries is significant. In Japan - 87, Sierra Leone - 46. Recently,
developing countries are catching up with the developed world. Most of
economic development happened in the Western world. Britain experienced
the Industrial Revolution whilst exploiting the poor through colonialism.
