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Distribution of income and wealth (Government policies to alleviate…
Distribution of income and wealth
Income
the flow of money a person or household receives in a particular time period
Factors influencing the distribution of income:
Factors of production
The distinction between earned and unearned income
wage and salary differentials
Wealth
Personal wealth is the stock of everything which has value that a person or household owns at a particular point in time
Factors influencing the distribution of wealth
The ability to benefit from capital gains
Private pension assest
Inheritance, gifts and luck
Wealth taxation versus taxation of income
Equality
means that everyone is treated exactly the same way. A completely equal distribution of income means that everybody has the same income
Equality
means that everybody is treated fairly
Lorenz curve
A graph on which the cumulative % of total national income or wealth is plotted against the cumulative % of population. The extent to which the curve dips below a straight diagonal line indicates the degree of inequality of distribution
Gini Coefficient
Measures the extent to which the distribution of income or wealth among individuals or households withing an economy deviates from a perfectly equal distribution
Benefits and costs of more equitable distribution of income and wealth
Poverty
Absolute poverty
Relative poverty
Causes of poverty
old age
unemployment
low wages
Effects of poverty
educational deprivation
Health deprivation
Poverty in communities
Government policies to alleviate poverty
Taxation
Welfare state transfers
Universal child benefits / unemployment benefit
Public (state) pensions
Conditional welfare transfers e.g. Conditional on attending unemployment programmes
Targeted welfare payments- linked to income
State-provided services (in-kind benefits)
Education - reduces inequality of market incomes
Health care – state provided health services
Social housing e.g. Provided by local authorities
Employment training
Poverty Trap
Unemployment Trap
