4.2.2 Inequality Flashcards
What is ‘wealth’?
Defined as a stock of assets such as a house, shares, land and cars
What is ‘income’?
Money received on a regular basis. This could be for a job, welfare payments e.c.t.
What are the two ways in which we measure inequality?
- the Lorenz curve
- Gini coefficient
What is the Lorenz curve?
A way of showing the distribution of income or wealth within a country. It shows the cumulative shares of income from different sections of the population
On the Lorenz curve, what does the straight line represent?
Perfect Equality
On the Lorenz curve, analyse it?
Shows a significant level of inequality.
50% of the Households own 15% of the wealth
In other words…
The richest 50% of Households own 85% of the welath
A shift outwards in the Lorenz curve shows what?
Increasing inequality
What is the Gini Coefficient?
A numerical value for inequality
How is the Gini Coefficient calculated?
Area A / Area A + Area B
On the Lorenz curve, how is the Gini Coefficient calculated?
A / A + B
What does a value of 0 show within the Gini Coefficient?
Perfect equality
What does a value of 1 show within the Gini Coefficient?
Perfect inequality, i.e. all the wealth in the country is concentrated in the hands on 1 individual / household
What are the causes of income and wealth inequality between countries?
- inequality in wages
- welfare payments and taxes
- unemployment
How does inequality in wages affect wealth and income inequality between countries?
More part time and temporary jobs have been made available leaving people underemployed which limits earning potential
Those with a degree earn more than those without
Men earn more than women
How do welfare payments and taxes affect wealth and income inequality between countries?
State pensions and welfare payments tend to increase less than what wages do.
Welfare payments can be cut
VAT is regressive
How does unemployment affect wealth and income inequality between countries?
Structural = decline of industry Cyclical = loss of demand
What causes inequality between countries?
External factors such as wars, famines, droughts e.c.t.
Population changes, Africas population of 1.1billion is meant to double by 2050 complicating efforts to reduce hunger
Exclusion of race, genders, sexual orientation e.c.t
What did Kuznet propose?
That as a society develops and moves from an agricultural one to a more industrial one, inequality rises. But this is only a tranistionary phase as wealth is then distributed via the government and this, in turn, reduces inequality
How does capitalism affect inequality?
Capitalism is when capital is privately owned, and wages are passed down via private firms. In a capitalist society, entrepreneurs take risks and are driven by the profit motive, therefore inequality is essential. It motivates workers to achieve more which encourages the learning of more skills and hard work.
How does inheritance lead to inequality?
Those with the most wealth pass it down to younger generations, they can achieve a higher education than those with no money can’t. They therefore get the better jobs, earn the most money e.c.t
