4.2.2 Inequality Flashcards
What is the distinction between wealth and income inequality.
Income is a flow of earnings whilst wealth is a stock.
- Income inequality - The extent to which income is distrubited in an uneven manner.
- Wealth inquality - Wealth inequality refers to the unequal distribution of assets, such as property and investments, among individuals or groups within a society. It is more likely to be unequally distributed as wealth can be accumulated over time.
Describe a Lorenz Curve
This shows the cumulative percentage of the population plotted
against the cumulative percentage of income that those people have. A perfectly equal society would have a straight line from corner to corner (the Lorenz Curve) ; the degree of the bend away from that straight line indicates the degree of inequality.
How do you measure income inequality?
GINI coefficient (higher = more unequal)
This can be plotted on a Lorenz Curve.
Why do wealth and income inequality vary between countries?
Some countries are held back by war, famine or poor governance.
What are the causes of wealth and income inequality?
- Wages - Some workers simply earn more than others - potentially because of higher education levels, they work longer hours or skills are more in demand. The higher someones wages, the more wealth they can build up.
- Wealth levels- Someone who already has a high level of wealth through saving or inheritance is able to multiply it easier.
- Chance - Those who happened to bu houses in the right area or bought the right assets will see huge increases in their wealth.
- Age - Working adults at the peak of their career will earn a higher income then those who just started.
What is the signifance of Capitalism in inequality?
Capitalist economy leads to income inequality because of wage differentials as jobs are based on hierachy and supply/demand.
Individuals also own resources and so wealth differs based on the assets they own.
Equality can arguably never be achieved in a capitalist society as the “ladder” **creates an incentive to work hard and take risks. **
A degree of inequality is necessary and desirable, but excessive inquality leads to problems.
What is the Kuznets Curve?
As society moves from an agricultural one to industrialised on, inequality increases as industrial workers wages rise quicker than farmers. Once a country is developed - taxation and Government spending redistrubutes the wealth so inquality falls.
THIS IS ALSO APPLICABLE TO ENVIROMENTAL DEGRADATION INSTEAD OF INEQUALITY
