Income And Wealth Flashcards
What are the causes of inequality in the distribution of Pre tax incomes
Education - Individuals with higher levels of education tend to earn more than those with basic. Can create inequality
Labour market - The demand and supply of labour can also create inequality in the distribution of pre tax income. Jobs that require specialised skills or experience pay better
Globalisation- the globalisation of labour markets has increased competition for jobs and led to outsourcing of jobs to countries with cheaper labour. This has created income inequality for countries with high labour costs
Discrimination
Government policies - taxation
What is income
Income is a flow concept measured over a given period of time
What is wealth
Wealth is a stock concept - assets with market value that can generate income
Policies to redistribute income/wealth
Taxation
Benefits
Minimum/ maximum wages
Legislation
government spending on education/training
Gov spending on healthcare
What is the possible effect of increasing progressive tax to redistribute income/wealth
Can cause lower incentive to take risks and improve the economy as they know it will get taxed heavily (laffer curve)
What are possible effects of increasing benefits
Poverty trap - low incentive to work
Decrease gov finances
What is the possible effects of minimum/maximum wages
Increase minimum = decrease in employment
Having a maximum- lower incentives
What are effects of legislation
Cost to a business
Enforcement
Gov failure
What are possible effects of increasing gov spending on education and healthcare
Gov finances
Time
