Inequality Flashcards
What is relative poverty
When a households income is below 60% of the median countries population.
-> for example one who lives in relative poverty in the Uk may be better off than one in (Chad) as we can access free health care ect
What is absolute poverty
When income is so low that it is impossible to access basic necessities
What percentage of people live in relative poverty in the UK
22% in 2019/2020
Define wealth inequality
Wealth inequality therefore refers to the unequal distribution of assets in a group of people.
Assets are things such as property, investments or art work.
define income inequality
The unequal distribution of income in a group of people
3 negatives of inequality
- Can cause relative poverty -> increased costs to government through universal credit.
- can causes an increase in crime -> as people may need to steal to access basic goods
- (evaluation) If there is regional inequality it can cause a disincentive to work.
2 positives of inequality
- Trickle down effect
2. Higher incentive to work or better their skills -> as those who do get paid better sums of money
What is the trickle down effect?
If high-income earners gain an increase in salary, then everyone in the economy will benefit as their increased income and wealth filter through to all sections in society
This can occur through higher AD or increased business investment.
Evaluation of the trickle down effect
- High-income earners have a high marginal propensity to save. Therefore, the increased disposable income from a tax cut does not filter into other sections of the economy because it is saved not spent. -> less money for benefits
This was shown in Ronal Reagans presidency when income tax is lowered
What effect does an income tax cut have on the economy?
A tax cut increases incentive to work as one can gain more disposable income. As a result it may increase economic activity
2 Causes of income inequality
- Weakening of trade unions due to regulation and them becoming less popular overtime
- A reduction in the level of progressiveness of the tax and benefits system or a Regressive tax taking a larger percentage of income from low-income earners than from high-income earners.
- zero hour contracts results in underemployment.
Equity
Equity recognizes that each person has different circumstances and allocates the exact resources and opportunities needed to reach an equal outcome.
Equity focuses on equal outcome
Equality
Equality means each individual or group of people is given the same resources or opportunities
Equality focus on equal starts.
What is the cost of inequality in the UK
£39 billion per year
Many of the costs associated with inequality remain incalculable. For example, how does one value the higher level of community cohesion, trust, and social mobility associated with less unequal countries?
4 ways to solve poverty
- progressive taxes
- minimum wages
- Supply side policies (such as education)
- Increased benefits