Inequality Flashcards
Wealth inequality (2)
Wealth = Stock of assets
Inequality = Uneven distribution
Income inequality (2j
Money received on a regular basis
Unevenly distributed
Lorenz curve what (3+)
Shows distribution of income / wealth in a country
Used to:
Compare country overtime
Compare countries
What is perfect line of equality (3)
50% households earn 50% of income = example
45° angle
No income inequality
Lorenz curve - what does hanging curve represent
The further the curve “hangs below” the perfect line of equality, the greater the level of inequality
What is Gini coefficient
Gives a numerical value for inequality and is derived from the Lorenz curve
Gini coefficient number (4)
Between 0-1
0 = perfect equality = on the lien
1 = perfect inequality
A = between Perefct equality and curve
B = between curve and corner of diagram
Examples of Gini coefficients = application (3)
UK = 0.3 (2022) + 0.3 (2016)
Norway = 0.22 (2020) + 0.24 (2016) = lowest = 56% tax rate so reinvests in services
Russia = 0.64 (2020) + 0.4 (2016) = highest
Causes of income and wealth inequality - wages (4)
Zero hour contracts = underemployment + limits earnings
Lack of education = low skilled work pays less
Discrimination = even with equal pay laws
Crowded into proffesssion = women = nurses
Causes of income + wealth inequality - Welfare payments and taxes (3)
Doesn’t rise at dame level as wages
Inflation therefore leads to y inequality
Benefits have been capped/cut
What does gov do to ‘improve’ inequality (3)
January = reduced national insurance tax
Incomes increase but tax bands have stayed the same = pay more tax
Gov being sneaky
Causes of income and wealth inequality - unemployment
Left to rely on state benefits
Cause of income + wealth inequality - changes to tax system (4)
Over the last 2-3 decades the UK has switched towards indirect taxes = tend to be more regressive
The top income tax rate fell from 83% in 1979 to 40% 1988 (still there now)
Now there is an income tax rate of 45% on incomes above £150000
The basic income tax rate fell from 33% to 20%, which helps workers keep more income
However, the benefits of this disproportionately favour the richest households = increase income inequality
Recent tax falling
Inheritance tax
Cause of wealth + income inequality - inequalities between countries (4+)
Discrimination = women can’t go to school or be employed
Held back by wars, droughts, famines and earthquakes
Application = Africa = population issues are complicating efforts to reduce poverty and eliminate hunger
Their population of 1.1 billion is expected to double by 2050
What is Kuznetsk theory (4+)
As society moves from agriculture to industry it develops
Inequality within society increases since the wages of industrial workers rises faster than farmers
Wealth is then redistributed through government transfers and education
Essentially argues that inequality in poor countries is just a transitional phase and once nations become economically developed - inequality reduces
What does Thomas piketty argue against Kuznets (2)
In 2014 argued that the capitalist free market system inevitably leads to continued inequality
The rich get richer + poor poorer = inequality increases
What is capitalism
There is minimal government intervention and resources are distributed according to the market
Capitalism creates inequality (3+)
Monopolies = charge higher prices + lower wages = exploit
Higher wage reflects higher productivity in capitalist society = inequality
Inheritance
Capitalism improve equality (2)
Increase competition = increase efficiency
Work incentive = profit = create jobs and employment
Gov intervention support equality (3)
Inheritance tax
Public education
Regulation = stop monopolies exploiting
What is trickle down economics (2)
Capitalism should create trickle down economics
Profit should ‘trickle down’ = investment = spend more in economy etc
Why does trickle down economics not always work (3j
Only so much you can buy
People may hold in stocks and shares
Top 10% of people earn 90% of income wealth around the world
What is diminishing marginal utility (well-being)
Well-being rises with income but each extra dollar of income increases well-being less than the previous dollar
What is equality of outcome
To have income completely redistributed evenly
What is equality of opportunity (2)
Long term policy
Investment in services (education) to give people similar opportunities
Do your parents determine your wealth (2)
Studies show half the economic advantage someone’s parents have or don’t have is passed down
Known as intergenerational mobility
Useful statistics - income + race
White (US) = 8X income of a black person and 5x income of Hispanic person
Useful statistics - inheritance + race (2)
1 in 3 (US) white people have an inheritance
1 in 10 (US) blacks people have one
