macro 31 income distribution Flashcards
Define distribution of income?
How income is divided between the rich and poor, by region, age, gender, and between countries.
Define Income?
FLOW CONCEPT, measures the flow of money over a period of time.
How can income be earned by FOPs?
Land - rent.
Labour - wages/salary.
Capital - interest.
Enterprise - profit/dividends.
What is margaret thatcher known for?
- Privatisation.
- Switching to services.
- Cut the top rate of tax.
How has the distribution of income in the UK changed in recent years?
The income is being distributed more unequally. This has got to do with cutting the top rate of tax from 83% to 45%. Privatisation and deregulation has also meant income has flown disproportionately to the very wealthy.
How does the distribution of income vary by region and what are the reasons for this?
South is richer. North south divide. Deindustrialisation means the economy gets richer - higher skilled jobs will be in demand - they will be paid higher wages compared to manufacturing jobs.
how does UK’s inequality compare to other countries?
UK is more unequal compare to the OECD (30 developed countries)
Explain “Unequal holdings of wealth” as a reason why income inequality exists?
The rich have a low MPC and a high MPS. The money goes to investment and saving unlike lower income groups.
THOMAS PIKETTY - As long as the rate of growth of capital is greater than rate of growth of income, inequality will keep worsening.
Explain “structural unemployment and occupational immobility” as a reason why income inequality exists?
Deindustrialization lead to job losses in manufacturing in the north. The only jobs that they could is retail jobs which are low paying. The service sector demanded high skilled jobs like doctors and lawyers.
Explain “tax cuts” as a reason why income inequality exists?
Margaret thatcher cut the top rate of tax from 83% to 45%, benefitting the very rich. The basic rate was also cut but not to the same extent. The benefits of the tax cut went disproportionately to the rich.
Explain “decline in trade union power and the rise of flexible labour markets” as a reason why income inequality exists?
Trade union power was the strongest in the manufacturing sector in the 80’s. Deindustrialisation has meant that the UK has moved away to services where union density is lighter. This affects income inequality because the interest of workers are not represented by unions in these sectors, so the pay is generally lower.
Explain “productivity” as a reason why income inequality exists?
High costs for firms means firms may have to compromise on wages. This coupled with rising inflation in the last 5 years means inequality has risen (rising energy prices).
- Decline in productivity since the financial crisis.
Define wealth?
A stock of assets that have a financial value.
Is wealth or income more unequal in the uk?
Wealth.
How is wealth distributed in the UK?
- Men are more wealthy, but this is chaning.
- Older people have more wealth as assets were cheaper back then.
- Ethnic minorities are less wealthy. Chinese and Indians are better off.
- Top 1% own 20% of assets.
