social class inequalities in wealth Flashcards
1
Q
what are social class inequalities in wealth?
A
- income is often described as a flow concept because income flows in and out of the pockets of people or households
- wealth on the other hand is a stock concept
- it measures the economic resources and possessions of a person or household at a fixed point in time
2
Q
what did the ONS (2012) say about social class inequalities?
A
- property wealth such as households and land: housing accounts for about 81% of total net worth in the UK
- physical wealth: this would include any valuable asses such as cars, jewellery etc.
- financial wealth: this is wealth in the form of money such as bank accounts, savings and investments in shares etc.
- private pension wealth: this is the cash value of what an individual has accumulated in their pension fund
3
Q
what are the sources of data on wealth?
A
- the ONS bases its estimates of the distribution of wealth on the wealth and asset survey
- this has the merit of being large scale national survey backed by the government
- in 2012, the annual Sunday Times Rich List suggests that the richest 200 families had between them total wealth averaging £225 billion between 2008 and 2010 an average of more than £1 billion each
- Hills (2013) suggests that the Sunday times list is probably better at capturing business assets but the ONS data probably gives better coverage of assets such as pensions
4
Q
what are problems with measuring wealth?
A
- not straightforward
- difficult to measure assets
- difficult to measure wealth
- hard to distinguish wealth and income
- businesses are owned by institutions
5
Q
what is the evaluation of the distribution of wealth?
A
- wealth is much more unequally distributed than income in the UK
- It would be very difficult to survive in the UK today with no income but a large proportion of the population has little or no wealth
- he poorest 50% of the population have only 10% of the wealth of the UK between them and the poorest 10% of the wealth of the UK between them and the poorest 10% have virtually no wealth at all, with many people being in a state of negative wealth, such as those with debts that are greater than their assets
6
Q
what did the Birmingham commission report (2013) say about the distribution of wealth?
A
- wealth inequalities occur in different ways, some people have higher incomes than others, some choose to accumulate wealth rather then spend, some receive higher levels of inheritance/ lifetime gifts from parents and some invest in housing or other assets just before they increase substantially in value
- wealth affects physical and mental wellbeing as well as education and employment opportunities, it has also been argued that wealthy people become insulated from the lives of others, leading to a divide between rich and poor, the ability of wealthy people to gain greater political influence is a potential threat to democratic process
- low levels of income reduce the ability to avoid debt and/or accumulate savings, levels of problem debt have been increasing in recent years and look set to increase still further
- those in the middle of the wealth distribution tend to have some housing and pension wealth or the ability o accumulate some, however there are a number of difficulties facing this group, for example young people may struggle to get a foot on the housing ladder, older home owners may find it difficult to access some of their housing wealth to maintain or increase their living standards, particularly retirement
- those at the very top of the income distribution have seen huge increases in their incomes in recent decades, which have subsequently fed through into wealth inequalities, those on high incomes are also much more likely to receive an inheritance and/or lifetime gift, and much more likely to receive one of high value
7
Q
are wealth inequalities based on age or class?
A
- critics of this kind of analysis argue that inequalities of wealth are more related to age than social class
- people tend to accumulate wealth as they get older
- for most middle income earners, their major sources of wealth are likely to be their homes and their pensions, in both cases, the value of these tends to increase as people approach retirement
8
Q
are wealth inequalities based in meritocracy?
A
- it can also be argued that inequalities of wealth represents a meritocracy
- in other words, people with talent and those who save their money or invest prudently are rewarded by building up more wealth
- Entrepreneurs such as Lord Alan Sugar, who came from a working class background and built up a business empire based on his company Amstrad are often cited as an example of people who built up considerable wealth based on their own merits
9
Q
what did Atkinson (2013) say about wealth inequalities based on meritocracy?
A
- Atkinson however reveals than an increasing proportion of national income now comes from inherited wealth, reversing a long term decline in the importance of inherited wealth, reversing a long term decline in the importance of inherited wealth going back at lest as far as the 19th century
- before the 1st world war total transmitted wealth going back at least as far as the 19th century
- before the 1st world war, total transmitted wealth represented some 20% of the national income
- this radially fell to around 10% after the 2nd world war, eventually dipping below 5% in the late 1970s
- since then the long term trend has been reserved with a rise from 4.8% in 1977 to 8.2% in 2006
- this suggests that inequalities of wealth do not simply result from differences in talent between individuals as an increasing proportion of people simply inherit wealth that their parents accumulated
10
Q
how is the fact that measuring wealth is not straightforward a weakness?
A
-defining what should be counted as wealth is not straightforward, for example, should state pensions be included as well as private pensions?
11
Q
how is the fact that measuring assets is difficult a weakness of measuring wealth?
A
- calculating the value of assets is difficult
- for example the value of a persons home may change rapidly if house prices are rising or falling quickly
12
Q
how is the fact that measuring wealth is difficult a weakness?
A
- obtaining data about wealth is not easy
- wealthy people are often careful to conceal their wealth in order to avoid taxation
- very wealthy people often have assets in different countries so it is difficult to track what they actually own
13
Q
how is the fact that distinguishing wealth from income a weakness of measuring wealth?
A
- distinguishing wealth from income can be difficult
- one example of this is capital gains
- a person may receive a gift of money or property from a relative or friend
- this will be taxed as income and subject to capital gains tax but could also be seen as a form of wealth if the person chooses to hold on to the money or other asset that they have acquired
14
Q
how is the fact that most businesses are owned by institutions a weakness of measuring wealth?
A
- much of the wealth in the form of shares in businesses in the UK is now owned by institutions such as pension funds, banks and insurance companies rather than private individuals
- this means tat while individuals may indirectly own a share in a company
- for example because their pension fund has invested in it they may have very little control over how that money is invested
15
Q
how does the Birmingham commission support the idea that wealth inequalities are based on age or class?
A
- this is to some extent supported by the Birmingham Commission
- they found a clear link between 2wealth and age, with those in the 55-64 age group having the highest level of wealth
- however there is considerable inequality within this age group
- the poorest 10th have less than £28,000 of wealth on average compared with the top 10th who have more than £1.3 million
- this reflects the fact that those on higher and middle incomes have much more chance to accumulate wealth than those on lower incomes
