The Distribution of Income and Wealth: Poverty and Inequality

Question 1

Income

Answer 1

Money received on a regular basis

Question 2

Wealth

Answer 2

a stock of assets, such as a house, shares, land, cars and savings

Question 3

Factors influencing the distribution of income and wealth

Answer 3

1. Education/ skill level
2. Welfare payments and taxes
3. Unemployment
4. Changes to UK tax system - indirect tax is more regressive
5. Level of discrimination

Question 4

Equality

Answer 4

equal distribution of wealth and income in society, so that everyone has the same income.

Question 5

Equity

Answer 5

refers to fairness, or what is considered to be an acceptable distribution of
income and wealth in society. This could be subjective.

Question 6

Gini Coefficient

Answer 6

A / A+B

A value of 0 indicates perfect equality, so everyone has the same income and wealth.
A value of 1 is perfect inequality i.e. all of the wealth in the country is concentrated
in the hands of one individual or household.

Question 7

The likely benefits and costs of more equal and more unequal distributions

Answer 7

Benefits of greater equality:
- greater social cohesion
- higher social mobility
- improved economic stability
- decreased poverty rates.

Costs of greater equality:
- diminished incentives for innovation
- reduced entrepreneurship
- productivity losses as harder working people get compensated less

Question 8

Relative poverty

Answer 8

measured by comparison to the average in the country. In the UK, those
with below 60% of the median income are considered to be in relative poverty.

Question 9

Absolute poverty

Answer 9

Absolute poverty is defined as living below subsistence. This means that the person is
unable to meet their basic needs of food, clean water, sanitation, health, shelter and
education. The World Bank uses a measurement based on the number of people living on less than $1.25 per day.

Question 10

Causes of poverty

Answer 10

• Lack of education/ skill
• Unemployment and low wages
• Inadequate social safety nets
• Discrimination and inequality
• Economics factors

Question 11

Effects of poverty

Answer 11

• Health and wellbeing
• Education and skill gap
• Social exclusion (Prejudice)
• Low economic growth rates
• Crime and social unrest

Question 12

Income redistribution policies

Answer 12

• Progressive tax
• Social Welfare Programs and State Provision
• Minimum Wage Legislation

Question 13

Wealth distribution policies

Answer 13

• Land Reform
• Inheritance and Estate Taxes

Question 14

Consequences of introducing wealth and income policies

Answer 14

• Economic Growth and Productivity
• Fiscal Considerations (costs a lot of money to implement, difficult to balance)