Yr2 The Distribution of Income and Wealth: Poverty and Inequality

Question 1

PART 1

Answer 1

THE DISTRIBUTION OF WEALTH AND INCOME

Question 2

What is equality

Answer 2

all resources are shared equally

Question 3

What is equity

Answer 3

resources are allocated depending on peoples’ needs

Question 4

What does the Lorenz curve show? And what does the gap show?

Answer 4

The relationship between % income and the % of the population, compared to complete equality.

The gap shows the Gini coefficient

Question 5

What is the Gini Coefficient?

Answer 5

• ranged from 0 (inequality) to 1 (equality)
• shows the distribution of income of an economy
• UK = 0.4

Question 6

Why is inequality in the UK rising?

Answer 6

1. Increased benefits + decr taxes
2. Labour market wages increased
   - demand for skilled workers
   - outsourcing low skilled jobs to China
3. Institutional change
   - reduction in trade unions
4. Weaker regulation of top incomes

Question 7

PART 2

Answer 7

THE PROBLEM OF POVERTY

Question 8

Definition of absolute poverty

Answer 8

where a household income is insufficient to purchase the minimum bundle of goods and services regarded as necessary for survival

Question 9

Definition of relative poverty

Answer 9

where household income falls below 50% of the median adjusted disposable income

Question 10

Causes for inequality in the UK

Answer 10

• regressive taxation
• education
• geographical immobility
• inheritances
• discrimination
• differences in household composition

Question 11

PART 3

Answer 11

GOVERNMENT POLICIES TO ALLEVIATE POVERTY AND TO INFLUENCE THE DISTRIBUTION OF INCOME AND WEALTH

Question 12

Examples of alleviating poverty? (Ideas)

Answer 12

1. Reform the benefits system
2. Improve educational attainment
3. Improve job prospects
4. Improve incentives to work
5. Incr redistributive taxation
6. Promote economic development
7. Improve labour mobility
8. Greater supply side policies

Question 13

Policies to reduce inequality in the UK

Answer 13

1. Redistributive welfare transfers
   - higher child benefits + triple lock on state pension
   - expanded support for disadvantaged students paying tuition
   - public goods free at the point of consumption
   - minimum income scheme + capital endowments for people
2. Progressive income, consumption and wealth taxes
   - higher taxes on property
   - incr income tax allowances + higher marginal rate on incomes above £100,000
   - progressive consumption tax
3. Strengthening wage floors and employment rights in the labour market
   - National Living Wage + rising minimum wage
   - improved employment rights, affordable childcare, tackling monopsony employers
4. Tackling structural barriers to employment
   - early years education + more nutritional school meals to improve brain development
   - improved access to new technologies in disadvantaged communities
   - better vocational courses (STEM + coding)
   - targeted measures to address long term unemployment and hysteresis effects