Inequality Flashcards
What are the 2 types of inequality
Wealth and income inequality
What does income measure
The flow of money received each year
What is income inequality
When the best paid workers take home more income than the rest of the countries workers
What is the Lorenz curve
Measures income inequality across countries
What is the gini coefficient formula
G = A/(A+B)
What is wealth inequality
When wealth is shared unequally between a population
E.g
A study by Oxfam show that just 8 men in the world earn the same wealth as the poorer half of the worlds population combined.
Richest 32 million people have nearly 80% of America’s wealth, therefore the remaining 20% of the wealth is shared by 288 million people
Factors influencing inequality
Minimum wage rates
Assortative mating
Social benefits & tax
Inheritance
What is assortative mating
When talented, successful rich women get married to and have children with talented, successful rich men
How does minimum wage affect inequality?
An increase from £10.42 to £11.44 per hour for 21 and over in 2023 to 2024
Increases income of low paid workers. But will lead to an increase in labour costs for firms which reduces profit margins causing managers and CEO’s salaries to decreases. This will improve income equality.
Also can incentivise workers go enter the workforce and motivate workers causing labour productivity to increase.
How does inheritance tax affect your inequality
Social benefits and tax
Progressive income tax reduces inequality. As the rich pay a higher amount of their income to the gov, tax revenue increases, increasing government spending.
E.g the uk gov gives out £1.7bn to those who cannot find jobs and £160bn to elderly on gov pensions
This reduces income inequality as the poorest in society receive benefits
