Inequalities in the Distribution of Income and Wealth

Inequalities in the Distribution of Income and Wealth

1. INCOME= a flow of earnings to a factor of production over a period of time, e.g. wages (hourly/weekly) or salaries (monthly/yearly)

   • Someone with a particular sporting talent, e.g. a racing cyclist, could command a high income

2. WEALTH= a stock of owned assets, e.g. housing property or a portfolio of shares

   • The main source of wealth in the UK is still through inheritance

3. In a free market economy, an individual's ability to consume goods and services depends on INCOME and WEALTH

   • An unequal distribution of income and wealth may result in an unsatisfactory allocation of resources, this may be judged as unfair or inequitable
     • The relatively poor don't have access to the range of goods and services consumed by 'average' citizens
       • High inequality may also lead to alienation and encourage crime with wider negative consequences for society
         • A lack of fairness or equity in the distribution of income and wealth can be seen as a failure in the free market
           • The government aims to close the gap between rich and poor and make things more equal

4. When discussing inequality and poverty we can't escape making value judgements and normative statements

   • What constitutes 'unacceptable' distribution of income and what the governement should do about this is a political issue; people will have varying views
     • There is evidence however that high and rising levels of inequality of income and wealth can lead to negative social consequences i.e. external costs that affect the whole of society