Policies to reduce poverty and income/wealth inequality

progressive tax, transfer payments, gov provision, min wage, financial assistance, promoting employment opportunities

Policies to reduce poverty and income/wealth inequality…

disincentivise work if too high; move assets abroad reducing revenue

Disadvantage of Progressive tax

UK income tax has higher rates for high earners(40% and 45% rate bands); capital gains and inheritance tax reduce wealth concentration

AO2: progressive tax

transfer paymetns

payments by gov to individuals without current production taking place, increasing income of low income households raising affordability for necessities and consumption

UK department for work and pensions administers Universal Credit for unemployed and low-paid workers, e.g. Child benefit

AO2: transfer payments

NHS; state schools; social housing lowers accomodation costs

AO2: Direct Gov provisions

needs high gov spending and tax

disadvantages of gov provisions and transfer payments

Min wage

• Minimum wage = legal minimum wage rate (price floor for labour)

• Raises incomes of lowest-paid → reduces in-work poverty

• Increases disposable income → improves living standards + potential savings

• Reduces reliance on welfare benefits → lowers government spending

national living wage

AO2: minimum wage

if set above labour productivity may lead to job losses — more inquality

AO4: Min wage

subsidies and financial assistance

• Subsidies = government payments to reduce costs

• Lower cost of essentials → increase real income (especially for poorest)

• Helps households:

  • Afford necessities

  • Avoid debt

  • Build small savings → reduce wealth inequality

Housing Benefit / Universal Credit, Energy support schemes in UK

AO2: subsidies and financial assistance

Risk of dependency, gov failure, costly for gov

AO4: subsidies and financial assistance

promoting employment opportunities

• Aim: increase employment + skills

• Employment = key way to reduce poverty (provides stable income)

• Policies include:

  • Training schemes

  • Apprenticeships

  • Job search support

  • Regional development

UK Jobcentre Plus and Apprenticeships

AO2: promoting employment opportunities

Availability of jobs; Skills match (structural unemployment)

AO4: promoting employment opportunities