30 - Redistribution of income

Income inequality

Differences in income that exist between the different groups of earners in society (the gap between the rich and poor)

Reasons for low income

Little education

No work

No assets owned

Gov redistribution of income

Reasons to reduce poverty and inequality

Meet basic human needs

Raise living standards

Ethical reasons

Lorenz curve

Graphical representation of the degree of income or wealth inequality in a country

Describe lorenz curve

y axis = income (cumulative%)

x axis = Population (cumulative%)

Hypothetical line (perfectly equal)

Realistic line

Distance between graphs = inequality

Absolute poverty

Where people do not have enough resources to meet all of their basic human needs

Relative property

Poverty that is defined relative to existing living standards for the average individual

Gov intervention to reduce poverty + income inequality

Benefit payments

Investment in education and health care

Progressive/Regressive taxation

Progressive taxation

Where the proportion of income paid in tax rises as the income of the taxpayer rises (burden of taxation heavy on rich)

Regressive taxation

tax system that places the burden of the tax more heavily on the poor