income and wealth AOS 2

earned income

comes from households selling their labour/ supplying intellectual or physical talents to businesses

unearned income

received for allowing others to use your property or savings includes rent and interest

transfer income

a one way transaction from govt to individuals with nothing in return, derived from govt welfare payments

fringe benefits

a special non-monetary reward given to a selected employee by an employer in lieu of income, eg free house, company car

gross income

sum of all income received by an individual from various sources before the taxes

disposable income

the income of a person from all sources including govt welfare after the payment of taxes

social wage income

disposable income plus the value of additional govt services such as health care

nominal income

number of dollars of income received by an individual measured over a period of time

real income

nominal income after taking into account the inflation or deflation rate in consumer prices

wealth

a stock of assets or things of value owned by private individuals or govts measured at a point in time

private wealth

the value of property, houses, shares, bonds, savings, superannuation contribution antiques or collectables

govt/public wealth

land, buildings, equipment/other infrastructure associated with the provision of collective public services such as power, transport, health, education

Gini coefficient

is a number between 1 and 0 where 0 is perfect equality, and 1 is perfect inequality

absolute poverty

serious material deprivation and the absence of the real necessities to sustain life 

relative poverty

where material living standards are low compared with the rest of the community

what happens when demand for labour is high but supply is low

influx of high paying jobs

what happens when supply for labour is high but demand is low

influx of low paying jobs

some causes of income inequality

• unemployment/ reduced hours of work

• ownership/ inheritance of wealth

• personal influences (age, inflation, overseas economic conditions, growth of technology)

employee income and wealth perspective

might feel wages too low and profits are to high allowing business owners to live a prosperous life they can only dream of

business owner income and wealth perspective

would like to pay staff less to cut cost, improve international competitiveness

consumer income and wealth perspective

they like cheap goods even if it requires depressing wages and profits

govt income and wealth perspectives

they realise it isn’t possible to keep everyone happy as for example cutting taxes for one group, reduces funds available for other purposes

negative effects on inequality

• affects educational outcomes

• divides society

• increase economic instability

positive effects of inequality 

• increased incentive to work hard and gain improved skills