The distribution of wealth and income

Distinction between wealth and income inequality

Wealth is defined as a stock of peoples assets, including property, material goods, private pension funds. Wealth inequality is an unequal distribution of these.

Income is money recieved on a regular basis, wages, dividends, rents. When income is unequally distributed across a nation, income inequality is said to exist.

Equality vs equity

Equality - each individual or group of people is given the same resources and opportunities.

Equity - fairness- each person has different circumstances, resources are allocated to take into account this, and gain equal outcomes.

Differeing views on inequality

It acts as a incentive to work hard and take risks. However income should be distributed equally due to people having similar needs.

Income and wealth relationship

Wealth can generate more income, such as rent on properties, dividends on shares…

Higher income allows people to build more wealth as they can buy assets.

The gini coefficient and Lorenz curve

0 means perfect equlity, 1 (or 100%) means perfect inequality. Gini coefficient is worked out as Area A/ Area A + B, from perfect equality line. More the line bulges out, the more uneven the distribution of income.

Causes of inequality

• Wage disparities

• Employment insecurity

• Educational disparities

• Housing market dynamic

• Financial assets and investments

• Tax policies

• Globalisation