Essay by dreyazHigh School, 10th grade January 2008

download word file, 2 pages 3.0

•Income is the amount of funds or other benefits, flowing to individuals or households from the sale of factors over time.

•Wealth is the value of accumulated assets over time.

•Income inequality refers to the degree which income is unevenly distributed among people.

•Income distribution is measured through:* The Lorenz Curve – a representation of the degree of income inequality through a level of deviation of the distribution of income from a line of absolute equality amongst income earners.

* The Gini Co-efficient – a mathematical indicator if the degree of income in equality, represented by a number between 0 and 1, where the closer to 1 the greater the inequality.

TRENDS IN INCOME & WEALTH:•Varies according to age, gender, occupation, ethnic background, family structure & geography* Age: incomes rise until retirement – 45-55 yrs receive approx. 2.5x the income of 15-24 yrs* Gender: women receive 80% of men’s’ – P/T occupations* Occupation: Labourers (mean income $412) and managers & administrators ($1187) (2000).

* Ethnic Background: ability to speak English, skills & education.

* Family Structure: single parent familles vs. married coupled families* Geography: on average NSW ($482 p/w) and TAS ($391) (2000).

COSTS & BENEFITS OF INCOME INEQUALITY•Economic Benefits:* Encourage labour force to improve their education & skills – better rewards as incentive* Encourage workers to work longer hours – higher incomes and so higher EG* Encourage entrepreneurs to accept more risks – vital to increase productive capacity•Economic Costs:* Inequality can reduce EG* Reduces consumption & investment* Increased poverty & social problems are expensive to solve•Social Benefits* Very Limited•Social Costs* Social class divisions – rich doesn’t associate with poor* PovertyGOVERNMENT POLICIES TOWARDS INCOME INEQUALITY•Directly:* Fiscal Policy – through govt. taxation and spending, redistributes income amongst poor. Recent push in fiscal balance has led to a reduction of this* Changes To...