distribution of income poverty and inequality

• What is the difference between income and wealth?

  • Income is the flow of money received by an individual or household in a period (e.g., wages, rent, interest, dividends).
  • Wealth is the stock of assets owned (e.g., property, savings, stocks, bonds). It represents accumulated resources.
• What are some key factors influencing the distribution of income and wealth?

  • Market factors (education, labour market conditions, capital ownership).
  • Social factors (family background, health).
  • Government policies (taxation, welfare, public services).
  • Globalization and technological change (impact on wages and job availability).
• What is the difference between equality and equity?

  • Equality means everyone receives the same amount of resources (statistical equality).
  • Equity means resources are distributed based on fairness and need (fairness-based).
• How is inequality measured using the Lorenz Curve and Gini Coefficient?

  • Lorenz Curve shows the cumulative distribution of income or wealth. A more bowed-out curve indicates greater inequality.
  • Gini Coefficient quantifies inequality: ranges from 0 (perfect equality) to 1 (perfect inequality).
• What are the benefits and costs of a more equal distribution of income

  • Benefits: Social stability, increased mobility, potential for growth.
  • Costs: Reduced incentives, lower capital accumulation.
• What are the benefits and costs of a more unequal distribution of income?

  • Benefits: Stronger incentives for innovation and hard work, efficiency.
  • Costs: Social unrest, poor health, and social outcomes.
• What is the difference between absolute and relative poverty?

  • Absolute Poverty is when individuals cannot meet basic life necessities (e.g., food, shelter).
  • Relative Poverty is when individuals are significantly poorer than the average in society, excluding them from standard living patterns.
• What are the main causes of poverty?

  • Economic Causes: Unemployment, low wages, economic structure changes.
  • Social Causes: Education, health issues, family structure.
  • Political Causes: Weak social safety nets, corruption.
• What are the effects of poverty on individuals and society?

  • Economic: Limited opportunities for investment, perpetuation of poverty.
  • Social: Worse health outcomes, higher crime rates, social exclusion.
• What government policies help influence income and wealth distribution?

  • Progressive Taxation: Taxes that increase as income increases.
  • Welfare Programs: Transfers like unemployment benefits, child benefits.
  • Minimum Wage Laws: Set a floor for wages to reduce low-income inequality.
  • Public Services: Subsidized healthcare, education, and housing.
• What are the economic consequences of redistributive policies?

  • Redistribution: Reduces inequality, improves well-being.
  • Work Incentives: Minimum wage and welfare may affect work incentives (e.g., higher taxes may reduce investment).
  • Economic Efficiency: Redistribution can reduce efficiency by lowering rewards for effort but may enhance human capital.
• How do moral and political perspectives influence views on redistribution?

  • Moral Arguments: Redistribution as a moral duty for fairness and justice.
  • Political Arguments: Left-wing supports redistribution, right-wing favors market forces and minimal government intervention.
• What are some of the social consequences of income inequality?

  • Higher crime rates (property crime, violent crime).
  • Health disparities: Inequality is linked to worse mental and physical health outcomes for lower-income groups.
  • Social exclusion: Those with lower incomes may be excluded from important social and economic opportunities.
• How does globalisation influence income distribution?

  • Increased wage disparity: High-skilled workers benefit from global markets, while low-skilled workers in certain sectors (e.g., manufacturing) face job losses or stagnant wages.
  • Income convergence: Globalization can reduce income disparities between countries, but often increases inequality within countries.
• How does technological change affect income distribution?

  • Job displacement: Automation and AI can replace low-skill jobs, leading to unemployment for certain workers.
  • Skill bias: Technological advancements typically benefit high-skilled workers, increasing income disparity between skilled and unskilled workers.
  • Capital accumulation: Owners of technology and capital (e.g., businesses) may see increased returns on investment.
• What is the "poverty trap"?

  • The poverty trap refers to a situation where individuals or families are stuck in poverty because they lack the resources or opportunities to escape it.
  • For example, low-income individuals may not be able to afford education or training that would help them earn higher wages, perpetuating the cycle of poverty.
• What role do inheritance and wealth accumulation play in income inequality?

  • Wealthy families can pass down assets (e.g., land, stocks) to the next generation, creating a wealth gap.
  • The accumulation of wealth over generations allows some families to have a significant advantage in terms of income generation and access to opportunities (e.g., better education, healthcare).
• What is the "Spoon-fed Theory" in terms of wealth distribution?

  The theory suggests that individuals born into wealthy families have advantages (e.g., inherited wealth, social connections, better education), which makes it easier for them to accumulate more wealth, perpetuating inequality.
• What is "structural unemployment"?

  • Structural unemployment occurs when there is a mismatch between the skills workers have and the jobs available.
  • Technological advances, changes in the economy, and globalization can lead to structural unemployment, often affecting lower-skilled workers.
• What is "cyclical unemployment"?

  Cyclical unemployment is unemployment that results from a downturn in the business cycle (e.g., during a recession), where demand for goods and services falls, leading to job cuts.
• How does education impact poverty?

  • Higher education levels are strongly correlated with higher lifetime earnings and lower risk of poverty.
  • Lack of access to quality education limits upward mobility, contributing to the perpetuation of poverty.
• What are the main governmental measures to combat poverty?

  • Welfare programs (e.g., unemployment benefits, housing assistance).
  • Progressive tax policies (higher taxes on the wealthy, lower taxes on low-income individuals).
  • Minimum wage laws to ensure workers earn a basic income.
  • Public services like free or subsidized education, healthcare, and housing.
• What is child poverty, and why is it a major concern?

  • Child poverty refers to children living in households with income levels below the poverty line.
  • It is a concern because it often leads to poorer health outcomes, lower educational attainment, and greater social exclusion, perpetuating the cycle of poverty into the next generation.
• How does poverty affect mental health?

  • Poverty is associated with higher levels of stress, anxiety, and depression due to financial instability, poor living conditions, and limited access to healthcare.
  • The lack of social mobility can also cause feelings of hopelessness and helplessness.
• What is the "dependency culture"?

  • The dependency culture refers to a belief that people living in poverty become reliant on government support (e.g., welfare) rather than seeking work or improving their situation.
  • Critics argue this creates a disincentive for individuals to improve their economic condition, although studies show most people in poverty would prefer to work if given the opportunity.
• What are social safety nets?

  • Social safety nets are government programs designed to protect people from falling into poverty, such as unemployment benefits, child allowances, housing subsidies, and disability benefits.
  • These programs provide temporary financial support during times of crisis (e.g., job loss, illness) and help maintain a minimum standard of living.
• How do universal basic income (UBI) programs work?

  • UBI involves giving every citizen a guaranteed, unconditional amount of money on a regular basis to meet basic living costs.
  • This approach aims to reduce poverty, increase economic stability, and provide everyone with a minimum standard of living.
• How does progressive taxation work to reduce inequality?

  • Progressive taxes are taxes that take a higher percentage of income from high-income earners than from low-income earners.
  • By redistributing income through higher taxes on the wealthy, the government can fund welfare programs and services that help reduce income inequality.
• What is the effect of a living wage policy?

  • A living wage policy sets the minimum wage at a level that allows workers to meet their basic living needs, including housing, food, and transportation.
  • It helps reduce poverty and income inequality, but critics argue it could lead to job losses or higher business costs.
• What is the economic argument against high taxes on the wealthy?

  • Critics argue that high taxes on the wealthy reduce incentives to invest, create jobs, and save, potentially slowing economic growth.
  • Some argue it discourages entrepreneurs and high earners from investing in business opportunities.
• How do cash transfers help reduce poverty?

  • Cash transfers are direct payments made to individuals or households, usually to low-income earners.
  • These transfers provide immediate financial support, helping recipients afford basic goods and services, reducing poverty in the short term.