policies to redistribute income and wealth

• Government intervention in labor markets is often based on what principle?

  Equity
• What is the primary reason for government intervention in labor markets according to the text?

  To redistribute income and wealth
• What is the relationship between income and wealth?

  They are mutually reinforcing concepts
• Government intervention in labor markets to redistribute wealth is based on what kind of consideration?

  Normative
• What are the two main options governments have regarding taxation policies to redistribute wealth?

  Progressive income tax and reduced regressive taxes
• How does raising the tax-free allowance help the poor?

  It allows them to keep more income
• How does raising taxes on the rich aim to help the poor?

  Provides revenue for redistribution
• Which taxes take up a greater proportion of income from the poor than the rich?

  Regressive taxes
• What is one argument against making progressive income tax systems more progressive?

  Distorted incentives
• According to the text, why might raising tax rates on the rich result in less tax revenue collected?

  It reduces the incentive to earn
• What is one argument against reducing regressive taxes?

  Hit to government finances
• What are payments made by the government where there is no exchange of goods and services called?

  Transfer payments
• How do increased benefits or transfer payments help to redistribute income?

  By increasing the incomes of the poor
• What is a key characteristic of means-tested benefits?

  Benefits are taken away when incomes increase
• What is a key characteristic of universal benefits?

  Available regardless of need
• What is a significant risk associated with increasing means-tested benefits?

  Poverty trap
• What could be the impact on government finances if there is an increase in universal benefits?

  Greater fiscal impact
• Government intervention in labor markets is often based on what grounds?

  Equity
• How can minimum wages be used to impact labor markets?

  Boost wages of lowly paid workers
• Why do governments intervene in labor markets?

  To redistribute income and wealth, and reduce poverty
• What is the purpose of maximum wages?

  Control how much wages can increase
• High income is generally associated with what?

  High wealth
• What is a potential negative incentive of maximum wages?

  Reduced incentive to be productive
• Government intervention in labor markets is primarily based on what type of consideration?

  Normative
• What is a potential employment side effect of minimum wages?

  Unemployment targeting the youth
• How can anti-discrimination laws help reduce wage differentials?

  By promoting equal opportunities
• Government intervention regarding equity is based on what?

  Fairness or unfair outcomes
• How can stricter hiring and firing legislation help reduce income inequality?

  By making workers less redundant
• What are two options available to governments regarding taxation policies?

  Progressive income tax and reduce regressive taxes
• What is a potential problem with using legislation to address income inequality?

  Costly for businesses
• How can governments make progressive income tax systems more progressive?

  Taxing the rich more heavily
• How does raising the income tax-free allowance benefit the poor?

  They keep more of their income
• What is a potential consequence of costly legislations for businesses?

  Businesses may shut down
• What is the intended purpose of the government collecting more income tax revenue from the rich?

  Redistribute and provide for the poor
• What is government failure in the context of government intervention?

  Costs outweigh benefits
• What is the purpose of supply-side policies like government spending on education and training?

  Improve productivity
• What type of taxes take up a greater proportion of the income of the poor than of the rich?

  Regressive taxes
• How does government spending on healthcare potentially improve productivity?

  By keeping people healthy
• Name a very regressive tax.

  VAT
• What is a limitation of supply-side policies regarding income redistribution?

  They take a long time