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Redistribution of income
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Income is shared unequally in every country. Governments try to reduce poverty and inequality.
Key terms
Income inequality: differences in income between people or households.
Absolute poverty: not having enough income to meet basic needs such as food, shelter and clean water.
Relative poverty: having much less income than the average in a society, so a person cannot enjoy a normal standard of living there.
Absolute poverty: not having enough income to meet basic needs such as food, shelter and clean water.
Relative poverty: having much less income than the average in a society, so a person cannot enjoy a normal standard of living there.
Why reduce poverty and inequality?
So that everyone can meet basic needs.
To raise living standards across society.
Because many people believe extreme inequality is unfair (ethical reasons).
To raise living standards across society.
Because many people believe extreme inequality is unfair (ethical reasons).
Government policies
Progressive taxation: higher earners pay a higher percentage of their income in tax.
Benefits: payments to people on low incomes, unemployed people and others in need.
Investment in education and healthcare: gives poorer people better chances to earn more in future.
Benefits: payments to people on low incomes, unemployed people and others in need.
Investment in education and healthcare: gives poorer people better chances to earn more in future.
Tax is 10% on income up to £20 000 and 30% on income above that. How much tax does someone earning £30 000 pay?
- 10% of 20 000 = 2000
- 30% of 10 000 = 3000
- 2000 + 3000
Answer: £5000
Inequality is uneven income. Absolute poverty: cannot meet basic needs. Relative poverty: far below average income. Governments use progressive taxes, benefits and investment in education and healthcare.
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