2 Aims and Objectives Aim: Understand the distribution of income in the UKObjectives:Define distribution of incomeExplain measures of inequality: Lorenz Curve, Gini CoefficientAnalyse UK income inequalitiesEvaluate methods of government intervention
5 Distribution of Income Definition: how income is shared out between factors of productionMore equal than the distribution of wealth.Can be measured by factor of production, between households and between regions.Article
6 Measuring The Distribution of Income: Lorenz Curve A method of measuring the degree of inequality in the distribution of income and wealth is the Lorenz Curve.
7 Measuring The Distribution of Income: Lorenz Curve Horizontal axis = cumulative % of populationVertical axis = cumulative % of income earned45 degree line = perfect equality i.e. the bottom 40% of population earned 40% of income.The actual cumulative percentages are then plottedIf inequalities exist this line falls below the 45 degree line.The greater the inequality the further the curve will be below the 45 degree line.Which country is income distributed more unevenly?
8 Measuring The Distribution of Income: Gini Coefficient A statistical measure of the degree of inequality shown on the Lorenz curve is the Gini CoefficientRatio of the area between 45 degree line and the Lorenz curve divided by the total area below the 45 degree line.(a / a + b)Perfect equality ratio of 0Perfect inequality ratio of 1Closer it is to 1 the more unequal the distribution of incomeTrends in UK
9 The Distribution of Income: Inequalities Distribution has become more unequal in recent decades.Due to:Reduction in top rates of income taxPrivatisation lead to rise in executives payReal value of benefits such as Job Seekers Allowance fell% of single parent households not in work doubled between
10 The Distribution of Income: Inequalities Brainstorm in groups what you feel the causes of inequality between household income are.
11 Causes of Income Inequalities Between Households Free market would not provide benefits and inequalities would be largeGov intervenes to lessen these inequalitiesImpact of the StateWealthier household will be able to earn more through dividends and interest from their assets.Wealth InequalityDifferent households will have different numbers in employment.Household CompositionPeople with skills and qualifications will tend to earn more. These differ between households.Skills and QualificationsPart time workers earn less than full timeWhite earn more than black on average etcEarnings Differences
12 Government Intervention Brainstorm in groups methods of government intervention to influence wealth and income distribution in the UK.
13 Government Intervention Methods Progressive taxationTaxationMeans tested e.g. income support.Universal e.g. child benefitMonetary BenefitsProvision of education, health care to give all citizens equality of opportunity.Funded through taxationDirect Provision of Goods/ServicesNMW, anti discrimination policies.Legislation & Labour Market Policy