Income & Wealth Distribution (AQA A Level Economics)

Human capital

• The higher the skill level, the higher the level of income
• A country with a poor education system will see greater inequality than one with a good education system

Inequality of opportunity

• Access to education and health can vary significantly within communities and between different regions
• Inequality in education and healthcare leads to inequality of opportunity in the job market

Assets

• Assets generate income and increase in value
• These assets are then passed on to the next generation through inheritance or gifts, widening wealth disparities 

Discrimination

• Gender, race or any other discrimination increases income inequality in an economy

Unequal power

• Countries with strong trade union membership provides workers with more power and higher levels of income
• With low trade union membership, the exploitation of workers through low wages is easier and income inequality is worse

Government policies

• Countries that provide a range of benefits (such as unemployment, pension, disability, child support, housing support, etc) raise the income of the lowest 20% of the population, resulting in more equal distribution
• Progressive tax systems allow all income earners to contribute to public revenue according to their ability
• Decreasing taxes on the lower end and increasing it on the upper end would mean that the system is more progressive and there would be a more equal distribution of income

Globalisation

• Globalisation is the economic integration of different countries through increasing freedoms in the cross-border movement of people, goods/services, technology and finance
• This integration of global economies has impacted national cultures, spread ideas, speeded up industrialisation in developing nations and led to de-industrialisation in developed nations
• Countries which are more isolated will experience higher levels of wealth and income inequality

Market based supply-side policies

• Supply-side policies such as deregulation, privatisation and trade liberalisation can provide great opportunities but also increase inequality
• E.g. Privatisation of state owned assets often allows a few people to get rich (those who buy the asset), however, the service provided by the newly privatised firm may become more expensive to access