Social Inequality - Income and Wealth

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Social Inequality and Difference Emma Rudd
1A Income and Wealth
There has been a call for more attention to be given to the distribution of income and wealth.
People's income is usually regarded as the best measure of their economic wellbeing, since it
determines how much they are able to save and spend. Income is the flow of money a person (or
family or household) receives within a given period of time.
Sources of Income
Income from employment is the single most important component of household income. Other
sources of income include social benefits such as pensions and welfare benefits, investment
income and selfemployment. Of course the most common source of income varies according to
particular social groups.
Income Statistics
Most income statistics are flawed in some way or other:
Useful information is gathered from surveys such as the Family Resources Survey and
the British Household Panel Survey. But these household surveys do not cover the
whole population for example they miss people sleeping rough and people living in
institutions. Also people may under report their income this might be innocent or it might
be an attempt to avoid paying tax.
The New Earnings Survey is an annual survey, which asks employers to provide
information on the earnings of a sample of employees. But employees with earnings
below the income tax threshold (mainly women with part time jobs, and some young
people) are less likely to be included in this sample. Also the survey provides data on the
incomes of individual employees but it does not reveal their household income. Clearly
people's living standards are not just affected by their own income but also by the pooled
income of all members of the household.
Average incomes can be misleading. The average figure is boosted by the huge earnings
of small but extremely rich groups. This is why some researchers prefer to use the
median figure. With half of all earners falling below this point and half above this point.
The choice of time period is important. The income of a particular household may change
within a relatively short time span, as well as over a lifetime. People often smooth out
these income fluctuations by saving when their incomes are high and borrowing or
dipping into savings when incomes are low.
Income inequalities showed a slight narrowing from the 1950's to late 1970's as the
richest people lost some of their share income.
Society became much more unequal in the 1980's when there was a reversal of the
longterm trend towards income redistribution.
This growth in inequality slowed down a little in the early 1990's but then rose once more.
As a result at the beginning of the 21st centaury income inequality in Britain stood at a
record high.
It is true that the majority of the population have benefited from a rise in their real incomes and so
their absolute living standards have improved considerably over the last 50 years or so. But the
poorest groups have failed to close the income gap between themselves and the rest of society.
If anything the gap has widened.
Between 1979 and 1999 real incomes rose on average by 55% but those of the bottom
10th of the population rose by only 6% while those of the top 10th rose by 82%

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Social Inequality and Difference Emma Rudd
Social Benefits
These became less generous in the 1980's and 1990's. This was because the benefit levels
were linked to prices rather than wages, yet wages rose faster than prices. So the living
standards of those on benefits fell further behind those of wage earners.
Tax Cuts
The government's decision to cut income tax rates was especially beneficial to those earners
who previously paid `supertax'.…read more

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Social Inequality and Difference Emma Rudd
One method is to ask a sample of the population about their wealth. For example, the Family
Resources Survey provides data on things like people's estimated savings. But people may
not feel like revealing their personal details to sociologists and statisticians. Also surveys rely
on people telling the truth, but some individuals (especially rich ones) may wish to conceal
their true wealth in order to avoid paying taxes.…read more

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Social Inequality and Difference Emma Rudd
Furthermore `wealth' is sometimes illusory or precarious. In the early years of the 21st century
many people carry huge debt burdens (e.g. large mortgages, high credit card debt, car loans). A
spell of unemployment could easily plunge them into a crisis situation. People who are
approaching retirement face the prospect of declining state pensions, as many employers have
ended their final salary occupational pension schemes.…read more


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