Redistribution of Income

Income Equality

• Is the differences in income that exist between the different groups of earners in society, that is, the gap between the rich and the poor.

Can arise for many reasons such as…

• If there is a shortage of qualified laboured workers with natural talent, good education, valuable work experience, and who can offer labour in a market will earn more

• People who don’t work (pensioners) receive lower incomes than those in employment 

• The level of how the government redistributes income through taxes and welfare payments

• People who own assets such as property, shares and capital will enjoy additional income like rents, dividends and interest

Poverty

Absolute Poverty

• Where people do not have enough resources to meet all of their basic human needs. 

• People try to survive in an environment where their needs are not fully met

• Common in poor countries

Relative Poverty 

• Common in richer countries

• Poverty that is defined relative to existing living standards for the average individuals

There is no precise measurement, but they can

• measure the number of households whose total income us at a certain level below the median income for that country

  • Each country is likely to have different median income level

  • Equal distribution will lead to an alleviation of poverty

Reasons to reduce poverty…