Why does the government redistribute wealth?

What is equity?
Fairness, all citizens have the same oppertunities and chances in life.
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What is equality?
Equality of outcome in terms of income and wealth
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What is the Gini coefficient?
A measure of income inequality. A coefficient of 0 would mean income is shared equally between all individuals while a score of 1 means one person has all of the country's income.
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What is relative poverty?
Applies to people who don't have enough income to participate fully in society.
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What is absolute poverty?
Means not having enough income to provide the bare necessities and survive.
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What are the causes of poverty and in equality?
Scarce high skilled workers can negotiate higher pay but low skill workers can't,Unemployment,More part time poorly paid jobs,TU's have low wage barganing power,Benefits rise with inflation but wages can rise faster,Bonuses tned to go to high earners
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Describe the poverty cycle
Growing up in a poor family often means poor education on few qualifications so the only poorly paid jobs are accessible and the next generation experiences similar.
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What has happened to taxes in the 1980s and 90s?
Taxes have move away from progressive to regressive so there is increased burden on the poor through taxes like VAT and cigarette tax.
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What are the costs of poverty?
External costs include mental illness, reduced life expectancy, child mortality, drugs, crime, homicide rates, obesity.
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How much is child poverty estimated to cost the UK each year?
£25-40 billion
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What are the costs of poverty to individuals and families?
Poor quality housing and homelessness, Increased illness, lower life expectancy, mental health, limited access to quality education, sense of being trapped in a hopeless situation that saps motivation to work.
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What are the costs of poverty to society?
Loss of output where unemployment is the problem, Benefits payments, Social services costs, Teenage pregnancy, crime, vandalism
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What is the impact of poverty and inequality on businesses?
People with less income spend less so less demand,Mainstream businesses may suffer as those targeting the rich or poor thrive, low wages may attract some businesses, Poor education may deter businesses from investing in a particular location.
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What is the impact of poverty and inequality on the economy?
Social costs divert resources elsewhere, Political instability caused by increasing poverty and resentment of the wealthy can create uncertainty
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What is the poverty trap?
The situation where some one would be even poorer or not much richer if they had a job, because they would no longer receive financial help from the government.
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What policies reduce the poverty trap?
Reduce benefits to increase work incentives, Increase income tax threashold, Increase minimum wage, Make it harder to get sickness/disability benefit, Capping maximum benefits payed.
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What are the problems with reducing benefit payments?
Increases inequality and causes genuine harship for those who want to work when unemployment is high.
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What are the problems with increasing the income tax threashold?
Reduces the governments tax revenue
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What are the problems with increasing the minimum wage?
If set to high it may cause more unemployment as the cost for employers increases, May reduce competitivness.
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What are the problems with making it harder to get sickness or disability benefit?
Some people genuinely need these payments
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What are the problems with capping the maximum benefits paid?
May push large families into hardship.
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Other cards in this set

Card 2

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What is equality?

Back

Equality of outcome in terms of income and wealth

Card 3

Front

What is the Gini coefficient?

Back

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Card 4

Front

What is relative poverty?

Back

Preview of the front of card 4

Card 5

Front

What is absolute poverty?

Back

Preview of the front of card 5
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