Fair Distribution of Income – GCSE Economics OCR Revision

Understanding Fair Distribution of Income

Fair Distribution of Income refers to an equitable distribution of a country’s total income among its citizens.
Income inequality is present when income is distributed unevenly among the population.
The Gini Coefficient is a measurement used to express income distribution, ranging from 0 (perfect equality) to 1 (complete inequality).

Different skills and qualifications lead to different wage levels. High demand for specific skills or qualifications often leads to higher income.
Inheritance and wealth can contribute to income inequality, as individuals inheriting wealth often have higher income and wealth than others.
Discrimination against gender, race, religion, or other factors can impact income levels.
Government policies such as taxes and benefits play a key role in income distribution.

Social tension and instability may arise due to high-income inequality.
Reduced economic growth because the poor struggle to invest in their education or start businesses due to a lack of capital.
Health problems and lower life expectancy may be experienced in societies with high income inequality.

Progressive taxation: Higher tax rates for high-income earners can help redistribute wealth.
Welfare benefits and income support: These measures can provide income to the most vulnerable.
Minimum wage laws: A statutory minimum wage ensures that low-paid workers earn a basic income.
Investment in education: Education provides individuals with the skills they need to increase their income.

A completely equal income distribution is neither feasible nor desirable since rewards should differ to incent hard work and initiative.
However, it is generally agreed upon that the current levels of income inequality in many countries is too high.
Governments need to balance the aims of encouraging enterprise and rewarding hard work with the need for fairness in society.