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The Division of Wealth

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Acacia Hayles

on 28 February 2014

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Transcript of The Division of Wealth

Background Information
The division of wealth can also be described as the gap between rich and poor, income inequality, wealth disparity, or wealth and income differences.

The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries.

The issue of economic inequality involves equity, equality of outcome, equality of opportunity, and life expectancy.

The new findings show that the household wealth of the top 10% of the population stands at £853,000 and more – over 100 times higher than the wealth of the poorest 10%, which is £8,800 or below (a sum including cars and other possessions).

When the highest-paid workers, such as bankers and chief executives, are put into the equation, the division in wealth is even more stark, with individuals in the top 1% of the population each possessing total household wealth of £2.6m or more.

Other traditionally more egalitarian countries, such as Germany, Denmark and Sweden, have seen the gap between rich and poor expand from 5 to 1 in the 1980s, to 6 to 1 today.

In the United States inequality has increased further from already high levels.

Income inequality in OECD countries is at its highest level for the past half century. The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago.

When the rich countries trade with the poor countries. The people who have low skills and live in the rich countries may see a decrease in wages due to competition from the poor countries who's Labour is much cheaper. But at the same time the low skilled workers in the poor countries may see a rise in wages.

However trade only accounts for 5-15% of rising income inequality.

If there is high demand for workers in an area it forces wages to rise for those who have the educational skills required. However the problem is that those who are unable to afford the education generally receive a much lower wage compared to others.
Racial Discrimination
Compared with a white British Christian man with similar qualifications, age and occupation, Pakistani and Bangladeshi Muslim men and Black African Christian men have an income that is 13-21% lower. Nearly half of Bangladeshi and Pakistani households are in poverty.

Technological changes
Technological innovation and automation has meant that low skilled jobs have been replaced by machine labour within the rich nations. As a result there is now a minority of the workforce who are low skilled as they are in competition with those from poor developing countries.

Machine labour makes it cheaper for the producers in the long run as they will not have to provide workers with a wage, therefore their business makes more profit and they may be able to reduce the price of the good to increase the demand in the market.


The idea of the gender gap tries to explain differences in income between genders. Culture and religion are thought to play a role in creating inequality by either encouraging or discouraging wealth-acquiring behavior, and by providing a basis for discrimination.

Economic growth
There is a relationship between wealth inequality and economic growth.

'Inequality reduces growth in poor countries and promotes growth in rich ones.'

Economic growth is an increase in a country's productive capacity.. This could be due to:
Increase in the capital stock
Advances in technology
Improvement in the quality and level of literacy.

However wealth inequality constraints growth on some countries, but this depends on the proportion of the population who are out of work or earning under the average wage.

Health and education
Girls have better educational outcomes than boys at school and are more likely to enter higher education and achieve good degrees, but women's median hourly pay is 21% less than men's.

Higher rates of health and social problems (obesity, mental illness, homicides, teenage births, incarceration, child conflict, drug use), and lower rates of social goods (life expectancy, educational performance, trust among strangers, women's status, social mobility, even numbers of patents issued) in countries and states with higher inequality.

Increasing social inequality in Britain is at the root of rising levels of anti-social behavior, teenage pregnancy, violence and obesity, according to a University of Nottingham academic.

Extent of the divide
Extent of Wealth Inequality in the UK
What is "extreme poverty"?
Economists define it as an income of less than $1.25 per day.

The number of people in extreme poverty, according to the World Bank, has fallen from two billion in 1980 to just over one billion today. Though many people in the world still live on a very low income,
Background information

Extent of the divide

Is the practice of letting a person's sex unfairly become a factor when deciding who receives a job, promotion, or other employment benefit.

The existence of different genders, races and cultures within a society is also thought to contribute to economic inequality.
Increasing trade
By increasing trade there would be an increase in exports. Therefore employment may increase as there would be more jobs available for a variety of people, whether they are highly skilled or not.
However this depends on if companies chose to employ more people or just invest in new machinery/technology to decrease output costs in the long run.
Strengthen the social safety net
This includes:
Universal health care.
Minimize the connection between neighborhood and primary and secondary education funding.
Free education for at least four years of college.
Negative income tax that insures at least a subsistence level of income for everyone.

Example Questions
Factors which influence wage level are:
skills, specialist ability, risk, location.

Discuss the relative significance of each of these factors in relation to the distribution of wealth in UK society.

Answer 1
Discuss the relative significance of each of these factors in relation to the distribution of wealth in UK society.

Example Questions
Question 1
The richest fifth have nearly two thirds of the wealth. More startling is that the poorer half of us speak for just 9p in every £1 of privately held wealth.
The least wealthy half of households accounted for only 9 per cent of wealth, while the wealthiest 20 per cent of households had 62 per cent of total wealth.
Private household net wealth in Great Britain totaled £9 trillion in 2006/08 and nearly 80% of this is accumulated in property and private pension entitlements.

These families have fewer children, of whom the vast majority survive, get enough food and go to school. In fact, for the first time ever, the evidence suggests it is now possible for the last billion to also get out of the misery of extreme poverty in the next few decades. It will mainly be through their own hard work - but it will only happen if they receive, from their governments and from the world at large, the focused help they need to stay healthy, get educated and increase their productivity.
six out of seven billion are now out of extreme poverty and this is a critical change.
In reality, it means that a family cannot be sure from one day to the next that they will have enough to eat. Children have to work instead of going to school. Children die from easily preventable causes such as pneumonia, diarrhoea and malaria. And for women it means uncontrolled fertility and families of six or more children.
However if everyone is highly educated, there is an increase in the number of skilled workers available for work, therefore leading to a decrease in the price of skill labour costs.
Therefore a lack of education directly results in lower incomes.
Poverty affects crime because the lack of funds tend to make some people not all steal or rob. They will participate in some form of crime to get quick money.
One problem with crime is that high crime rate will drive businesses out of a neighborhood. This eliminates both availability of products and services and a source of jobs. which increases unemployment in the area.
Less education meant more criminal offenses ranging from property crime to “casual” theft and drug-related offenses (again, mostly theft)
Universal health care.
Minimize the connection between neighborhood and primary and secondary education funding and free education for at least four years of college.
Negative income tax that insures at least a subsistence level of income for everyone.
This is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.
Provide everyone with the same healthcare services. The NHS in the UK has meant that everyone, no matter how rich or poor is able to have access to free healthcare if required. By improving the health of everyone life expectancy would improve and the overall HDI for the country would increase.
This allows everyone to be entitled to an education. In the future this would help as education increases the number of qualifications an individual has, and they will be able to get a better qualified job in the future.
Technology has lead to increased global communications and a decrease in inequality worldwide as a large percentage of people have access to a certain level of technology. Developing countries in particular have got more up to date with the current technology by missing out some of the steps eg. telephones and have moved straight to mobile phones.

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