Discuss whether the most effective way to have income and wealth equality is to tax income more progressively.
Income is a stable flow of money, often a salary, which someone works for but this can also be made through interest on savings. This flow of money is often very unequal from person to person due to wage differentials, this then creates inequality. Wealth on the other hand is a stock of assets which have a market value, which may change over time e.g. houses or cars. These are often inherited but can be bought by someone through their income. Wealth and income often found together however someone who is wealthy doesn’t always have a large income. Their relationship with inequality is also very different with a lot more inequality
…show more content…
One alternative system for reducing inequality is by providing incentives for people to get into work. This could be done by changing the minimum wage as it would reduce the replacement ratio. This can also be achieved by reducing the unemployment benefits or making them harder to get. Reducing benefits would also lower the budget deficit as the government can save money. However this could be hard on people who genuinely can’t work due to long term illness or disability. Another way of increasing the work force is by increasing spending on training of workers but also in the education system. This will create better skilled and qualified workers, allowing them to make more money and giving them more job opportunities. This type of supply side policy can be expensive but there should be future benefits as their will be more money made from income tax. They would also create job opportunities for teachers or other people to teach skills. Other examples of this include apprenticeships and part time work schemes that together should create a job for everyone, reducing the tax bill. However they won’t work for everyone as there is always someone who will be left behind and It may also be hard to change the mind set of people who are used to not working. These types of policies would also all stop inequality as the poorer people would have employment opportunities giving them a higher source of income.
However there are very little alternatives to