ISSUE WITH INEQUALITY
- Weak demand in goods and services
- Consumption levels are dependent on wages of those in lower/middle end of income scale rather than profits of the wealthy
- Household debt
- With stagnant wages, households rely increasingly on debt to maintain lifestyle – loans easier to get
- Wealth concentration
- Wealth at top of income scale increases risky financial speculation (Wall Street Crash)
- Poverty increases
- Expensive to deal with/solve inequality (benefits)
IMPACT ON INDIVIDUALS (poorer end affected more)
- Lower aspirations
- Poorer health
- Social immobility
- Cannot participate in society
- Lower life expectancy
- Lower educational attainment
IMPACT OF INEQUALITY ON FIRMS
- Pattern of demand alters for mainstream businesses. Those targeting rich or poor survive whilst others suffer from less demand.
- Low income groups have less disposable income (will spend less) so sales are affected.
- Businesses may take advantage of increasing inequality e.g. zero-hour contracts (so have lower costs) to cope with flexible demand
- Harder to recruit skilled employees in some areas due to polarisation of poor citizens (possible skills shortages)
IMPACT OF INEQUALITY ON THE ECONOMY
- Loss of output due to low productivity and employment
- Loss of talent – poorer children may not go to university and have less opportunities
- People unable to save – vulnerable population
- Lower economic growth – mainstream businesses especially
- Increased cost to health services (and Gov. have opportunity cost) due to poor living/working conditions
- Minority of rich people influence decisions
LINK BETWEEN LOW PRODUCTIVITY AND INCOME
- Employees less motivated and productive (less skilled/low-paid)
- Higher absenteeism
- Higher labour turnover and poor customer service