Income Distribution

Income Distribution

  • Both income and wealth are distributed unevenly in the UK
  • Wealth is more unevenly distributed
    • While one can survive without owning any assets (e.g. renting a house), one couldn’t survive without any income
  • Within an economy, distribution of income can be considered in terms of how income is shared out between:
    • The factors of production (functional distribution of income)
    • Between households (size distribution of income)
    • Between different regions (geographical distribution of income)

The Functional Distribution of Income

  • Income is the flow of money over a period of time
    • It can be earned by labour in the form of wages, by capital in the form of interest, by land in the form of rent and by entrepreneurs in the form of profit
    • Out of these, it is often wages that account for the largest percentage of total income.
  • People can also receive income in the form of state benefits

The Size Distribution of Income

  • This has become more unevenly distributed over time

The Geographical Distribution of Income

  • Income is unevenly distributed between regions of the UK
  • Causes of differences in the geographical distribution of income include the variation in:
    • Unemployment rates
    • The proportion of the population claiming benefits
    • The qualifications and the skills of the labour force
    • Industrial structure
    • Occupational structure
    • Living costs that give rise to differences in pay
  • There are also variations within regions
    • g. London on the whole has a high income per capital, but it also has some of the most deprived districts in the UK

Causes of Income Inequality Between Households

  • Unequal holdings of wealth
    • Wealth can generate income in the form of profit and interest, and so differentials in wealth cause differences in income
  • Differences in the composition of households
    • Some households have 2 adults in full-time employment, whereas others have no-one in employment
  • Differences in skills and qualifications
    • Those with high skills and qualifications are likely to be able to earn high incomes
  • Differences in educational opportunities
    • Those who have the opportunity to stay in education for longer are likely to increase their earning potential
  • Discrimination
    • The income of some groups is adversely affected by discrimination in the form of employment opportunities, promotion chances and pay
  • Differences in hours worked
    • Most full-time workers earn more than part-time workers, and those who work overtime earn more than those who work standard hours.