In: Economics
Consider the impact of economic inequality for politics and society. What are some of the methods used to assess inequality? Prescribe a policy or set of policies that you think could be the most effective at ameliorating inequality, and why.
Economic Inequality
Economic inequality can be defined as the unequal distribution of
income and opportunity within different groups or individuals of
the population. The impact made by the inequality affects the
entire society and its functioning. Society may suffer from
unemployment, problems in public health, access to education,
happiness, level of consumption of social goods and the way they
are distributed, welfare problems and political inequalities of
difference in accessing the public systems etc. Also, most of the
problems arises due to inequality will affect only a group of
population and not everyone. That is how it defines as unequal
distribution. Economic inequality also pulls the economy back from
an efficient rate of growth. With high inequality, the ability of
the economy to perform better get reduces. Also, political impacts
include the inability of a group of the society to access
governmental resources and to have equal ability to be the part of
decision making for the public.
Gini coefficient, The Theil index and Hoover index are some methods
to analyze or measure income inequality. Gini coefficient is the
most accepted and widely used one to measure income inequality. A
numerical measure on income distribution is analyzed and observed
how and when it becomes unequal. Measuring the income distribution
over a whole society to the ratios measuring 0 -1. Zero measures
perfect equality and one measures perfect inequality.
Unequal distribution of income can be tackled by governments
spending on social security expenditure, efficient allocation of
public goods, transfer payments and through welfare activities.
Government charge high tax on higher income groups and redistribute
that to the lower ones. Health, public sector services which helps
the lower income groups can reduce the level of inequality.
Policies should be more of direct benefits rather than indirect
utilities from the allocations.