Economic and Social Costs of Inequality in Australia

Analyse the economic and social costs and benefits of inequality in distribution of income in Australia. Income inequality describes the extent to which income is distributed unevenly among residents of an area. High levels of inequality indicate that a small number of people receive most of the total income, and that most people receive only a small share of the total. There are many advantages and disadvantages associated with the inequitable distribution of income. Income inequality can lead to an increase in the productive capacity of resources and so an increase in real GDP per capita. Economic benefits are mainly derived from the incentive effects of inequality. Firstly, inequality encourages the labour force to increase†¦show more content†¦Class divisions can result in tensions between people and different regions. Wage disputes between workers and employers in which workers try to improve their income levels are a common cause of dispute. These divisions can sometimes lead to social and economic instability. As shown earlier, inequality leads to poverty problems but the facts have not been explored. Australia has a very high level of relative poverty with 12.2% of Australians living below the poverty line, defined as receiving an income below 50% of the median income level. Poverty tends to trap families into a vicious cycle of low incomes and limited economic opportunities. High poverty levels also tend to be associated with inc reased levels of crime, suicide, disease and reduced life expectancy. As you can see, there are many economic and social costs and benefits of inequality in the distribution of income but in general, having high levels of income inequality is bad for an economy and individuals so Australia has continually attempted to have relatively low levels of incomeShow MoreRelatedPotential Solutions For High Youth Unemployment1005 Words   |  5 Pageshigh levels of What are potential solutions for high youth unemployment in Australia be solved, and what are its implications on inequality for young Australians? I. Introduction High levels of unemployment have many negative effects, including rising inequality, which is a major issue in developed economies such as Australia (REF). Income, and wealth inequality are the two main types of inequality examined in economics. 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