Factors influencing Income inequality in the UK 【Essay范文】

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Introduction

Income inequality refers to the rift of disposable income between individuals or households. A host of social problems may be incurred by income inequality. For example, if there is a wide consensus among financially worse-off citizens that income distribution is unfair, they may vote for a populist government that pledge to tackle it, posing a threat to political stability for the country. This may also lead to an increase in criminal activities such as robbery. It is pointed out that the United Kingdom (UK) has a rather high level of income inequality ranking the fourth in terms of income disparities among European countries (Credit Suisse, 2016). This essay argues that there are various reasons accounting for income disparities in the UK and considering the dire consequences caused by income gap, a variety of solutions could be provided to tackle this issue. To justify it, this paper will first examine the reasons behind income inequality in the UK from the perspectives of education, employment and tax systems, followed by an analysis of possible ways in these aspects to handle it.

Factors Influencing Income Disparities in the UK

Education is one of the major elements that affect income disparities in the UK. Although everyone is entitled to have equal opportunity to be educated in the country, the type of education children have access to is to a large extent determined by the families they are born into. People from families with more disposable income would be able to receive a high quality of education in private schools where tuition fees are significantly higher than publicly funded schools. As a consequence of unequal quality of education, it is likely that people having received a degree from public schools may be unable to compete with their peers who have obtained more knowledge and skills from private schools in the competitive job market. Better job opportunities for better educated people could inevitably widen income distribution in the UK.

Employment is another crucial factor influencing the income gap in the UK. For instance, the employment is more services-oriented and the average pay is higher in London while it is more goods-oriented and the average salary is lower in northern England, which could cause income inequality between the two regions (Jenkins 1996, p.41). Besides, it is considered that white collar workers earn more than blue collar ones and lawyers definitely earn more than Zara workers. Income inequality could be further affected by the different level of commitment and motivation among individuals: people who put more efforts in their job may have more opportunities to promote higher pay. In addition, across the UK, the unemployment rate stood at 5% in 2016 (Office for National Statistics, 2017). Although the unemployment level is relatively low, the number of unemployed people is huge, contributing to the widening gap between the wealthy and the unemployed.

Taxation and government policies also play a part in unequal income distribution in the UK. The taxation system could hugely impact the wealth re-distribution in any nation (Sepulveda and Martinez-Vazquez, 2011, p.322). While the UK has adopted a regressive tax regime, financially worse-off people have been hit badly by the policy. Although the richest people in the UK make a greater contribution to the tax revenues for the UK government than the poorest, the richest pay a smaller proportion of their income in tax than their poorest counterparts and a huge proportion of the household income from the bottom of the society is spent on council tax. Apparently, this would further divide the two groups with regard to disposable income and enlarge the income inequality in the UK.

Solutions to Income Inequality in the UK

A high level of education equality could be a priority for the government so that income inequality would not be passed from previous generations to the next ones. The UK government should not merely stress the importance of equal educational opportunities for every child across the country, but they have to ensure that everyone receives a sound quality of education, irrespective of their race, ethnicity, gender and social class. More funding and non-financial support could be given to publicly funded schools to safeguard the quality of education for everyone. When people graduate with a degree and other qualifications from these schools, they would not find themselves in a dilemma where they are not able to compete with people privately educated. This could to some degree cut down income inequality if people are open to equal job opportunities with similar qualifications.

Improving employment opportunities for people should also be on the government’s agenda in order to promote income equality. Apart from education equality, there are other fields the government could focus on to boost employment opportunities for citizens. For a start, curbing unemployment rate could be sought through various channels. Additional job training could be offered to unskilled workers. Government policies aimed at narrowing down the average incomes with different sectors and regions could also be considered.

From the angle of tax policies, a tax shift from a regressive tax programme to a more progressive one since it would allow the UK government to intervene in the wealth re-distribution and steer the labour market to the right direction. Rich people would be taxed at a higher level in proportion to the high level of their disposal income while poorer people would be taxed at a lower level considering the low level of their income. This could also be supplemented with a benefits system for people with lower incomes. By doing so, the rift between the wealthy and poor could further shrink.

Conclusion

It can be seen that education, employment and taxation are all powerful factors affecting income inequality within the UK. In order to mitigate the repercussions of these respects on income equality, it is urgent that various measures concerning these fields are carefully planned out and implemented by the government. After all, equality is what any democracy aims for and income equality certainly is a major part for everyone to enjoy the benefits of the British democracy and the strong British economy.

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References

Credit Suisse (2016). GINI. Retrieved from

http://publications.credit-suisse.com/?referralUrl=http%3A%2F%2Fpublications%2Ecredit%2Dsuisse%2Ecom%2Findex%2Ecfm%2Fpublikationen%2Dshop%2F [accessed 10.07.2017].

Jenkins, S. P. (1996). Recent trends in the UK income distribution: What happened and why?. Oxford Review of Economic Policy, 12(1), 29-46.

Office for National Statistics (2017). Income Inequality. Retrieved from

https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonincomeinequality/1977tofinancialyearending2015 [accessed 10.07.2017].

Sepulveda, C. F., & Martinez-Vazquez, J. (2011). The consequences of fiscal decentralization on poverty and income equality. Environment and Planning C: Government and Policy, 29(2), 321-343.