The increase in income inequality

Income inequality has become more prevalent in today’s society, as in the 1970 the top 1% accounted for 10% of the national income in the UK but today its above 20% showing a dramatic increase in the high proportion of wealth amongst a small proportion of the population. Political policies are a factor which fuel this disproportionate concentration of wealth between the worlds population. A large factor in this occurring can be seen due to a powerful business not paying taxes at a rate even close to that of the middle class, therefore allowing the highly paid business owners to even further increase their income. Whereas it has been identified that the middle classes income has remained stagnated, causing the income difference to become even greater.

Another cause of income inequality is the skills and education workers have access to. Large wage premiums are accessible to those workers who have a high level of skills and education, with demand for these workers now increasing due to a rise in developing countries. As a result, the demand for these workers is now greater than the supply, meaning they can charge greater amounts causing an increase in income for the highly skilled workers. A solution to this issue may be to increase the accessibility of job training opportunities, therefore allowing a wide range of people including those with low levels of education to have access to these higher paying jobs.

Offshoring trade is another cause thought to be responsible for the rise in income inequality. Offshoring production involves a country moving production of a good to another country for a variety of reasons which could be for example to gain access to a cheaper pool of labour. This leads to a loss of jobs in the original country, causing a rise in unemployment. However, to prevent this a country could offer incentives for business to maintain the jobs within the country helping those of lower classes to keep a steady income.