Increasing Gap between Wealthy and Poor †Myassignmenthelp.Com

Question: Explain On Increasing Gap between Wealthy and Poor? Answer: Introduction Gap between rich and poor keeps growing. Inequality it refers to the increase in economic gap among the groups and individuals within a society. In other words we can say it is the increase in the gap between rich and poor, rich are becoming richer and poor are becoming poorest (Harding 1997). Since the year 1980s Australia faced problem of wage disparities. Inequality in Australia took a lead after Global Recession which leads to large hike in the real incomes of the people. Inequality may lead to many problems for poor peoples for their livelihood or for survival they need money. This situation is not only in Australia but there are many other countries in which there is gap between wealthy and poor. Government should take some steps to reduce the problem which is faced by poor peoples. Increase in income inequality gap In Australia this gap is becoming wider day by day; the data shows how inequality is increasing: half of the income is received by top 20% of households and just 4% income is received by bottom 20%. We can clearly see the gap in income one group is getting almost half and other is getting only 4% (News 2016). There are some specific areas where we found inequality level is high such as NSW (0.42) is having highest inequality among the rich and poor in 2011, Second last is Tasmania (0.38) and then comes Northern Territory (0.40), where we will find the gap is increasing day by day. Gini co- efficient is the tool through which we can measure the statistical data or degree of variation in set of values in income inequality. Gini 0 shows that the total income of the Australia is distributed evenly in population of the region. So the above diagram shows the areas of Australia where inequality is on peak and it shows the data of 2011 and 2001. So we can see the comparison that the level of inequality increased in 2011. This data is based on the assumption saying that the 30% of families in the richest income bracket and rest on the middle and poor bracket (The conversation 2015). Role of income distribution for growth Income distribution is not only important for the poor peoples of Australia but it is also important for the growth of country. As per the study of IMF, we found that income inequality negative affects growth and its sustainability. We find an inverse relationship between the economic growth and incometax share accruing to rich (top 20%). If the income share of 20% increased by 1%, then GDP growth is 0.08% lower in the coming five years. This data shows that how inequality affects the growth the country. In Australia, there was an increase in inequality from 2011-2014 which left an impact on economy and it should that economy could cost up to $500 per person in the coming year 2019-2020. After this fact, it is suggested that government should take some steps to reduce inequality; otherwise it will cost Australia 3% of GDP in the next 25 years. The analysis conducted in Australia shows that between 2012 and 2014, Australians income shows an increment from 32%-33%. Government should ma ke changes in the policy which includes wage slabs for middle class and working class Australians and also to ensure that people reliant on government payments should get adequate income (Australian economy 2016). Impact of income inequality The impact of inequality in Australia became a major impact for the Australians. There are some of the impacts of inequality in Australia such as- Living standard, childrens education, technological change. Living standard: - With the increasing gap between the wealthy and poor there is gap in the living standard of peoples. With the good income rich people will live luxury life where they will get comfort and satisfaction on the other hand poor that is facing problem because with their salary they will be able to fulfill basic needs. So this creates a big gap between wealthy and poor (McDonald 2000). Childrens education: - People who are earning low will not be able to spend amount in their childrens education, on the hand people whose income slab is good will give good education to their childrens. Ultimately the output will be, youth who is passed out from good school or college will get good job and good income but others have to face income inequality problem again which shows that situation get repeated (Chapman 1997). Technological change: - With the update and changes in the technology company hire more employees with good skill. Company will give placement to good qualified candidates who have skills, not only this company can replace their old employees with the new qualified workers; those who will be able to cope up with the technological changes. This will lead to job security problem and unemployment for the workers (Jaumotte, Lall and Papageorgiou 2013). Income Inequality leads to competition Income Inequality plays a vital role in the competition between peoples. Many people believe that inequality in income is fair for the people who are skilled, getting good pay and unskilled people who are getting less pay. In a competition two people with different skills compete with each other and accordingly they will be entitled to get income (Kay and Thompson 1986). Suppose a person is having good skills for leading in company then he can think for good future ahead and might get leadership opportunity. On the other hand a person who is at learning phase trying to learn leadership skills will require time to show performance and skills to a company. This leads to competition between two of them and skilled person will get good income and other person has to wait for the next opportunity. Fairness among the peoples Income Inequality leads to fairness for the peoples who are working hard for the achievement. Some people might believe that people who are working with full dedication and trying to achieve target maximum should get good income than the others who are just completing work (Ellem, Baird, Lansbury and Cooper 2005). Suppose in an organization there is a target work in which they have a different slabs for income according to target. Person who is delivering 90% of target and who is delivering 95% of target, both are in same slab, so in this person who is trying hard and achieving 95% is not getting any extra amount for achieving 95%. This leads to clashes between the employees of the company and hence here income inequality is required to keep fairness in employees. Conclusion The analysis of the issue shows that Australia is facing gap between wealthy and poor. This gap is increasing day by day and people are facing problems for this, there is need of government to take some steps considering the current situation of the country they should make changes in the monetary policy, fiscal policy and taxation system which helps in reducing gap between peoples (Buchanan 1950). Income inequality situation is impacting not only Australia but the whole word is facing this situation. Considering the government effects for reducing the gap we can say that with the implementations of plan there will be a positive change. Doors will be open for the growth and development of the world, people standard of living will increase and hence education of youth will help to fill the remaining gap between the wealthy and poor. Inequality income gap not only brings change in the people life but also effects the GDP growth. References Australian economy, 2016, Rising inequality in Australia could cost 3% of GDP, study finds, viewed on 9th May 2017, viewed from https://www.theguardian.com/business/2016/aug/22/rising-inequality-in-australia-could-cost-3-of-gdp-study-finds Buchanan, J.M., 1950. Federalism and fiscal equity. The American Economic Review, 40(4), pp.583-599. Chapman, B., 1997. Conceptual issues and the Australian experience with income contingent charges for higher education. The Economic Journal, 107(442), pp.738-751. Ellem, B., Baird, M., Lansbury, R.D. and Cooper, R., 2005. Workchoices, myth-making at work:[Paper in: Whose Choices? Analysis of the Current Industrial Relations' Reforms'.]. Journal of Australian Political Economy, The, (56), p.13. Harding, A., 1997. The suffering middle: trends in income inequality in Australia, 1982 to 1993-94. Canberra: NATSEM. Jaumotte, F., Lall, S. and Papageorgiou, C., 2013. Rising income inequality: technology, or trade and financial globalization?. IMF Economic Review, 61(2), pp.271-309. Kay, J.A. and Thompson, D.J., 1986. Privatisation: a policy in search of a rationale. The economic journal, 96(381), pp.18-32. McDonald, P., 2000. Gender equity, social institutions and the future of fertility. Journal of population Research, 17(1), pp.1-16. News, 2016, Income inequality means were no longer the land of the middle class, viewed on 9th May 2017 from https://www.news.com.au/national/income-inequality-means-were-no-longer-the-land-of-the-middle-class/news-story/90821b0b0b013babd29d2ac4c5dfd304 The conversation, 2015, Rich and poor: which areas of Australia are most unequal?, viewed on 9th May 2017 from https://theconversation.com/rich-and-poor-which-areas-of-australia-are-most-unequal-42409