EconomicsNotes

    Income inequality arises when different consumers have different incomes, and different people have different talents. It could also arise because of the source of income or the value of the talents. For instance, employees might have different incomes from each other because of different marginal labour products, different factor returns to their labour, or different elasticities of labour. People might have different skills for which there is a greater or lesser need and employers, or the purchasers of labour might have different demands. Equally, entrepreneurs often take greater risks than others, and thereby expect and receive greater rewards than those who do not take risks. There might be different factor returns to capital or land, which result in various levels of profit, dividend, or rent, for those who do not live by the return to their labour value. A functional market would bring all these diverse groups together as suppliers and consumers and would matc...

  The idea of a wage gap is somewhat simplistic. It is undeniable that there is a gap in nominal terms between those who are not formally skilled and those with salaried jobs who hold professional qualifications. The development of the ‘precariat’ is something which tends to run against this idea. Many of those who are formally skilled are highly leveraged, and it is estimated, have so little in savings, and so much in housing, educational, and personal debt, that they are between one and two pay-days away from bankruptcy. Often, those who are skilled live in high-cost areas and rent, rather than own property, whereas some of those who are unskilled live in public housing or their family property with a much lower set of outgoings per month. In addition, many of those classed as unskilled are young, and are living with parents or relatives who can accommodate them. It follows that a wage gap predicated upon technological change which pushes out those in service positions, or wh...