Distribution+of+Income+and+Wealth

Distribution of Income and Wealth

//Trends in the distribution of income and wealth// //Income// Distribution of income is measured by ABS. It divided Australian population into equal 20% and calculated the mean income of the particular group. Equivalised disposable income household income adjust the income in different needs. - Small number of people have very high household income - Large number of people have relatively low income //Wealth// - Net worth of a household - Subtract household liabilities from household assets - Is more unequal than the distribution of income - Older household may have a high net worth but low net income Factors affect the distribution of income and wealth

// Measuring the distribution of income and wealth //

We construct the **Lorenz curve** by plotting the cumulative percentage of total income received (vertical axis) against the cumulative percentage of income recipient (horizontal axis)
 * // Measuring income inequality – the Lorenz curve //**


 * // Lorenz curve //**// – // is a graphical representation of income distribution. Plotting the cumulative increase in population against the cumulative increase in income.

The **gini coefficient** is a single statistic that summarizes the distribution of income across the population. It is calculated as the ratio of the area between the actual Lorenz curve and the line of equality and the total area under the line of equality.
 * // Measuring income inequality – the gini coefficient //**

Gini coefficient = __**A**__ The gini coefficient ranges between zero when all incomes are equal, and one when a single household receives all the income. Therefore, the smaller the gini coefficient, the more even the distribution of income.
 * A+B**

The Gini Co-efficient is the ratio of the area between the Lorenz curve and the 45-degree line to the whole area below the 45-degree line.

The process of measuring wealth is more complex than measuring income levels, and prior to the first release of comprehensive figures by the Bureau of Statistics in 2006; it relied on occasional surveys by other researchers.
 * // Measuring the distribution of wealth in Australia //**

The gini Co-efficient - This increase in income inequality in Australia is supported by ABS data that shows the **gini-coefficient for household disposable income on Australia has increased from 0.296 in 1995-9 to 0.319 in 2007 – 2008 despite a falling rate of unemployment.** - This is reflected in the shift of the Lorenz curve **further from the line of equality** - Australia has even greater disparities in wealth.
 * Updated statistics **


 * Sources of Income:**


 * Wages From the Sale of Labour**: such as salary and also includes non-wage like superannuation and workers' compensation payments (61.5%)
 * Rent From Land**: Consumers may own an investment property that generates rental income
 * Earning From Capital**: returns from the ownership of capital occurs indirectly through superannuation and other investment funds and through other ownership shares
 * Profit From The Sale of Entrepreneurial Skills**: business making profit through involving in small businesses
 * Transfer Payments:** these are received through social security or social welfare

- Unincorporated business income (profit) - 5.7% - Government pensions and allowances - 23.2% - Other income - 9.2%


 * Sources of wealth in Australia:**

The two largest components of household assets are property and superannuation, which account for most household assets in Australia.

However the main sources of wealth are:

- Land, houses, units - 57% - Business assets - factories, capital, shares - 28% - Consumer durables - cars, furniture, etc. - 6% - Government Securities - 3% - Investment overseas - 4% - Cash deposits - 1%

__**POLICIES FOR CHANGING THE DISTRIBUTION OF INCOME:**__

The __income__ inequality gap has been slightly bridged.
 * The gap has closed due to:
 * Tax cuts for low income earners
 * Encouraging long-term unemployed to work
 * Encouraging single parents to seek employment
 * One-off $500 to pensioners
 * $900 stimulus
 * Recent rise in minimum wages
 * Income tax cuts in **The New Tax System (2000)** – helped to reduce tax burden on all income groups, particularly low-income earners
 * 2008-09 Rudd Government: **Working Families Support Package** – designed to alleviate living pressures on families e.g. tax cuts, Child Care rebates, Education allowance
 * THEREFORE these **//fiscal policies//** have helped reduce the incidence of poverty traps