Economic Benefits of Inequality

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There are advantages and disadvantages related with inequality; economic benefits and social costs. Inequality has the advantage of creating and strengthening individuals incentives to better themselves in the working industry, which not only helps the individuals, but also boosts the economy. Inequality is not the same as poverty. Inequality is the difference of incomes among different people or households, whatever the levels of incomes. Poverty is having a low income. The Gini coefficient is a measure of inequality of a distribution. It is defined as a ratio with values between 0 and 1. If everyone had exactly the same income then it would be zero (perfect equality). If one household had all the income then it would be one (complete inequality). Inequality in economics encourages individuals to work more. The potential to earn higher incomes produces an incentive for workers to work longer and harder, however, workers will have to give up leisure time in order to gain more work. This will only occur when the extra income is more valuable than leisure time. Output will then be increased, and will boost the economy. Inequality also encourages the labour force to increase education and skill level. With more individuals seeking education to become qualified for better jobs, thus earning a better income and having a better living standard. With better qualified people, the unemployment rate will drop, productivity will improve and increase economic growth. Hence why we should make education more available for the country. When outcomes for unemployment were assessed, the improvement was not seen to the same extent across levels of educational attainment. Indigenous adults experienced an unemployment rate (15.1%), four times as high as non-Indigenous adults (3.8%) in 2008. Though, among adults with Year 12 or equivalent achievements, the unemployment rate for
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