Wealth and Income Distribution (AQA A-Level Sociology): Revision Notes
Wealth and Income Distribution
Understanding wealth versus income
When examining how resources are spread across society, it's essential to distinguish between wealth and income as these represent different forms of economic resources that are distributed very unequally.
Understanding the difference between wealth and income is fundamental to analysing economic inequality. While these terms are often used interchangeably in everyday conversation, they represent distinctly different economic concepts with different patterns of distribution across society.
Wealth represents the total value of assets owned by a person or household. These assets include money, property, land, stocks and shares, and financial bonds. Wealth serves as a source of unearned income and tends to be much more concentrated among the upper social classes than income.
Income refers to the flow of resources received over time. Unlike wealth, which is a stock concept (what you own), income is a flow concept (what you receive).
Income consists of four main components that together determine a household's total income flow:
- Earned income from employment (including self-employment)
- Income from state support (benefits, tax credits, state pensions)
- Income from private pensions (occupational and personal pensions)
- Other income (interest from savings, rental income from property)
Distribution of wealth
Wealth distribution in the UK demonstrates extreme inequality. According to Ruth Lister (2004), wealth is considerably less evenly distributed than income and remains closely linked to social class patterns.
ONS measurement of wealth
The Office for National Statistics measures wealth through their Wealth and Assets Survey, dividing household wealth into four categories:
ONS Wealth Categories: The Four Types of Household Wealth
The ONS measures wealth comprehensively through these four distinct categories:
- Property wealth - including second homes and property to rent
- Physical wealth - household contents, cars, paintings, antiques
- Financial wealth - savings accounts, ISAs, shares
- Private pensions - accrued value of private and company pensions
UK wealth inequality
Personal wealth shows dramatic concentration among the wealthiest households. The richest 10% of families control £4.5 trillion, whilst the bottom 50% share just £1.0 trillion between them. This demonstrates how wealth accumulates at the top whilst many working and middle-class households may actually have negative wealth due to debts from mortgages, credit cards, or student loans.
The super-wealthy in Britain have experienced record wealth accumulation. By 2015, the Sunday Times Rich List required at least £100 million to qualify for the top 1000 wealthiest individuals. The combined wealth of these individuals reached £547 billion, with 117 billionaires recorded (compared to just 60 in 2005).
Many wealthy individuals achieve non-domicile status to reduce their tax obligations whilst living in Britain.
Global wealth inequality
Britain's wealth concentration reflects a worldwide trend. Oxfam research from 2015 revealed that the richest 1% of people globally owned 48% of total world wealth, leaving 52% to be shared among the remaining 99% of the adult population. If current trends continue, Oxfam projects that the top 1% will control more wealth than the remaining 99% by 2016.
Distribution of income
Income inequality in the UK has become increasingly stark over recent decades. Oxfam describes income inequality as a serious problem facing modern Britain.
Income inequality trends
Between 1993 and 2011, the incomes of the top 0.1% grew by 101%, nearly four times faster than the bottom 90% whose incomes grew by just 27%. In practical terms, the richest 0.1% saw weekly income increases of over £461 (equivalent to more than £24,000 annually), whilst the bottom 90% experienced increases of only £147 per year.
When accounting for inflation and living costs, income inequality becomes even more pronounced. Since 2003, 99% of the British public experienced a 12% real-terms drop in disposable income, whilst the richest 5% saw their disposable income increase.
Social wage
Income can be supplemented through the social wage - income provided in-kind through benefits that support family budgets. This includes housing benefit, free prescriptions, and free school meals. Research by Flaherty et al (2004) shows that many families view free school meal provision as valuable, enabling children to receive adequate nutrition when household budgets are stretched.
Living wage campaigns
To address in-work poverty, the national minimum wage was introduced in 1999, reaching £6.50 per hour by October 2014. However, the Living Wage Foundation argues this remains insufficient for basic living standards. They calculate a UK living wage of £7.65 per hour outside London (£8.80 in London), determined annually by the Centre for Research in Social Policy at Loughborough University.
Currently, more working households live in poverty than non-working ones, highlighting the inadequacy of minimum wage levels. This represents a significant shift in the nature of poverty from unemployment-related to employment-related poverty.
Global income inequality
Economic inequality extends far beyond the UK, with seven out of ten countries worldwide experiencing increased inequality over the past 30 years. Oxfam argues that this growing inequality enables wealthy individuals to influence government policy through political donations and lobbying, creating policies that favour high earners through measures like reduced taxes for the wealthy.
Key sociological perspectives
Ruth Lister (2004) emphasises that poverty remains one of the most urgent contemporary issues, stemming from unequal distribution of both wealth and income. She highlights how poverty particularly affects women and black and minority ethnic groups, demonstrating that economic inequality intersects with other forms of social disadvantage.
Contemporary research shows that Britain has become deeply divided, with the super-rich achieving unprecedented wealth whilst millions struggle with basic living costs. Growing numbers rely on food banks, yet the highest earners have received the largest tax reductions globally.
Remember!
Key Points to Remember:
- Wealth is accumulated assets whilst income is a flow of resources over time - wealth is much more unequally distributed than income
- The ONS measures four types of wealth: property, physical, financial, and private pensions
- Income inequality has dramatically increased since the 1990s - the top 0.1% experienced income growth four times faster than the bottom 90%
- The social wage supplements monetary income through benefits like free school meals and housing support
- Living wage campaigns highlight inadequacies in minimum wage levels - more working households now live in poverty than non-working ones