Advantages of income inequality
- It promotes individual initiative and hard work in bid for the poor to earn a living.
- Entrepreneurs require rewards. Inequality is necessary to encourage entrepreneurs to take risks and set up a new business. Without the prospect of substantial rewards, there would be little incentive to take risks and invest in new business opportunities.
- Trickledown effect. If some people gain extra income, then this can ‘trickle down’ to other people, e.g. if an entrepreneur sets up a business he may become a millionaire, but also will create jobs and provide incomes for other workers. There may be a gap between the highest and lowest earners. But, the lowest earners are still better off than without the entrepreneur.
- Fairness. It can be argued that people deserve to keep higher incomes if their skills merit it. If a top footballer gets paid £100,000 a week, this is a reflection that people are willing to pay that kind of money to watch him.
- Improvement of relationship such as between employer and employee to promote production
- Encourages labour mobility. Geographical mobility is search of of an increase in income
- Stimulates government effort to adopt policies that alleviate poverty.
- Promotes harmony and respect in society. Poor respect the rich.
- Promotes creativity and innovativeness in peoples’ struggle to become rich
- Leads to progressive tax and ability of the government to obtain taxes for infrastructural development.
- Provide employment opportunities when the rich invest
CATEGORIES Economics
TAGS Dr. Bbosa Science
