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It does not take much imagination to see how an inequitable distribution of income will affect individuals.  Like unemployment, inequality can cause immeasurable distress to people.  It is worth taking the time to examine this problem from both ends of the spectrum.

The poorest people in society are said to be in the “first quintile”.  These people receive a very low percentage of the available income, and they own absolutely none of the wealth.  With no assets and a very low income base, people in the first quintile often find it difficult to organise their finances in such a way that their basic needs can be met.

The real impact of inequality can be summed up as follows – as people have different levels of income, they will also have different living standards.  Those who receive a higher income will have a higher standard of living than those who exist with lower incomes.  This will have flow on effects for the way in which low income earners live.  In extreme situations, those on lower incomes are statistically more likely to be involved in crime, to take illegal drugs, and to be in prison.  (It should be noted, however, that these problems are certainly not isolated to those in the first quintile.  Researchers have noted that although low income earners are more likely to have depression, high income earners are more likely to be diagnosed with depression.)

With such significant consequences, it is imperative that the government acts to overcome the problems that can arise from extreme inequality.  This is one area in which the two sides of government have very different views.  As such, your own opinion about this problem will help you to decide your own political leaning.  (As you read the following descriptions, keep in mind that these are very general statements – before you decide who to vote for, you should always look at the actual policies being offered by each party prior to each election.)

Liberal Party: The Liberal Party believes that people must be encouraged to work hard, and that the best way to encourage them is to make sure that they are rewarded for their efforts.  They believe that taxation should be as low as possible, and this means that there is not as much money available for welfare.  While people will be given a basic level of support through periods of unemployment, welfare is more likely to be set at a lower level under a Liberal government.  They are also likely to make it more difficult to access that welfare.

Labor Party: The Labor Party believes that all people should be supported through difficult periods of their life.  As such, they are more likely to set income tax rates at a slightly higher level.  This ensures that they have the necessary funds to provide relatively easy access to unemployment benefits and disability pensions.  Those who claim they need this support will still need to prove their eligibility, but they are more likely to be given access at a higher level, and for a longer period of time.

It follows, therefore, that the exact impact of inequality on government will vary depending on which party is in power at the time.  One thing is certain: neither party wants to be responsible for the breakdown of society.  As we know that inequality can lead to some terrible social problems, the government will always have some form of income redistribution in place.  We will explore the policy options use in Australia on the last page of this topic.

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