Why do some households earn ten times as much as others? The guide lists eight causes.
Why some earn far more than others
Unequal opportunity
Where you are born and to whom shapes your chances.
Owning resources
Owners of land, shares and property earn rent, profit and interest.
Human capital
Fewer skills and less schooling mean lower wages.
Discrimination
Women or minorities may be paid less or passed over.
Status and power
Powerful firms and groups capture a bigger share.
Taxes and benefits
Regressive taxes or small benefits leave the gap wide.
Globalisation and technology
Skilled workers gain; routine jobs move or vanish.
Market-based supply-side policy
Weaker unions and deregulation can hold wages down.
The points to remember
- Explain a cause in one sentence: "Workers with fewer skills earn lower wages, so the gap between high and low earners widens."
- In a data question, say which way the distribution moved: "Income became more unequal."
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High inequality affects growth, living standards and social stability.
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How inequality can trap the poor
Low income
Little money for food, housing and books.
Poor health and schooling
Children leave school early or fall ill more often.
Low skills
As adults they qualify only for low-paid jobs.
Low income again
Their own children start with the same disadvantage.
The points to remember
- Social stability: very high inequality can bring crime, unrest and low trust.
- But some inequality can raise saving, which funds investment.
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Does growth make income more equal? It can go either way.
Growth can make income more equal
- New jobs for the unemployed and the low-paid.
- More tax revenue to pay for transfers, schools and clinics.
- Brazil, 2001-2014: growth plus cash transfers; Gini about 0.58 to about 0.52.
Growth can make income less equal
- Gains go first to owners of capital and skilled workers.
- Cities pull ahead of the countryside.
- China, 1990-2008: fast growth; Gini about 0.32 to about 0.49.
Remember it as: Growth gives the means to share; policy decides whether it is shared.
Paper 3 asked this in May 2026 for 4 marks, with data on the country.
Corland: income distribution (made-up data)
| 2000 | 2018 | |
|---|---|---|
| Gini coefficient | 0.35 | 0.41 |
| Share of income of the richest 10% | 30% | 36% |
With reference to the data, explain two likely causes of the change in Corland's income distribution between 2000 and 2018.
Model answer plan
See the answer broken into clear points, with guidance on how each point earns marks.
How the 4 marks are given
| Marks | What your answer needs |
|---|---|
| 3–4 | Two causes, each explained, and a clear statement that income became more unequal |
| 1–2 | One cause explained, or two causes only named |
| Not saying it became more unequal | At most 3 |