Tuesday, June 12, 2007

Effect on inequality of declining pensions

help please: assess the effects on income distribtuion that are likely to result from the sad decline of the UK pensions (2006 labour markets papaer?

Sad decline relates to state pensions being indexed linked. This means they are increased in line with inflation, therefore the value of state pensions falls relative to average wages (which increases faster than inflation.

This means that those who rely on state pensions will become relatively poorer than the rest of the society. There will not be an increase in absolute poverty. Pensioners should maintain the same standard of living. But they fall further behind the rest of society causing lorenz curve to shift further to the right.

Also, some pensioners relying on private pension schemes will suffer from them going under like Maxwell pensions and some other schemes.

Don't forget to refer to data, I'm sure there is another point to be got from using the data.


However, inflation rates for pensioners have been increasing faster than actual inflation, therefore pensioners could actually become worse off.

Not all pensioners will become worse off.
Some will have generous private pensions
Some pensioners will have benefitted from rising wealth, due to rising house prices. From this wealth they can get income (e.g. remortgaging)

Therefore, there will be an increase in inequality amongst pensioner.

Government has given more means tested pensions to old people, who rely on state pensions. This reduces effect on increasing income inequality.

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