💰 How it is meant to work
Higher earners pay more tax. The government uses that money to pay benefits to people on low or no income. Income is moved from the top towards the bottom.
Reducing Inequality » Using Laws and Taxes to Reduce Inequality
What you'll learn this session
Study time: 30 minutes
Cambridge spec: 3.2.1
- How governments use laws to reduce inequality
- Progressive taxation and the redistribution of wealth through benefits
- Minimum wages, equal opportunities laws, quotas and affirmative action
- The limits of each measure
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Unlock This CourseUsing the law to make society fairer
You have seen that inequality in life chances is real and that sociologists explain it in different ways. This lesson looks at what governments actually do about it. The main tool a government has is legislation: laws that everyone in a society must follow.
Governments cannot simply make everyone equal. What they can do is change the rules, so that some people pay more, some people receive more, and some unfair treatment becomes illegal. The spec lists five ideas: progressive taxation, redistribution of wealth through benefits, a minimum wage, equal opportunities laws and other government measures.
Key terms:
- Legislation: laws made by a government.
- Progressive taxation: a tax system in which people with higher incomes pay a higher percentage of their income in tax.
- Redistribution of wealth: taking money from some people, mainly through tax, and giving it to others, mainly through benefits.
- Benefits: payments made by the government to people who need support, such as the unemployed, the sick, the disabled and pensioners.
- Minimum wage: the lowest hourly pay an employer is allowed by law to pay a worker.
- Equal opportunities laws: laws that make it illegal to treat people unfairly because of things like sex, ethnicity, age or disability.
- Quota: a fixed number or share of places or jobs that must go to a particular group.
- Affirmative action: steps that give extra help or priority to groups who have been treated unfairly in the past.
Progressive taxation
With progressive tax, the more you earn the bigger the share of your income you pay - higher earners pay a higher rate
Tax is the money a government collects from people and businesses. In a progressive system, the more you earn, the bigger the share of your income you hand over. A person on a low income pays a small percentage. A person on a high income pays a larger percentage.
The idea is simple: people with the most can afford to give the most, and the money raised pays for public services and benefits that help everyone, especially those with the least.
Worked example
In a made-up country, people pay 10% tax on income up to 20,000, and 30% on every unit of income above 20,000.
Worker A earns 20,000. Tax = 10% of 20,000 = 2,000. That is 10% of their income.
Worker B earns 40,000. Tax on the first 20,000 = 2,000. Tax on the next 20,000 = 30% of 20,000 = 6,000. Total = 8,000. That is 20% of their income.
Worker B pays double the percentage of Worker A, so the system is progressive.
Redistribution through benefits
Taxes only reduce inequality if the money is put to use. Redistribution of wealth means the government collects money through tax and passes it on through benefits. Examples include unemployment benefit, payments for disabled people, support for families with children, and pensions for older people.
Benefits aim to raise the income of the poorest, so that fewer people live in poverty. In sociological terms they try to improve life chances for people who start with the least. The bigger picture of how whole welfare systems work is covered in the lesson Welfare States and Life Chances.
⚠️ Possible limits
Some people say high taxes put off hard work or investment. Others say benefits may be too low to lift people out of poverty. Governments must also decide who qualifies.
A minimum wage
A minimum wage is set by law, so no employer can pay this barista less per hour than the legal amount
A minimum wage is set by law. An employer cannot pay a worker less per hour than this amount. It protects people in the lowest-paid jobs from being paid very little, and so reduces the gap between rich and poor. In the UK, a national minimum wage was introduced in 1999, and many other countries have a version of their own.
Supporters say it raises the incomes of the lowest paid and makes work fairer. Critics argue that if wages are forced up, some employers may cut jobs or hours. The minimum wage can also be set too low to live on, or ignored by employers who pay less illegally.
Equal opportunities laws
These laws make it illegal to discriminate. An employer cannot refuse to hire, promote or pay someone less because of, for example, their sex, ethnicity, age or disability. In some societies the same kind of law applies to schools, housing and the services people use.
The aim is a fairer chance for everyone, so that achievement depends on ability and effort and not on ascribed status. You met discrimination in the lesson Life Chances, Ethnicity and Intersectionality.
The limits are practical. Discrimination is often hidden and hard to prove. A person has to know their rights and take a case to court, which can be costly and stressful. A law can stop obvious unfairness without changing attitudes.
Other government measures
Governments also use more targeted measures. Two examples are quotas and affirmative action.
👥 Quotas
A quota fixes a share of places or jobs for a group. In India, some places in public education and government jobs are reserved for groups who have faced long-term disadvantage. Norway has a law that the boards of public limited companies must include at least 40% of each sex.
🤝 Affirmative action
This means positive steps to help disadvantaged groups, such as extra outreach, scholarships or priority when applicants are equally qualified. The aim is to make up for past unfairness and open doors that were closed.
Critics say these measures can feel unfair to people who are not helped, and may make people question whether someone earned their place. Supporters reply that without such steps, unequal starting points would last for generations.
Common mistakes
1. Saying a progressive tax means the rich pay more money. Even a tax where everyone pays the same percentage does that. Progressive means they pay a bigger percentage.
2. Mixing up equal opportunities laws and quotas. Equal opportunities laws ban unfair treatment. Quotas fix numbers.
3. Saying the laws end inequality. They aim to reduce it, and each has limits.
Exam-style question
(a) Define the term progressive taxation. [2]
(b) Give two examples of laws or measures governments use to reduce inequality. [2]
(c) Explain three reasons why equal opportunities laws may not completely remove inequality. [6]
Model answer
(a) A tax system in which people on higher incomes (1) pay a higher percentage of their income in tax (1).
(b) Any two from: progressive taxation (1); redistribution of wealth through benefits (1); a minimum wage (1); equal opportunities laws (1); quotas (1); affirmative action (1).
(c) First, discrimination is often hidden (1), so it is hard to prove that an employer treated someone unfairly (1). Second, people must know their rights and afford to take a case to court (1), so many do not complain and the unfair treatment continues (1). Third, laws cannot easily change attitudes and stereotypes (1), so unfair treatment can carry on in less obvious ways, such as who gets recommended for a job (1).
Exam tip
In an "explain three" question, make three clearly separate points and add a reason to each. Start each one with a different word such as "First", "Second" and "Third".