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Explain the reasons why income inequality occurs.

Quick Answer:

• Regressive taxes mean that those on higher incomes pay less tax and their incomes don’t fall as much once taxes are deducted.
• Taxes not progressive enough to counteract the differences in earnings which means that the taxes taken off higher income earners are not high enough to counteract rising incomes.
• Low levels of welfare benefits for low income earnings and unemployed which means that rises in income by higher earners outpace those on lower incomes.
• Education level inadequate/inconsistent which means that those unsuccessful in education cannot access high paying jobs.
• Differences in types of job or skills of workers. Note: This indicative content is not exhaustive, other creditworthy responses should be awarded marks as appropriate

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