income disparity.

15.5 Government Policies to Reduce Income Inequality

LEARNING OBJECTIVES

By the end of this section, you will be able to:

• Explain the arguments for and against government intervention in a market economy

•

Identify beneficial ways to reduce the economic inequality in a society

• Show the tradeoff between incentives and income equality

No society should expect or desire complete equality of income at a given point in time, for a number of

reasons. First, most workers receive relatively low earnings in their first few jobs, higher earnings as they

reach middle age, and then lower earnings after retirement. Thus, a society with people of varying ages will

have a certain amount of income inequality. Second, people’s preferences and desires differ. Some are willing

to work long hours to have income for large houses, fast cars and computers, luxury vacations, and the ability

to support children and grandchildren.
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