It seems difficult to open a newspaper nowadays and not find a story on inequality, whether it is about the differences in school results for poor and rich children or the difference in pay between chief executives and their employees. Economists are interested in inequalities in health, consumption, housing and educational performance, to name just a few, but it is inequalities in income that perhaps get the most attention.
In the UK, the median full-time salary in 2010–11 was £26,200 per year, but someone working full time for the minimum wage would only earn around £11,000, while the top 10% earned over £52,600. Given the intense interest in income inequality, what can economists say about this phenomenon?
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