Income inequality is predetermined by the uneven distribution of wealth. In a market economy occurs in the markets of various production factors: capital, natural resources, labor. Depending on the degree of possession of these, a redistribution of goods occurs, as a result of which income inequality arises. Among the main reasons for this phenomenon are the following:

income inequality. Lorenz curve

To graphically depict the degree of inequality in society, economists use the Otto Lorenz curve. It is an image of the distribution function

income, in which all numerical shares are accumulated and That is, it displays the income of a particular category of the population relative to its size.

Income inequality and its consequences

Among the consequences of this phenomenon are economic and social. The first, for example, includes the growing stratification of categories of the population: that is, a small number of the population concentrates in their hands everything large quantity resources by taking them from the poor. The consequence of this is discontent in society, social tension, unrest, and so on.

5. CAUSES OF INEQUALITY IN INCOME

Analysis of the economic experience of countries where the labor market has existed for a long time reveals the following main causes of inequality:

1) Differences in ability

People have different intellectual, physical and aesthetic abilities. So, some have inherited intellectual abilities and therefore, other things being equal, they can get a well-paid job after graduation. Others are endowed with exceptional physical abilities and can become highly paid professional athletes. Still others have an aesthetic talent that allows them to become famous artists and musicians.

Consequently, innate talents allow some to receive high incomes, while others (without special talents) - medium or low;

2) Differences in education and training

These differences, firstly, may be the result of free choice. After graduating from school (college), a person can independently make a decision: either to study further and become a specialist, or to go to an enterprise and become a worker.

Secondly, they are due to the lack Money to receive paid education, for free - the existing level of knowledge is insufficient;

3) Differences in professional income

Some employees can increase their income through part-time work, i.e. working in two or three places; others - at the expense of overtime hours of work; still others, at the risk of failing, try to entrepreneurial activity etc.

However, there are also such workers who are satisfied with a quiet and unstressed activity that provides an income sufficient for them;

4) Difference in ownership

One part of the population may have significant inherited property (enterprises, large tracts of land, parcels valuable papers etc.) and receive significant income from this (“wealth breeds wealth”)

Others are usually most of population, do not have inherited wealth and are forced to become wage earners. Foreign practice shows that most often the children of workers remain workers;

5) Luck, connections, misfortunes

Economic practice shows that luck, the choice of the optimal time moment and the ability to "be in the right place at the right time" - all this helps to get rich.

Along with this, the role of personal contacts and the use of political influence in obtaining high incomes are also useful.

However, in life there are also negative moments (for example, an accident, a long illness, an unexpected collapse of an enterprise, etc.) that can lead to poverty. Statistics show that such negative moments are distributed very unevenly among the population, and this contributes to income inequality.

Incomes of the population of Russia and their differentiation

The amount of income is influenced by many different factors, often having a multidirectional impact. Among them are socio-political ...

Income inequality and the problem of their equalization in a market economy

Monetary incomes are distributed among people unevenly, which is typical for all countries of the world. This phenomenon is known as Pareto's Law...

Income inequality in Russia

Economic growth in Russia does not help to fight poverty and does not contribute to reducing the gap between the incomes of the poor and the rich. This conclusion was made in the report of the Institute of Socio-Economic Problems of Population of the Russian Academy of Sciences...

Estimation of the market value of real estate

To determine the net operating income for the appraised object, it is supposed to draw up an income statement based on the initial data according to the algorithm below: 1. Potential gross income from renting out the appraised object PGI = S1e * m * 0 ...

1. Potential gross income from the lease of the object PGI=S*m*0.8*Ar* k (9) where S is the area of ​​one floor, m; m - number of floors; 0.8 - coefficient, taking into account the difference between the building area and the area ...

Real estate valuation

Indicator Designation, calculation formula Calculation result Potential gross income PGI=S*m*0.8*Ar* k 1728000 rub. Losses from unemployment and during the collection of rent V + L = PGI * + PGI * k 207360 rubles. Other income MI= PGI*(k-1) 172800 rub...

Enterprise planning

Table 11 Statement of income and expenses, thousand rubles ...

One of the sources of social tension in any country is the difference in the levels of well-being of citizens, their level of wealth. The level of wealth is determined by two factors: 1) the amount of property of all kinds ...

The problem of distribution and redistribution of income

Before turning to the problem of measuring inequality in the distribution of income, it must be said that disposable income is the income of an economic entity ...

Development of information and communication technologies: new opportunities and new social inequality

In 1997, at the UN meeting in Berlin, the concept of "information poverty" was first heard, which meant the lack of access to information and communication technologies (ICT) ...

The current state of income of the population in the Ulyanovsk region

The causes of income inequality are: 1. Hereditary causes, such as resource endowment, ability and giftedness; 2. Human capital in the form of professional qualities, experience in any activity ...

Theoretical foundations of molding and distribution of income

Vіdmіnnostі v razmіrakh zarobіtnoі ї platy i іnshikh dzherel dzhelіvannya dzhelіvannya native budget vznachayut nerіvnіst і rozpodіlі іdovіv. For example, the average salary of a teacher at school is about UAH 1,500, a housekeeper - UAH 700, a financier - UAH 4,500....

Standard of living

The 90s of the last century were marked for Russia by rapidly developing processes of horizontal and vertical differentiation...

Economic performance of the enterprise and ways to improve them

Profit and income are the main indicators of the financial results of the production and economic activities of the enterprise. Income is the proceeds from the sale of products (works, services) minus material costs ...

The British government intends to eliminate discrimination against women in matters of wages. In Russia, such inequality also exists, and they have been doing this for a long time. Now, according to experts, Russia needs to adopt several fundamental bills.

So, the UK government has obliged companies with more than 250 employees to provide data by April next year to study gender discrimination in wages.

"The gender pay gap will not disappear on its own, we need to take consistent action. We need to see a qualitative change in the number of companies that publish data on the gender gap and offer development and flexibility for all workers," said the Prime Minister of this country Theresa May. “As for Russia, the problem can be solved if the country has a law on equal pay for work of equal value. There is a corresponding convention of the International Labor Organization, which we have not yet ratified,” says Elena Mezentseva, Ph.D. . But before we get to ratifying it, we need to do preliminary work, she continues.

Women often underestimate themselves and ask for a lower salary than men when applying for a job.

First you need to pass a law on equal rights and opportunities. It is a legislative framework that, in principle, proclaims the equality of rights and opportunities for men and women. Such a law has been adopted in almost all CIS countries.

"Another law that we are sorely lacking is on domestic violence, which is also adopted in many CIS countries. A definition of domestic violence should be given there, and sanctions for those responsible for it should be spelled out," the expert continues. And then it will be possible to take steps to equalize the salaries of men and women.

Why do the genders receive differently? There are several factors. The first is that men are more often employed in heavy and dangerous work for which they pay more. They can work longer hours, get sick less often, and almost never go on maternity leave.

The second is discrimination. According to various studies, the contribution of discrimination to the wage gap is 12-18 percent, Mezentseva says. Self-discrimination also adds fuel to the fire - a woman who comes to get a job most often asks for a lower salary for herself than any man would ask. However, this psychological feature inherent not only to Russian women, but also to women in developed countries, such as the United States or Germany.

70 percent was the gap between the salaries of men and women in Soviet times. Now this difference is an order of magnitude smaller.

Thus, according to an expert of the German Federal Institute of Secondary Education Michael Tiemann, young girls different reasons choose professions where the pay is, in principle, less than in those professions that men choose. "And the second component is that they underestimate themselves a bit when they negotiate wages," he said.

Thus, our analysis leads to the conclusion that in modern conditions the growth of wealth not only does not depend on the abstinence of wealthy people, as is usually thought, but, most likely, is restrained by it. One of the main social justifications for large inequalities in the distribution of wealth is therefore dropped. I am not saying that there are no other causes, not covered by our theory, which can, in certain circumstances, justify a certain degree of inequality. But this removes one of the most important reasons why we have hitherto considered it necessary to proceed with great caution. This is especially true of our attitude to inheritance tax, since some of the considerations in favor of income inequality clearly do not apply to the same extent to inheritance inequality.

The cost-production method for determining GDP reveals the amount of total expenditure as a factor that directly affects the levels of production, employment and income. Although the method of withdrawals and injections (S = Ig) is not so straightforward, its advantage is that it explains the reason for the inequality of C + Jg and GDP at all levels of production, except for equilibrium.

In Chapter 31, we will continue our analysis of the role of the state, its failure, and the problems of taxation at the microeconomic level. The subsequent chapters of Part VII deal with the economic problems that the state has tried with more or less success to solve, Chapter 32 examines the problems of monopolies and anti-competitive practices of companies, Chapter 33 deals with agricultural problems, Chapter 34 deals with poverty and income inequality, and Chapter 35 deals with the health care system that has been talked about so much in the American media. Chapter 36 deals with aspects of the labor market such as trade unionism, discrimination and migration. The better you understand the material presented in chapters 30 and 31, the easier it will be for you to understand the reasons for government intervention in these areas of the economy.

There are three important reasons for the existence of income inequality - unequal personal opportunities differences in the nature of external social factors. The first factor depends solely on luck - some people have high intelligence, certain talents or physical dexterity that allow them to receive high incomes. In addition, they may inherit property or be helped by the social status and financial resources of their parents. The second reason involves personal initiative—individuals may want to get expensive education, take risks, or accept unpleasant working conditions in the expectation of higher pay. They can also show high personal initiative in business. The third factor relates to society as a whole. Market power and discrimination are two important social factors that determine the uneven distribution of income.

Several major themes are developed most intensively in radical economic theory. Among them are inequality of income, capital and power. The analysis of inequality goes beyond the contradictions between capitalists and workers and considers intra-class differences between social groups from unskilled workers to the managerial elite. It is argued that while inequality may be a necessary consequence of the scarcity of resources, developed economies now lack any reason for the existence of scarcity, which under advanced capitalism is artificially created, such as through advertising, so that there is no longer a need for in significant disparity. Radical economics advocates a reasonable minimum income for all, often simply a benefit without the obligation to work, and a large number of free basic commodities.

As the analysis of the listed causes of inequality in the distribution of income shows, they are both objective and subjective. What should society strive for to equalize incomes or to differentiate them?

Causes of Income Inequality

The reason for the disparity is the regulation of rents by the City of New York. The city budget deficit is 2.3 billion - the largest in the last 20 years. The city's property tax revenues are currently estimated to be around 100 mln as rent pressures are holding back cash flow and therefore the appraised value of rental buildings. Critics also argue that the restrictions discourage new housing development and force owners - and indirectly taxpayers - to subsidize tenants who are lucky enough to get a rent-regulated apartment.

Despite the fact that the ideas of the functionalists are not always supported by the facts from real life they can still be accepted. Then it follows from the foregoing that in economic theory inequality is studied in terms of social status, one of which is the wage received by the individual. Sociologists, on the other hand, are trying to understand the real causes of inequality in the possession of basic goods, which are more difficult to quantify and, therefore, evaluate. It seems to us that this is why in sociology the issue of income inequality and its assessment has so far been less explored.

Apparently, one of the reasons that gave rise to such populist policies was the significant income inequality in the countries of Latin America. At one extreme were the very wealthy, who accounted for most of the national income, and, using their economic power, they exerted political pressure on the government to avoid large sizes taxation. At the other extreme were the lower classes, who disposed of only a small part of the national income, but whose huge share of the total population demanded substantial public spending. This ratio generates the need for increased spending when the government's ability to increase tax revenues is low. This has not been and is not the case in East Asia, where income distribution is significantly more even.

Inequality is important not only in itself, but also because it is one of the causes of a much more obvious and acute problem facing all governments - the problem of poverty. Poverty does not have any unambiguous indicator. There is an absolute approach (setting a living wage or poverty line), a relative approach (setting a poverty line at 50% of the median or average income) and a subjective approach. None of them is unconditional, but what is significant in all dimensions is the dynamics, composition and social mobility of the poor. The most common indicator is the poverty rate - the proportion of the population living below the poverty line, i.e. having income

This inequality is being overcome gradually. In modern conditions, this is primarily due to the acceleration of scientific and technological progress, which leads to an increase in the general educational and cultural and technical level of members of society, leads to a decrease in differences in the qualifications of different categories of workers, and, consequently, in their income levels. Smoothing out the difference in income and consumption, generated by the unequal family status of the worker, is facilitated by an increase in the funds allocated by the state for the maintenance of those members of society who, due to their age or other reasons, cannot take part in social production.

But why does income inequality exist at all After all, in democratic countries it is customary to talk about equality of opportunity, which should be provided by the relevant institutions of a market economy. Various economists name many reasons and factors for this inequality. Let us note only the most important of them.

Fifthly, there is a group of reasons that are simply related to luck, chance, unexpected gain, etc. Under the conditions of uncertainty characteristic of a market economy, this group of reasons can explain many cases of inequality in income distribution.

As we already know, people receive income as a result of providing the factors of production that they own (their labor, capital, land) for the use of firms to produce goods that people need, or they invest these resources in creating their own firms. In such a mechanism of income formation, the possibility of their inequality was initially laid down. As seen in fig. 13-1, the reason for this

The reason for this rapid increase in income inequality is helped by Fig. 13-6.

Suppose now that the utility received by an individual depends not only on his income, but also on how income is distributed in the community. Individual B is concerned about inequality in society, and for this reason, in the process of redistribution, with an increase in his income, his own utility increases, while the utility of individual A decreases, only up to a certain point (point M). With a further increase in inequality, its utility decreases (Fig. 5). Similarly, the utility of individual A decreases as the utility received by individual B falls below the level corresponding to the point N. We thus assumed the existence of external effects in consumption (for more details on external effects, see the lecture).

This argument has been criticized for two reasons. First, there are other categories of expenditure (such as food) that are, at least on some level, just as necessary. But the difference in the amount of food needed is likely to be smaller than the difference between the required amounts of medical expenses. Secondly, a significant part of medical expenses is provided at the discretion of the patient (for example, a separate room or not, a TV in the room, plastic surgery for rejuvenation, etc.). The law, however, does not distinguish between "necessary" expenses and "optional" expenses, since such a distinction, although clear in principle, is practically impossible in practice. Tax rules currently only allow medical expenses to be deducted where they exceed 7.5% of adjusted gross income. This seems to reflect the view that significant disparity in ability to pay arises only in connection with significant medical costs, and that these, in all probability (but not always), should not be "optional".

Such a regime has the consequence of both inefficiency and inequality. The inefficiencies are obvious and investments are being diverted to less productive but more tax-friendly uses. Inequality is often more subtle. There are two reasons for this. First, resources are diverted to favorable areas where after-tax returns may be declining. Individuals in such industries earn the same after-tax income in the long run as those in other industries. Those operating in such an industry during a special tax regime receive a certain additional income during the transition

Income inequality and poverty are contradictory phenomena, since their sources have a large number of different causes, and the significance of each of them is difficult to assess. For example, few question the existence of discrimination, but its role as a source of poverty and inequality remains uncertain. However, in disputes on topics that have already become traditional, assessments are used more often than facts, and this area is no exception. Everyone agrees that hard-working bright personalities are worthy of reward, but the question is how much And if hard work should be rewarded, what should be the punishment for lazy people Whether it is worth allowing parents to make a fortune for their children or passing it on by inheritance is an example of dishonest receipt advantages in life Different people with their views and assessments will give different answers to these questions.

In ch. 19 we discussed some of the causes of rising income inequality. Increased trade with low-wage underdeveloped countries and changes in technology have reduced the demand for unskilled labor and increased the demand for skilled workers in the US itself. As a result, the wages of unskilled workers, compared with the wages of highly skilled workers, have fallen, reflected in changes in relative incomes and increased family inequality.

The theoretical discussion was dealt with in the previous chapter according to the functionalist point of view, in modern societies there is equal access to education, and education system acts as the most important channel of social mobility. This hypothesis was challenged by Jencks and Boudon, who argued that the causes of inequality lie outside of education, are determined mainly by economic factors (income inequality), and education is not able to smooth out existing disparities. According to Bourdieu, equality of opportunity is nothing more than a myth, since the educational system reproduces the existing pattern of distribution of cultural capital among classes in such a way that the culture that the educational system transmits is closest to that of the ruling class. The most striking manifestation of this process is the examination system.

It has also become clear that ensuring human security will require the development of new policies, both nationally and globally. In this regard, it is important to create an early warning approach not only to serious domestic crises, but also to economic crime. Its objective reasons lie in inefficient consumption, high unemployment and impoverishment, in the reduction of real wages and the absence of sources of permanent income, in the violation of human rights and ethnic conflicts, and in the increase in inequality between regions and individual social strata. It should also not be forgotten that "the state creates criminals faster than it punishes them. We first issue a lot of laws that give rise to crimes, and then we issue even more laws in order to punish these crimes," Tooker rightly points out.1

The distribution of income in a market economy is usually characterized by a significant degree of inequality. It is determined by three main factors.

First, factors that were broadly inherited by the individual. These include not only inherited shares, cash deposits, real estate, etc., but also natural talent, the ability to do certain activities.

Secondly, the human capital accumulated throughout life. The most important factor in its formation is education.

Thirdly, luck: a person can suddenly get rich by investing in one corporation, and go broke by investing in another.

Let's consider these factors in more detail. There is a significant inequality of income between persons who own property, and therefore receive income from it, and persons who do not own it. It is property income that determines the position of households at the very top of the income pyramid. The right to inherit and the fact that wealth breeds wealth reinforces the role played by inequality of ownership in increasing income inequality. Differentiation of earnings is also explained by the ratio of supply and demand for a particular profession. If, for example, the salary of an engineer falls, then the demand for this type of labor decreases. But why do demand conditions differ in different labor markets? If all workers were homogeneous, all jobs were equally attractive to workers, and labor markets were perfectly competitive, then all workers would receive exactly the same wage rate. From this it is clear why in practice wage rates are different.

• 1. Workers are heterogeneous. They differ in abilities, as well as in levels of training and education, so they fall into professional groups that do not compete with each other.
• 2. Types of work differ in their attractiveness.
• 3. Labor markets are usually characterized by imperfect competition.

The heterogeneity of workers underlies the presence of non-competing groups. For example, a relatively small number of workers have the ability to be surgeons, violinists, research chemists, astronauts. Only a few have the financial means to receive the necessary training. As a result, the supply of these particular types of labor is very small in relation to the demand for them and, accordingly, their wages are high. These (and similar groups) do not compete with each other or with other skilled or unskilled workers: the violinist does not compete with the surgeon, the salesman does not compete with the violinist.

But a number of unskilled workers in different trades may belong to the same group. For example, gas station workers, agricultural laborers, and unskilled construction workers may all be classified in the same group, since each can do the work of the other. But none of the workers in this group will effectively compete with programmers, teachers of mathematics, who are in other, more limited groups.

Job attractiveness is another important factor in income differentiation. Almost everywhere construction workers receive higher wages than office clerks. Construction works involve hard physical labor in different weather conditions, the possibility of injury. Office workers are white-collar, pleasant environment, air conditioning, low risk of accidents and layoffs. As a result, construction contractors must pay higher wages than firms pay.

There are other factors that influence income inequality. Luck, chance, personal contacts - all this helps to get rich. On the other hand, many causes (prolonged illness, accident, death of the breadwinner, ethnic discrimination) can lead to poverty.

The quantitative measurement of the degree of inequality in the distribution of income between different groups of the population is carried out using the following indicators:

• 1) the Lorenz curve, named after the American economist and statistician Max Lorenz, which reflects the uneven distribution of the total income of society between different groups of the population,
• 2) the Gini coefficient (or income concentration index), named after the Italian economist and statistician Corrado Gini. It is determined by the ratio of the area of ​​the shaded figure on the graph of the Lorentz curve, formed by the line of absolute equality and the line of real income distribution (0ABCD), to the area of ​​the triangle 0EF. The Gini coefficient can vary from 0 to 1. Obviously, the greater the deviation of the Lorenz curve from the bisector, the greater the area of ​​the shaded figure and the greater the Gini coefficient.
• 3) decile coefficient, which expresses the ratio between the average incomes of the 10% of the most wealthy citizens and the average incomes of the 10% of the least wealthy. The recommended value of this coefficient is up to 5.

Income differentiation is largely related to the level of education. It should be taken into account that the distribution of the population into income groups reflects income differentiation by this moment, but for many people, incomes change over the course of their lives. If young people tend to have low incomes, then by the age of 40-50 they move into higher income groups. In people with higher education incomes are, on average, more than twice as high as those of people who have just finished school.

In the economic literature, the term “investment in human capital” has become widespread. These are any expenses aimed at improving skills and abilities. Like the cost of equipment, the cost of education and training can be considered as an investment, since current expenses are carried out with the expectation that these costs will be repaid many times over.