What is income inequality. Income inequality and its causes
Income inequality and its causes. Indicators of income inequality.
Differences in the level of income per capita or per one employed are commonly called income differentiation. Income inequality is common in all economies, but to varying degrees. The traditional system has the largest income gap. It gradually diminished with the transition to free competition capitalism and decreased markedly with the transition to the modern market system. A significant increase in income inequality is noted during the transition from an administrative-command to a market system. This is due to the fact that part of the population continues to live in the conditions of the disintegrating former system, and at the same time a social stratum appears, acting according to the laws of a market economy. Over time, however, inequality diminishes by involving the broader population in market relations.
Income and wealth inequality can be enormous and threaten political and economic stability in a country. For this reason, virtually every developed country in the world is constantly taking steps to reduce these inequalities. But the development of these measures is possible only with the ability to accurately measure the degree of differentiation of income and wealth, as well as the results of influencing it with the help of state policy.
People receive income as a result of the fact that they create their own business (become entrepreneurs), or provide the factors of production (their labor, land or capital) in their ownership for the use of other people or firms. And they use this property to get the benefits people need. In such a mechanism of income generation, the possibility of their inequality was initially incorporated. The reason for this is:
Different values \u200b\u200bof the factors of production belonging to people (capital in the form of a computer, in principle, is able to bring more income than capital in the form of a shovel);
Differing success in the use of factors of production (for example, an employee in a firm producing a scarce commodity can earn higher earnings than his colleague of the same qualifications working in a firm whose products are sold with difficulty);
Different volume of factors of production belonging to people (the owner of two oil wells receives, other things being equal, more income than the owner of one well).
Building on this, it is imperative to touch on human empowerment to understand the causes of income inequality.
First of all, from birth, people are endowed with various abilities, both mental and physical. All other things being equal (this premise should always be borne in mind), a person endowed with exceptional physical strength is more likely to become a famous and highly paid athlete.
Secondly, differences in the ownership of property, especially inherited property. People cannot choose which family they will be born into - hereditary millionaires or ordinary workers. Hence, one type of income stream, ᴛ.ᴇ. income from property will differ significantly for the entities we have named.
Third, differences in educational level. This very reason largely depends on those named above. A child born into a wealthy family is more likely to receive an excellent education and, accordingly, a profession that brings a high income than a child in a poor, large family.
Fourth, even with equal opportunities and the same starting conditions for education, people who are sometimes called "workaholics" will receive more income. These people are ready for a lot to achieve high results in their work.
Fifthly, there is a group of reasons that is simply associated with luck, chance, unexpected gain, etc. in the face of uncertainty inherent in a market economy, this group of causes can explain many cases of inequality in income distribution.
Various indicators are used to quantify income differentiation. But in order to assess the level of inequality in society and develop an effective state policy, indicators of the factor distribution of income are not enough, because the level of concentration of income is not visible among certain groups of the population, ᴛ.ᴇ. it is about the personal distribution of personal income between families or individuals. For this, it is extremely important to divide the total number of families by income level into 5 groups equal in terms of the number of families. The first 20% of families include families with low incomes, the second 20% includes families where incomes are higher than in the first group, etc. Consequently, the fifth group will include 20% of families with the highest incomes in the country.
To graphically depict the personal distribution of national income, a Lorentz curve is constructed (Fig. 1.).
When plotting the curve, the abscissa represents the percentages of families with the corresponding percentage of income, and the ordinate represents the percentages of the families in question. The theoretical possibility of absolutely equal income distribution is represented by the bisector, which indicates that any given percentage of families receive a corresponding percentage of income. This means that if 20, 40, 60% of families receive, respectively, 20, 40 and 60% of the total income, then the corresponding points will be located on the bisector. The Lorenz curve is the cumulative distribution of the population and the corresponding income. As a result, it shows the ratio of the percentages of all income to the percentages of all recipients. If incomes were distributed evenly, ᴛ.ᴇ. 10% of recipients would have a tenth of the income, 50% - half, etc., then such a distribution would look like a line of equal distribution (s).
The uneven distribution is characterized by the Lorentz curve, ᴛ.ᴇ. the line of actual distribution (oabcde), the further from the straight line, the greater the differentiation. For example, 20% of the population with the lowest income received 5% of the total income, 40% with the lowest income 15%, and so on. The area between the line of absolute equal distribution and the Lorenz curve indicates the degree of income inequality: the larger the area, the greater the degree of income inequality. If the actual distribution of income were absolutely equal, then the Lorentz curve (oabcde) and the bisector (oe) would coincide.
To characterize the distribution of aggregate income between population groups, the population income concentration index (Gini coefficient), named after the Italian statistician and economist Corrado Gini (1884-1965), is used.
The Gini coefficient is equal to the ratio of the area of \u200b\u200bthe figure bounded by the Lorentz curve to the area of \u200b\u200bthe triangle under the same curve, or
I Gini = S0abcde
The larger this coefficient, the stronger the inequality, ᴛ.ᴇ. the higher the degree of polarization of a society in terms of income, the closer the Gini coefficient is to 1. When incomes are equalized in society, this indicator tends to 0. It should be noted that this coefficient cannot be equal to either 1 or 0, since a civilized market economy excludes such extremes by purposeful redistribution of income.
The amount of income of each interval group is determined on the basis of the distribution curve of the population by the size of the average per capita income by multiplying the middle of the income interval by the population in the given interval.
Along with the Gini coefficient, to characterize the differentiation of income in society, the coefficient of funds or the decile coefficient of income differentiation is used, which shows how large the gap in the incomes of the most distant from each other population groups, having the same share in the total population: 10% with the lowest income and 10% - with the highest. World practice shows that the income differentiation coefficient should not exceed the critical critical ratio of 10: 1, in Russia this ratio, reflecting only legal incomes taken into account by statistics, was 15: 1 in 2006, ᴛ.ᴇ. 5 points higher than acceptable. If we take into account the shadow income, then this ratio will be even higher.
The formation of a market system of management and the formation of a layer of owners on this basis will inevitably increase the influence of the principle of distribution based on accumulated property. At the same time, the formation of the aggregate income of the population will contribute to the growth of income differentiation and social stratification of society, the formation of a stratum of not only the rich, but also the poor, which will require active government intervention to overcome social tension.
The resolution of such an acute social problem as poverty is one of the directions of the state's activity and is associated with support at the level of at least a living wage for those who could not provide themselves with a better life. Otherwise, an increase in the number of poor people is fraught with social explosions and instability in society. Reducing the number of the poor is one of the basic tasks of state social policy in countries with a market economy. But the practical implementation of income equalization policy is associated with the expansion of complex problems. The state, taking responsibility for the social climate, is sometimes faced with extremely contradictory public perception of its actions. The fact is that for the successful implementation of socio-economic measures, considerable financial resources are needed. Their sources are taxes. Hence the regularity: the higher the amount of social benefits, the tougher the taxation should be. This dependence was successfully formulated by L. Erhard: “The improvement of living standards, which I strive for, is not so much a problem of distribution as of production, more precisely, productivity. The solution lies not in dividing, but in multiplying national products. Those who devote their attention to the problems of distribution always come to the erroneous desire to distribute more than they are able to produce the national economy ”(L. Erhard. Welfare for all. M., 1991. - p. 205). But a dynamically developing economy makes it possible to collect taxes at relatively preferential rates and at the same time receive rather large sums of funds for social purposes. In modern Western countries, the profitability of the economy as a whole is quite high, which allows the governments of these states to carry out effective social programs, thereby ensuring a favorable social situation conducive to dynamic development.
It should also be noted that differences in the level of consumption may also depend on factors that are not related to the internal properties of labor and its quality in the worker himself. First of all, these factors include: family size, the ratio of the number of workers and dependents in the family, health status, geographic and climatic conditions.
The fundamental purpose of the redistribution of the national income of the state is to reduce these differences and provide more favorable conditions for material life for all members of society. This goal is achieved through the distribution of products and services, transfer payments, as well as government programs to stabilize income.
Payments through assistance programs are designed to mitigate differences in income levels caused not by differences in work, but by reasons outside the labor process itself, and also to help meet a number of needs that are most important in terms of the tasks of forming the ability to work, personal development, achieving more high educational and cultural levels, affordable health care, retirement benefits. But since this form of distribution affects the interests of society as a whole and of each of its members individually, the state policy in this area should be especially active.
The problems of inequality in the distribution of income and social policy of the state again became the subject of lively theoretical discussions in the late 70s - early 80s, during the period of the neoconservative shift in government regulation (“Greyganomics”, “Thatcherism”). The essence of the problem is as follows: what are the limits of state intervention in redistribution processes? Isn't the efficiency of the economy as a whole decreasing due to the growing scale of transfer payments - after all, taxes are the source? Are ever more progressive tax rates undermining entrepreneurial incentives? Do social programs contribute to the growth of the layer of social dependents? The American economist P. Heine notes: indeed, people with yachts are rich, people rummaging in garbage cans are poor. But if new rules are adopted, according to which every yacht owner will be taxed $ 10 thousand annually into a special fund for "movers", and if each of the "movers" gets the right to receive an annual benefit of $ 2 thousand from this fund, then rather All this, the following will happen: the number of owners of registered yachts will decrease, and the number of "pilgrims" will increase surprisingly quickly (Heine P. Economic way of thinking. M., 1991. - p. 379).
It should not be forgotten that income inequality is largely generated by the objective action of the market price mechanism. The desire to completely destroy income differentiation would mean the intention to completely destroy the market mechanism itself.
Τᴀᴋᴎᴍ ᴏϬᴩᴀᴈᴏᴍ, the social policy of the state in the market economy should be a very subtle instrument, on the one hand, it is designed to contribute to social stability and alleviate social tension, and on the other, not in any way undermine the incentives for entrepreneurship of highly efficient labor for hire.
Income inequality and its causes. Indicators of income inequality. - concept and types. Classification and features of the category "Income inequality and its causes. Indicators of income inequality." 2017, 2018.
Income inequality
Differences in wages and other sources of family budgeting determine inequality in income distribution. For example, the average salary of a teacher in a school is about UAH 1,500, a janitor - UAH 700, a financier - UAH 4,500, a scholarship - UAH 500. Why is there such income inequality? Indeed, the market system does not provide for absolute equality, because someone uses factors of production better than others. And thus makes more money. However, there are more specific reasons that contribute to this inequality.
Causes of inequality in the distribution of national income
These reasons include:
1) differences in abilities;
2) differences in education;
3) differences in professional experience;
4) differences in the distribution of property;
5) risk, luck, failure, access to valuable information. Differences in ability. People have different physical and intellectual
ability. For example, some people are endowed with exceptional physical abilities and can receive large sums of money for their sports achievements. And some are blessed with entrepreneurial skills and a penchant for running a successful business. So, people who have talent in any area of \u200b\u200blife can make more money than others.
Differences in education. People differ not only in differences in abilities, but also in educational level. However, these differences are partly a result of the individual's own choices. So, after the end of the 11th grade, someone will go to work, and someone will enter the university. So, a university graduate has more opportunities to earn more income than people without higher education.
Differences in professional experience. Individuals' incomes differ, including due to differences in professional experience. So, if Ivanov has been working in a company for one year, then it is clear that he will receive less salary than Petrov, who has been working in this company for more than 10 years and has more professional experience.
Differences in the distribution of property. Differences in the distribution of property are the most significant causes of income inequality. A large number of people have little or no property and, accordingly, either receive little or no income. Others are owners of more real estate, equipment, shares, etc. and get more income.
Risk, luck, failure, access to valuable information. These factors also have a significant impact on income distribution. So, a person who is inclined to take risks in economic activities can receive more income than other people who are not capable of taking risks. Luck also helps you generate more income. For example, if a person finds a treasure.
All of these reasons work in different directions, increasing or decreasing inequality. In order to determine the extent of this inequality, economists use the Lorentz curve, which reflects the actual distribution of national income. This curve is used by economists to compare incomes at different intervals of time, or between different layers of a given country or between different countries. The horizontal axis of the curve is the percentage of the population, and the vertical is the percentage of income. Of course, economists divide the population into five parts, each of which comprises 20% of the population. Population groups are distributed along the axis from the poorest to the richest. The theoretical possibility of absolutely equal distribution of income is represented by the AB line. The AB line indicates that any population group receives a corresponding percentage of income. Absolutely uneven distribution of income is represented by the WB line. It means that all 100% of families receive all national income. Absolutely even distribution means that 20% of families receive 20% of total income, 40% - 40%, 60% - 60%, etc.
Suppose that each of the population groups received a certain share of the national income (Figure 15.2).
Of course, in real life, the poor part of the population receives 5-7% of the total income, and the rich 40-45%. Therefore, the Lorentz curve lies between the lines that reflect absolute equality and inequality in the distribution of income. The more uneven the distribution of income, the greater the concavity of the Lorentz curve and the closer it will be to point B. And vice versa, the more equitable the distribution, the closer the Lorentz curve will be to the AB line.
Redistribution of national income and social protection of the population
How can the problem of inequality in the distribution of national income between different segments of the population be mitigated? In most developed countries, it is the state (government) that undertakes to reduce income inequality. The government can solve this problem with the help of the tax system. That is, in total, parts of the population are subject to higher taxes (in percentage terms) than the poor. In addition, the state can use the received tax revenues as transfer payments in favor of the poor. In almost all countries, there are various social programs to protect the population, namely, social insurance assistance in case of loss of work, loss of breadwinner, disability benefits, and the like.
So, the state tax system and various transfer programs significantly reduce the degree of inequality in the distribution of the country's national income.
Introduction
Currently, many scientists and specialists admit that the flaws of the reform model that was implemented during the 90s are not least manifested in the most serious problems with the establishment of a middle class in the country (in its hypostases characteristic of a developed market economy).
The solution of these problems, as well as the "ripe and overripe" adjustment of the course of reforms, could be helped by the use in the relevant scientific and economic studies of the approach consisting in considering the emerging Russian middle class as the most important subject of the "shadow" economy, the hypertrophied development of which is another negative result the course of market reforms chosen in 1992.
This approach seems extremely relevant today, when the country is again faced with the "fateful" question of choosing an economic strategy.
The purpose of this course work is to consider the problem of income inequality and the essence of poverty.
To achieve this goal in the course work, a number of tasks were solved:
Consider the nature and extent of income inequality;
Consider the concept of poverty;
Consider methods of regulating income.
The object is the formation of income and expenses, the reasons for their inequality among various social strata of the population.
Subject - inequality of income and expenditure.
1. Income inequality: nature, causes, measurement
1.1 Concept and causes of income inequality
Economic growth in Russia is not helping to combat poverty and is not helping to narrow the income gap between the poor and the rich. This conclusion was made in the report of the Institute of Social and Economic Problems of Population of the Russian Academy of Sciences, dedicated to the problem of poverty in Russia.
Scientists note that the difference between the incomes of the richest and the poorest is practically the same in all regions of Russia, despite the fact that these regions themselves face different social problems and the economic situation in them is different.
At the same time - scientists pay special attention - the "gap" between the poor and the rich as the reforms are carried out does not decrease, but increases: if in 1991, according to the State Statistics Committee, it reached 4.5 times, then by now, according to expert estimates, increased up to 14-15 times.
The causes of inequality in income distribution are related to the market system itself. The market system is an impassive mechanism; it does not conform to moral norms. Therefore, the main reason for income inequality lies in the private nature of the economy, with the ruthless laws of competition. In addition, the following reasons for income inequality can be identified:
1. Objective reasons - reflect the general usefulness of occupations, territory, sectoral and interprofessional differentiation of wages, educational level, inequality in property ownership.
2. Subjective reasons - associated with the nature of the person (luck, connections, risk, adventurism, discrimination, etc.).
3. Specific reasons - due to the current specifics of the market environment (low labor costs, unregulated regulatory framework, the possibility of appropriating large “shadow” incomes).
Population incomes differ enormously, “and these variations are weakly related to the level of gross regional product (GRP) per capita,” the report says.
"About 30% of the population receive wages below the subsistence level," said Alexei Shevyakov, director of the Institute of Socio-Economic Problems of Population of the Russian Academy of Sciences.
Economic growth in the country has a positive effect mainly on the incomes of the prosperous part of the population. And, contrary to the expectations of the government, it does not lead to a real reduction in the number of poor and low-income citizens.
A paradoxical situation arises: neither the rate of poverty reduction, nor the rate of growth in living standards are statistically related to the rate of growth of the gross regional product (GRP).
And, in contrast to countries with developed economies, in Russia, the growth of the wage fund is also not evidence of an improvement in the socio-economic situation: after all, most of this increase is due to an increase in the salaries of top and middle managers, while the indexation of public sector salaries is the poorest part of the Russian population - often lags behind the rate of price growth. 45% of the total increase in wages was due to an increase in wages of 10% of the highest paid workers, and more than 60% - an increase in wages of 20% of workers with the highest wages. The contribution of the increase in wages of 20% of workers with the lowest wages to the total increase in wages was less than 3%.
According to the leading expert of the Development Center Natalya Akindinova, at the end of 2004 there was a serious gap between the incomes of the wealthy and the poor. The state periodically reduces the gap between the incomes of the poor and the rich by increasing social payments and salaries to public sector employees.
“We have a high level of income polarization due to an undifferentiated economy. Incomes are concentrated in a limited range of industries, and accordingly, income growth in other industries is poor, ”noted Natalya Akindinova.
Employees of the Institute of Socio-Economic Problems of Population, Russian Academy of Sciences, believe that polarization is most noticeable in the growth of income from property.
“According to our estimates, in 2003 income from property amounted to 28.5% of all monetary incomes of 20% of the wealthiest population and about 12% of GDP. The problem of unfair income inequality in the Russian regions is that the regional elites provide themselves with incomes that are many times higher than both the GRP per capita and the average per capita income of the region's population. Moreover, the lower the level of productivity of the regional economy and, accordingly, the lower the standard of living of the population of the region on average, the stronger such contrasts, ”the report says.
Different results of economic activity, differences in the level of wages, in the return on human capital for men and women lay the economic foundations of modern gender inequality. But other social and demographic factors also influence gender inequality. Low wages for women are often not viewed as a serious problem, as most women are assumed to have access to other sources of resources through their spouses, other family members, and thus can work for low wages without being poor. Economic inequality in income can, of course, be smoothed out by intrafamilial redistribution, or it can increase. There may also be sources of income other than wages, inequality in access to which will affect gender inequality.
The gender structure of the Russian population differs most strongly at older ages. High mortality and low life expectancy for men have led to the fact that there are almost 2, 2 times more women older than working age than men older than working age. Or, if we compare comparable age groups over 60, there are almost 1.9 times more women than men. Thus, two-thirds of the pensioners are women. Moreover, in the oldest age groups, over 75 years old, this dominance is even stronger - 3-4 times.
Poverty among lonely older women is also characterized by extreme forms of its manifestation, since, having no other transfers besides pensions, having lost the physical ability to earn money and run their personal subsidiary plots, they find themselves among the most needy groups of the population.
Single-parent families have less economic opportunities, taking into account the dependent burden. And although the number of children in a family is on average greater in complete families, compared with incomplete families, which are overwhelmingly one-child, but given that half of complete families have one child for two parents, the dependent load in single-parent families is more conducive to getting to the poor.
A high divorce rate, an increase in the number of illegitimate children, an increase in widowhood due to the high mortality rate of men, and a decrease in remarriage - all these factors increase the proportion of single-parent families.
Poverty analysis is usually carried out on the basis of Goskomstat data or research databases such as the RLMS. But experts are well aware that such research does not affect the extreme groups: the richest and the poorest. Without taking into account the poorest, the marginalized, the social bottom, the picture turns out to be shifted, which does not allow the development of an adequate social policy.
Most of the homeless have secondary education and there has been a decrease in the proportion of homeless people with incomplete secondary education. This is due to the fact that in the 1990s, the replenishment of the homeless occurred largely not only at the expense of former prisoners, but also at the expense of those who lost their homes as a result of real estate transactions. In terms of their professional qualifications, they are mainly workers (80%).
Sources of livelihood for the homeless: - 59% have casual and temporary earnings; - 20% live at the expense of friends and relatives; - 14% ask for alms; - receive pensions and / or benefits 11%; - collect bottles 7%; - only 4% have a permanent job. The most difficult situation is for people 50 years old and older: 11% had no income, 31% were forced to begging.
The low share of those who have a permanent job is explained by the fact that enterprises (institutions, organizations) practically do not employ people who do not have registration at their place of residence, and those who have lost their housing and registration at their place of residence are fired.
Street children are also marginalized. They are not always homeless, but due to various circumstances, their lifestyle is mainly associated with the street.
1.2 Indicators for measuring income inequality
Inequality can be measured in various ways:
1. The Lorenz Curve is a graph showing what proportion of a country's total income for a year was received by various groups of the population, from the poorest to the richest. Graphically, the distribution of income is depicted as follows. Horizontally, the percentages are used for the groups of the population, and vertically, the summed up incomes received by them, also in percent. The more the Lorentz curve is curved, the less evenly income is distributed.
Figure 1. Lorentz curve
2. The Gini index (coefficient) is the proportion that the area between the Lorenz curve and the line of absolute equality is the area of \u200b\u200bthe triangle under this curve, measured from 0% to 100%, or from 0 to 1. The higher the index value, the greater the inequality in the distribution of income. For example, for the USSR in 1990 the Gini index was 23.3%, and for Russia in 2006 - 39.4%.
In the USSR in 1990 (on the eve of the collapse of the Soviet Union) there was an equalizing distribution of income, the Gini index was 23.3%, which cannot be considered an advantage, since reduced incentives to work. The transition to a market economy inevitably leads to the stratification of the population, the emergence of the poor and the rich. 1994 was the year of the highest inequality (40.9% index), then there was a slight decrease in inequality to 37.5%, but the August 1998 crisis again gave impetus to the growth of inequality. Significant income inequality negatively affects the quality of life of people, determines a relatively large share of the poor in the population, and threatens political stability in the country. The normal economic development of the country corresponds to the value of the index in the range from 28 to 32%.
1.3 Differentiation of population income
Differentiation of the population's income is assessed based on budget statistics, which does not cover both the richest and the poorest (living outside the home) segments of the population. In addition, to assess the differentiation, the indicator of the average monthly income of the household covered by constant observation is used, where the fact of the irregularity of individual income is thus leveled.
The structural and dynamic characteristics of incomes will make it possible to obtain a general picture of the availability of income for the population as a whole and their individual components.
First of all, let us consider the trend in the dynamics of household incomes (Fig. 1).
Figure 1. Dynamics of the population's cash income in 2003-2007
As seen from Fig. 1, the largest increase in cash income over the period under review occurred in the financial sector, geological exploration, and management. The least increase in income was in education, culture, agriculture, and trade. Nevertheless, a positive trend is a steady increase in income over the entire period under review.
Analyzing the presented statistical data, it can be noted that the average per capita money income in December 2007. amounted to 14325.0 rubles. or 142.5% to December 2006.
Consumer expenditures per capita in December 2007 amounted to 7537.2 rubles, which is 54.5% higher than this indicator for the same month last year.
In 2007, cash income per capita amounted to 112342.2 rubles. (monthly average - 9361.9 rubles) or 125.5% against 2006, consumer spending since the beginning of the current year per capita amounted to 67,521.2 rubles. (average monthly - 5626.8 rubles) or 130.6% by 2006.
The structure of money income of the population in the Russian Federation is shown in Fig. 2.
Figure 2. The structure of monetary incomes of the population, rubles.
Fig. 2 shows that in the structure of monetary incomes of the population, the largest share is occupied by wages, the smallest - other income and income from property. During the period under review (2003-2007), there was an increase in income in all categories.
In the third quarter of 2007, compared to the corresponding period of the previous year, the share of income from property and income from entrepreneurial activity increased (12.2% versus 11.1% a year earlier), while the share of wages and social benefits decreased (61.7% and 13 , 8% versus 66.9% and 14.3% in the third quarter of 2006).
The highest wages are observed in the gas, fuel, oil refining industries, as well as in the non-ferrous metallurgy industry, the lowest in health care, education, culture, and agriculture.
The ratio of the maximum cash income to the minimum is 15.95 (2007). This indicates a large differentiation of the population's monetary income. In 2006, this ratio was 6.23 units, which indicates an increase in the differentiation of cash income.
Fig. 2 shows that the ratio of the average wage to the subsistence minimum is increasing in dynamics (in 2007 it was 2.88, in 2006 - 2.6, in 2003 - 1.83), which indicates an improvement in the standard of living of the population.
If we compare the incomes for individual industries with the subsistence minimum (Fig. 3), we can see that income
Figure 3. Ratio of income in some industries with a living wage
Thus, from Fig. 3 shows that the value of wages in agriculture and light industry is slightly higher than the subsistence minimum, and incomes in the oil refining industry are significantly (almost 10 times) higher than the subsistence minimum, which indicates a large differentiation of wages.
The high differentiation of cash income can also be judged from Fig. 4.
Figure 4. Distribution of the population by income
Fig. 4 it can be seen that in 2007 the share of the population with incomes over 15,000 thousand rubles increased up to 30%, the share of the population whose incomes are less than 2,000 rubles - less than two% of the total mass. Population whose incomes are in the range of 7000 - 10000, 10000-12000, 13000-15000 rubles. occupy approximately equal shares (12 - 15% of the total mass).
The growth of incomes of the population is associated with an increase in the qualifications of the population. In Russia, the level of education of the working-age population is high, but most countries, both industrially developed and those with economies in transition, demonstrate higher rates of growth in the educational level of citizens due to significant state investments and private investments in the corresponding system. The most positive shifts have been noted in the higher education system: over the past 12 years, there has been a doubling of both the number of educational institutions in this segment of the educational sphere and the number of students enrolled in them.
Thus, the following conclusions can be drawn from the analysis of statistical data.
1. Average per capita monetary incomes in 2007 increased by 42.5%, while household expenditures increased by 54.5%.
2. In the structure of monetary incomes of the population in 2007 as compared to the previous year, the share of income from property and income from entrepreneurial activity increased, while the share of wages and social benefits decreased.
3. The highest value of wages is observed in the gas, fuel, oil refining industries, as well as in the non-ferrous metallurgy industry, the lowest in healthcare, education, and culture.
4. The standard of living of the population in 2007 improved in comparison with previous years, but at the same time the differentiation of incomes of the population increased (in 2007 the coefficient was 15.95 against 6, 23 in 2006), which is undoubtedly a negative trend.
2. Poverty: nature, causes, dimensions
2.1 Concept and causes of poverty
Poverty - a characteristic of the economic situation of an individual or a group, in which they cannot pay the cost of the necessary goods themselves.
In studies of the causes and place of poverty in society, the period from the 18th to the first half of the 20th centuries is distinguished (A. Smith, D. Ricardo, T. Malthus, G. Spencer, J. Proudhon, E. Reclus, C. Marx, C. Booth and S. Rowntree) and modern studies of poverty in the XX century (F.A. Hayek, P. Townsend and others). Already the works of A. Smith have revealed the relative nature of poverty through the connection between poverty and social shame, i.e. the gap between social standards and the material ability to adhere to them. Back in the 19th century, it was proposed to calculate the poverty line on the basis of family budgets and thereby introduce the criterion of absolute poverty, link the criteria for determining poverty with the level of income and meeting the basic needs of an individual associated with maintaining a certain level of his working capacity and health. Both economists and sociologists made a significant contribution to the study of poverty problems, most of whom recognized the regularity of the existence of poverty in society; the difference of points of view consisted, first of all, in the recognition or denial of the need for state intervention in solving the problem of poverty and in the scale of such intervention.
Over the past 20-30 years, alternative theories of poverty have been developed that have influenced the formation of social policies to combat poverty. Significant influence in the 1980s provided an empirical definition of the poverty line (the so-called Leiden definition), based on the idea of \u200b\u200bpeople about a sufficient minimum income, which is a function of their actual income; it became widespread in the Netherlands.
In Russia, poverty research on the basis of budget surveys began in 1908-1909, the most famous of which was conducted by A.M. Stop in 1909 and published in 1913 and completely in 1916 - concerned the budget of the oil industrial worker, this is the only study so far that has provided an analysis of needs and budgets in the national context (7 nationalities). According to this survey, the lowest-income groups (below 250 rubles) spent more than three-quarters of all income on physiological needs, while the highest-income groups (over 900 rubles) spent slightly more than half; specially investigated the budgets of the unemployed. In 1918. the first minimum budget was drawn up, and budget surveys of urban workers and employees continued until 1927 and their publication until 1929, the budgets of collective farmers are 1-2 years longer, but the latter were largely falsified. The cessation of first publications, and then of the surveys themselves, was due to the picture of the standard of living that was sharply different in their results from those descriptions that were given officially. The most "indecent" fact, from the point of view of the authorities, is the rapid growth of alcohol consumption at the expense of the family's living expenses. In the post-war period, the only work of the employees of the Institute of Labor, G.S. Sarkisyan and N.P. Kuznetsova, dealing with the problems of poverty, but using only the term poverty, which continued to be used even in numerous works of the late 1980s and early 1990s. The price reform in 1991 and a sharp drop in living standards led to the introduction of the concept of poverty and the emergence of special studies of this phenomenon.
A special study of poor families was carried out according to the VTsIOM poll on the basis of a representative sample of the adult population by sex, age, educational level, and type of settlement. Of great importance in such studies of poverty in countries with economies in transition (transit countries) is a comparison of the old and new poor, i.e. those socio-demographic groups that traditionally fell into the category of the poor (large and single-parent families, the elderly, living only on minimal pensions, etc.) and those who fell into poverty as a result of inflation, unemployment, underemployment, among the latter distinguish between the working poor and those in search of work or the unemployed. The assessment of the study gave 58% of those living in poverty among the sample, which is almost 2 times higher than the estimates of official statistical agencies, but the differences are caused by the poverty line adopted in the assessment, which is two-thirds higher for VTsIOM, but more corresponds to the international criteria of relative poverty and therefore Researchers rightly suggest that the assessment of statistical agencies be considered an assessment of the level of poverty.
2.2 Measuring poverty
Theoretical and methodological approaches to the study and measurement of poverty (and, accordingly, the sources of discrepancy in estimates of its scale) are based on three basic concepts: absolute based on the formal compliance of incomes with the established minimum means of subsistence; subjective based on assessments of their own situation with the people themselves; relative , assuming that, with different consumption standards in different communities, establishing a single minimum “poverty line” is at least problematic and depends on the average living standard of a particular country.
The official understanding of poverty in Russia is based on its absolute understanding, while the indicator is the comparison of average per capita income with the subsistence minimum, i.e. with the cost of the minimum basket, formed taking into account the established consumption standards.
VTsIOM, for example, regularly monitors the opinion of the population on the required value of the subsistence minimum, but the data based on the comparison of the subsistence minimum and per capita income of Russians are not always adequate to the real situation with poverty, since in modern conditions information on income is not sufficiently reliable.
The living wage criteria can give different results depending on what is meant by it. In addition to the officially used methodology, there are different approaches to calculating the subsistence minimum and different ideas about it. There is also a method for measuring family income, households (RLMS).
In the era of the crisis of the so-called welfare state, which affected the development of countries of the world (these processes are also recorded in Russia), many scientists and politicians come to the conclusion that poverty in a modern industrial society should no longer be considered as an absolute, but as a relative state, and, hence, it will inevitably exist as long as there is social inequality.
The weak point of any quantitative assessment of poverty is the neglect of a wide range of other available resources that affect the maintenance of the material condition of people.
The concept of relative poverty (P. TOUZENT): (the poor are distinguished according to the median principle): those whose income makes up a certain proportion of the “median” income in a given country at a given period of time are recognized as poor. Moreover, the poverty line is always at the same distance from the median, which statistically characterizes the standard of living achieved in society.
It has recently been that Russian sociologists have begun to come to the conclusion that poverty research requires an analysis of the deprivation, deprivation, and limitations in social life experienced by a certain proportion of the population. This is the essence of the deprivation approach in assessing poverty, an integral part of the concept of its relative understanding and study.
Deprivation approach (or the assessment of poverty through the experienced deprivation) requires taking into account a number of material, but also social indicators in order to determine the qualitative "threshold" below which the lack of mental approaches leads the individual to the brink of falling out of the usual social ties and the generally accepted way of life of the majority of the population of a certain region or country , "Threshold", which, in fact, means social exclusion, i.e. de facto exclusion of a certain proportion of the population from normal living conditions.
The application of the deprivation approach in research practice involves the solution of three main tasks (methodological):
1. How to identify indicators of deprivation.
2. To what extent do they indicate a decline in the generally accepted standard of living.
3. Are there high-quality “thresholds” of deprivation that allow assessing the living standards of this or that individual, family.
Assessment in poverty based on the deprivation approach should distinguish between the quantitative and qualitative aspects of deprivation.
Qualitative filling of various levels of deprivation of poor households:
4th stage of deprivation - the level of poverty, when the resources are not enough for adequate food, the family saves on hygiene items, does not renew clothes for children as they grow, refuses to buy fruits, juices, and does not have such durables as a TV and refrigerator.
3rd stage of deprivation - the stage of acute need (poverty) - deprivation is concentrated on the quality of food, lack of clothing and shoes (adult family members are forced to refuse to renew them), it is difficult for a family to maintain housing in order, to have simple everyday furniture, to organize, if necessary, the necessary ritual ceremony (funeral , commemoration), purchase vital medicines and medical devices, limit the possibility of inviting guests and going out.
2nd stage of deprivation - the level of constraint (low income) - when there is not enough funds for the delicacies loved in the family, gifts for loved ones, newspapers, magazines, books; the quality of leisure for adults and children decreases; the family cannot afford to buy a washing machine, to visit relatives living far away; refuses paid services, primarily necessary medical services.
1st stage - a stage that characterizes living standards close to average and does not mean the existence of a deviation from the generally accepted way of life in the Russian community. Families at this stage need to improve their living conditions, save on the purchase of modern expensive durables, paid educational, recreational services, family rest and entertainment.
It should be noted that many types of deprivation experienced by Russians at the present time are not yet directly associated in the mass consciousness with poverty, since they are present among the majority of the population.
There are a number of poverty indices that give its different characteristics: for example, the surplus-separation index, when the share of different income groups in the total population is used in the form of coefficients, allows one to give both a qualitative and quantitative assessment of poverty changes among population groups in relation to towards global poverty; the Rawls index reflects the position of only the poorest family, other indices reflect the proportional income shortfall of the poor, the total income shortage, which is missing to the poverty line.
3. Income support system
3.1 State mechanism of income redistribution
State regulation of income is a system of measures and norms of a legislative, executive and controlling nature, carried out by competent state institutions and public organizations in order to stabilize incomes and their growth, depending on the changing socio-economic conditions of the development of society. It is aimed at creating conditions conducive to the normal reproduction of the labor force and its development.
In theory, the state policy of income is broader than state regulation of income, since the former can also be based on the principle of non-intervention of the state (the principle of economic liberalism). The latter took place in Russia at the initial stage of transition to the market (“shock therapy”). But now these concepts are identical. In modern conditions, non-interference of the state in socio-economic processes is impossible, since market distribution is unfair and does not provide everyone with income for a decent life, regardless of the results of economic activity. There is a need for state intervention. The debate is not about the need for state intervention, but about its scale, forms and intensity.
Objects of state regulation of income are spheres, situations, conditions, sources of income generation, where difficulties have arisen or may arise, problems that cannot be solved automatically or resolved in the long term, and the removal of these problems is necessary for the normal functioning of the economy, reproduction of the labor force, maintaining stability. ...
The main objects of state regulation of income: minimum income, wages; employment; taxes, prices; social guarantees, social relations (including relations between employers and employees, social security); legal support (security, safety of life, property, property, money savings, etc.), etc.
The state policy of revenues is to redistribute them through the state budget by taxing various groups of income recipients.
At the same time, other tasks are being addressed: increasing incomes for the poor creates conditions for the normal reproduction of their labor force, eliminating imbalances associated with the need for production factors (land, capital, labor, entrepreneurial ability), regulating employment, and reducing social tension.
The state's activity here is measured by the volume and dynamics of social expenditures from the federal and local budgets. The possibilities of the state in the redistribution of national income are limited by budget receipts.
When organizing the redistribution of incomes, the state is dealing with the following problem: it is necessary to determine who, what strata of society and why it should make it pay for the unemployed, disabled, old people, etc.
These difficult issues are resolved by the state in conjunction with economic opportunities and social needs, neutralizing negative effects at the micro and macro levels.
In any society, income policy is based on certain principles arising from the Constitution and other legislative acts equated to it.
These principles are: social justice; social partnership and solidarity of all segments of the population; individual responsibility for their financial situation (self-defense of the population); the right to work and remuneration worthy of it; the right to professional associations; economic feasibility and others.
The assigned tasks are implemented using certain methods, means, the choice of the most important goals with limited funds, etc.
During the period of transition to the market, the main directions (objects) of state regulation of income were formed: minimum wages; wages in the public sector and civil servants; regional regulation of wages; anti-inflationary and employment policy; tax policy, social security systems and the entire social protection system in society (including social security, insurance, service, etc.); providing a legislative framework in the field of income regulation, employment, collective bargaining regulation of labor relations, tax policy, the creation of relevant bodies and institutions, etc.
An important place in the regulation of income is occupied by the development of its legislative (regulatory) base, which is the starting point of the entire regulation process. The standards are used to calculate the normative consumer budgets, the working time standards - to determine the working hours, the duration of vacations at enterprises, the maximum environmental pollution standards - to use the appropriate means and technologies, treatment facilities, create safe working conditions; tax rates - for withholding income and social and other taxes, taxes from legal entities and individuals (including social taxes) and others.
The most significant for the regulation of incomes and living standards of the population are the Constitution of the Russian Federation (basic law), the Civil Code, the Labor Code, the Family Code, the Employment Law, other laws, Presidential decrees, Government decrees (on increasing the minimum wage, legal support for collective contractual system, social security and insurance, social guarantees, etc.).
The state, for example, establishes normative regulation of the activities of enterprises in the following areas: labor legislation; regulation of working conditions; environmental pollution control; tariffs and import quotas, taxes and tax incentives; curbing competition; antitrust laws.
Thus, the state directly or indirectly influences the process of redistribution of income through the federal and local budgets.
There are economic, administrative, conciliatory methods of state regulation of income.
Economic methods include the definition of the minimum wage, tax policy, price regulation, wages at state-owned enterprises and civil servants, employment, etc.
The growth of the minimum wage, as we have already noted, depends on the economic (financial) opportunities that have developed in society at a certain stage. Underestimation of this factor can lead to delays in the payment of wages for workers, budget deficits, etc. At the same time, the level of the minimum wage should be built taking into account the necessary funds for the physical reproduction of the labor force (PM), and this directly depends on the monetary politicians. The minimum wage is involved in the system of social benefits, fines, duties, etc. It is the starting point in the organization of remuneration. Therefore, the justification of the minimum wage is of great socio-economic importance.
Tax policy provides tax revenue to the budget. Without it, it is impossible to establish effective stimulation of economic growth, to organize the redistribution of income. Now it is no longer possible to name a problem for the solution of which the tax regulator cannot be adapted (for example, the release of that part of the income that is spent on charity).
Tax regulation is supplemented by a public expenditure policy, which makes it possible to carry out structural transformations of production, smooth out regional disproportions, and ease the acuteness of the problem of unemployment.
The state goes to provide exporters with tax incentives, assumes guarantees of export credits, uses multilateral agreements, etc. to strengthen the country's export potential, which results in the creation of new jobs for the population, and hence income.
Customs taxation - the state, by changing customs duties, receives from trading partners either counter concessions or toughening of the conditions for national exports. Customs duties are a type of indirect taxes, the increase of which leads to an increase in the cost of imported, and after them, domestic goods. Price regulation has a similar effect.
The state regulates wages in the public sector based on its economic capabilities. The role of this sphere is high in meeting the spiritual needs of the population. It is through the efforts of this sphere that the human potential of any society is formed. Here the relationship with the professional and qualification structure of the labor force, scientific and technical progress and innovations can be traced. The role of this sphere in health promotion and leisure activities is great. By increasing the cost of maintaining this area, the state is implementing the social orientation of the economy to the tasks of personal development. There is also an inverse relationship: more complex, creative work creates a large mass of production per unit time, which leads to economic growth.
Administrative methods are not associated with the creation of additional material incentives or the danger of economic (financial) damage. They are based on the strength of power and include measures of prohibition, permission or coercion.
Coercive measures were widespread in our country: this is a quota of jobs at enterprises for socially vulnerable groups of the population (for adolescents, disabled people, etc.), and the obligation of enterprises (organizations) to allocate a certain norm of workers for agricultural, construction work, for work on the improvement of territories, etc. The measures of the prohibition were manifested, for example, in the fact that it was forbidden to work in combination (with some exceptions, for example, for medical workers, scientists and teachers, etc.).
At present, the following methods and forms of administrative regulation can be distinguished: direct state control over monopoly markets; development of standards, control over their observance; education and maintenance of the minimum acceptable parameters of the population's life, the level below which poverty (setting the minimum wages, pensions, unemployment benefits); protecting the interests of the nation - export licensing or state control over imports.
Economic and administrative methods have some similarities. At the same time, they are opposite. Administrative methods limit freedom of economic choice. State control can be all-encompassing, covering the size of production, its structure, consumer qualities of products, costs, wages, profits, etc., that is, the entire economic mechanism. With this approach, not only will there be no economic freedom, but there will be no economic benefit, most likely, there may be damage, narrowing of motivation for entrepreneurial activity, etc.
Currently, conciliatory methods are the most widespread and are considered the most economical and “bloodless”. Social partnership - coordination of actions of the government, entrepreneurs and employees on the dynamics of wages and social transfers.
3.2 Social protection as an income equalization mechanism
Social protection of the population is carried out through the mechanism of income redistribution. Closely linked to inequality is the problem of poverty. This is a relative concept, defined through the introduction of a poverty line. For the first time, social protection mechanisms were created in Germany in 1883 by Bismarck. The state allocates money for programs, including for the fight against poverty:
- transfer payments - unemployment benefits, pensions to low-income groups of the population;
- regulation of prices for socially significant products (medicines);
- indexation of fixed income and transfer payments at a statutory inflation rate;
- mandatory minimum wages;
- progressive taxation.
In economics, the following views on social justice have developed:
1. Egalitarian (egalitarian), according to which everyone gets equal shares.
2. Rawlsian (J. Rawls, American philosopher), in which the utility of the poorest strata of the population is maximized.
3. Utilitarian (I. Bentham, English economist), according to which the general utility of all members of society should be maximized: "ensuring happiness for as many people as possible is the main function of the state."
4. Market, according to which the fair market distribution is recognized.
Inflation has a significant impact on the decline in income in a transitional economy. It leads to a reduction in the Robertsonian lag (the time interval between the exposure and its effect), in particular, the consumption lag, i.e. the time interval between earning income and the intention to make a purchase. The lagging function of consumption was analyzed by M. Friedman. The reduction of this lag in a transitional economy is due to inflationary expectations, which induce the population to make purchases or financial savings.
Thus, the incomes formed in a society in transition are the second pole of the equilibrium state of the economy, the first of which is the supply of final products. The method of income distribution, their general level, introduce additional conditions into the Walrasian supply and demand equilibrium model - the so-called Pareto optimum. V. Pareto proved that equilibrium exists only when not only equilibrium of supply and demand is established, but also equilibrium well-being of participants in market relations. This is the ideal of a market in which not only exchange is balanced, but also the well-being of all its participants grows. The Pareto Optimum, or its criterion of well-being, states that any change that does not hurt anyone and improves the situation of some should be considered an overall improvement. But in real practice there is no material form of Pareto optimum.
Income regulation is carried out through a redistributive mechanism created by the state:
- taxes on large incomes;
- transfers for the poor.
Conclusion
The problem is that there is no reliable income statistics in Russia. Basically, the existing data are based on statistics of expenditures, that is, household expenditures are taken as income. But in reality, income and expenses are completely different characteristics. Let's say a person receives a high salary, but saves money for a house. Accordingly, by saving savings, he spends a small part of his income, and by this indicator he may even be a poor person. The opposite example can also be cited: a person saved up for a house for many years and finally acquired it. Maybe he is not rich, but in terms of expenses per month of purchase he will fall into the group of very wealthy people.
Another methodological problem is that the Russian statistical agency estimates inequality and income differentiation based on a certain mathematical model, which is insensitive to the changes currently taking place in our country. There seems to be a gap between measurements and actual changes. But in which cases are we dealing with the effect of the absence of these changes, and in which with insufficient sensitivity of measurement methods? - this issue must be dealt with separately.
However, it is indisputable that Russia is indeed a country with a sufficiently high social inequality, which is largely dictated by objective reality.
The formation and distribution of income in market conditions is based on the fact that each owner of the factors of production receives his income depending on the demand for the offered resource and the supply of this resource in the market.
Major Western economists recognize inequality in the distribution of income and wealth. Moreover, by wealth they mean the available movable and immovable property, money, securities, and by income - the total amount of money earned or received in another way during any period.
The problem of income distribution has two aspects: functional distribution and personal distribution. The functional distribution of income relates to the way in which a society's monetary income is divided into wages, rent, interest, and profit. Personal income distribution is related to the way the total income of a society is distributed among individual households.
There are several ways to assess inequality in income distribution. The paper considers the Lawrence curve and the Gini coefficient.
The formation and distribution of income in a market economy occurs with the direct participation of the state, which practically in all economically developed countries carries out state regulation of these processes. The state assumes the responsibility of ensuring the human right to a certain standard of well-being in a given society and social protection of every member of society. The state reduces inequality in income distribution through transfer payments and tax policy. The system for maintaining the level of income in the community includes a social insurance program and a state assistance program.
There are several views on distribution of goods: egalitarian, Rawlsian, utilitarian and market.
The governments of industrialized countries did not wait for the end of the theoretical debate about fair distribution of income, especially since there is no one to make a judgment that has the status of absolute truth in a regulatory debate. Practice has shown that the existence of large areas of poverty is fraught with many negative consequences for stable and sustainable economic growth, law and order, moral health, etc. In essence, this is obvious within the framework of common sense and political pragmatism of leaders who do not want social upheavals in society.
List of references
1. Abakumova N.N., Podovalova R.Ya. Income and wages policy. Tutorial. - M .: 2007 .-- 224 p.
2. Ivanov V.N. Inequality and Poverty of the Population: Solutions to the Problem in Russia and Abroad. // Problems of forecasting. - 2006. - No. 3. - P.132-148
3. Iokhin V.Ya. Economic theory - M .: Jurist, 2007, p. 79
4. Kokin Yu. Fundamentals of income and wages policy for the future // Chel. and labor. - 2000. - No. 12. - h. 58-60; 2007. - No. 1.
5. Lipatov V. On the issue of income inequality and the allocation of the middle class in the Russian economy // Economic Issues. - 2007. - No. 11. - P. 14.
6. Income and wages policy. Textbook / Ed. P.V. Savchenko, Yu.P. Kokin. - M .: Jurist, 2007 .-- 456 p.
7. Speransky A. Poverty as a diagnosis. // Social protection. - 2006. - No. 4. - P. 3-6
8. Social development and living standards // Bulletin of Economics, 2007, No. 6. - P. 28-30
9. Taganov E. Income inequality in Russia // The Economist. - 2007. - No. 11. - P. 73.
10. Popova IN Economy of the rich // The Economist. - 2007. - No. 2. - p. 68.
11. Fedorova O.G. Poverty in Russia (problems of its historical and legal analysis in the post-Soviet space) // History of State and Law. - 2006. - No. 8. - P.2-3
12. Economic theory. / Ed. Dobrynina A.I. - SPb .: Peter, 2007 .-- P. 281
Kokin Yu. Fundamentals of income and wages policy for the future // Chel. and labor. - 2000. - No. 12. - h. 58-60; 2007. - No. 1.
Abakumova N.N., Podovalova R.Ya. Income and wages policy. Tutorial. - M .: 2007 .-- 224 p.
Iokhin V.Ya. Economic theory - M .: Jurist, 2007, p. 79
Factors such as the innate ability of people, which can vary quite significantly. Individuals with higher productivity also receive higher incomes. In addition, some of them have unique abilities that enable them to extract “intellectual rent”. At the same time, not the least importance is the performance of a person, his desire to achieve high results in his activities. The amount of income depends on differences in property ownership, but the latter can be inherited by individuals, i.e. Income inequality is reproduced, contributing to this category of people getting a better education and, accordingly, a better paid job.
Reasons for inequality in income distribution:
1) differences in abilities;
2) differences in education;
3) differences in professional experience;
4) differences in the distribution of property;
5) risk, luck, failure, access to valuable information.
Differences in ability. People have different physical and intellectual abilities. For example, some people are endowed with exceptional physical abilities and can receive large sums of money for their sports achievements. And some are endowed with entrepreneurial skills and business skills. So, people who have talent in some area of \u200b\u200blife can get more money than others.
Differences in education. People differ not only in differences in abilities, but also in educational level. However, these differences are mostly the result of the choice of the person himself. So, after the end of the 11th grade, someone will go to work, and someone will enter the university. So, a university graduate has more opportunities to earn more income than people without higher education.
Differences in professional experience. Individuals' incomes differ, including due to differences in professional experience. So, if Ivanov has been working in a company for one year, then it is clear that he will receive less salary than Petrov, who has been working in this company for more than 10 years and has more professional experience.
Differences in the distribution of property. Differences in the distribution of property are the most powerful cause of income inequality. A large number of people have little or no property and, accordingly, either receive little or no income. Others are owners of more real estate, equipment, shares, etc. and get more income.
Risk, luck, failure, access to valuable information. These factors also have a significant impact on income distribution. Thus, a person who is inclined to take risks in economic activities can receive more income than other people who are not capable of taking risks. Luck also helps you generate more income.
“Reasonable” income inequality can stimulate entrepreneurial and energetic people and, on the basis of increased income, support socially disadvantaged segments of society. What are the causes of inequality in income distribution?
- 1. Differences in the abilities and talents of people.
- 2. One of the main causes of income inequality is inequality in wealth ownership, which is even more unequally distributed than income. According to S. Fisher, the difference in wealth between families in the United States reaches exceptional proportions. 0.05% of American families own 35% of the total value of personal property, while the property of the "bottom" 90%: households accounts for only 30% of its total value. If in 1963. the top 1% of families owned 32% of the national wealth, then in 1983 they already owned 42%. The distribution of national wealth in Great Britain is even more uneven than in the United States.
- 3. An increasingly important factor in income differentiation is the level of education and training. If in 1976 graduates of colleges in the United States earned on average 55% more than graduates of secondary schools, then in 1994, already by 84%. College graduates earn approximately $ 2.5 million by age 65, and those who do not graduate from high school earn $ 1.2 million.
- 4. Professional affiliation of a person. Recently, in the USA, for example, doctors have been leading, earning an average of $ 120,000 a year, which is explained by a number of factors: the demand for their services is growing; they spend a lot of time and energy studying; medical institutions do not train a sufficient number of relevant specialists.
- 5. Applicable taxation systems. A progressive income tax smooths out income inequality.
- 6. The degree of monopolization of the economy.
- 7. Other factors: for example, who works more earns more; persons engaged in non-prestigious activities and in unfavorable working conditions receive compensation, etc.
If incomes were distributed absolutely evenly, then the lowest 20% group of the population (bottom quintile) would receive exactly 20% of the total income, 60% of the population would receive 60% of the income, and the highest (also 20% group) would receive exactly the same share total income - 20%. In reality, however, the bottom quintile accounted for in the United States at the end of the 20th century. only 4.2% of total income, the second - 10%, the third - 15.7%, the fourth - 23.3%, the fifth - 46.9%. Moreover, the upper group, consisting of 5% of the population, appropriated 20.1% of the national income, i.e. more than 40% of all families belonging to the lower groups.
The degree of inequality in the distribution of income is demonstrated by the Lorentz curve (Fig. 1). On the abscissa, we will postpone the shares of population groups in its total population, and on the ordinate, the shares in the national income.
income inequality lorentz differentiation