Income inequality is determined by the uneven distribution of wealth. In a market economy, income distribution occurs in the markets of various production factors: capital, natural resources, labor. Depending on the degree of possession of these types of resources, a redistribution of goods takes place, as a result of which income inequality arises. Among the main causes of this phenomenon are the following:
- Different distribution of property. This is the most fundamental reason for this inequality. It is a consequence of the fact that the creation of material goods of any kind (and therefore income) requires the means of production: on a large scale, these can be factories and plants, on small scales - up to working tools. One way or another, the initial private ownership of the means of production and their uneven distribution among the population are the cause of income inequality. The most banal example may be the initial differences in the starting capabilities of the offspring of oligarchs, who receive large means of reproduction of capital in inheritance, and the heirs of average citizens. And if this is a negative feature of the capitalist system itself, then most of the following reasons arise from individual qualities.
- Different abilities. It is no secret that people have excellent intellectual and physical abilities. Someone, possessing exceptional physical data, sells them in the sports industry, someone is good in the financial sector and so on. These features lead people to different spheres of social activity, each of which has its own average level and ceiling of earnings.
- Different level of education. In addition to individual abilities, people have differences in education. The fundamental difference between this reason and the previous one is that the educational level is often the result of a conscious choice of each person (not always, but usually it is). Of course, having a greater supply of professional and general knowledge, there is also a greater chance of more profitable realization of one's own labor, followed by income inequality.
- Various professional experience. In the current domestic labor market, professional experience is highly valued. As a rule, in practice this means lower wages among young workers and their increase with professional growth and the accumulation of experience.
- Inequality of income may also give rise to some additional factors. Such as luck or failure, access to valuable resources and so on.
Income inequality. Lorentz curve
For a graphic representation of the degree of inequality in society, economists use the Otto Lorenz curve. It is an image of the distribution function.
income in which all the numerical shares and incomes of the population are accumulated. That is, it displays the income of a specific category of the population relative to its size.
Inequality of income and its consequences
Among the consequences of this phenomenon, economic and social are distinguished. The first, for example, is the growing stratification of population categories: that is, a small number of the population are concentrating in their hands an increasing amount of resources, taking them from the poor. The consequence of this is discontent in society, social tension, unrest and so on.
