Income inequality: causes and consequences

Income inequality is predetermineduneven distribution of material wealth. In a market economy, income distribution occurs in the markets of a variety of production factors: capital, natural resources, labor. Depending on the degree of ownership of these types of resources, there is a redistribution of benefits, resulting in income inequality. Among the main reasons for this phenomenon are the following:

1. Different distribution of ownership.This is the most fundamental reason for this inequality. It is a consequence of the fact that for the creation of material goods of any kind (and therefore income), the means of production are needed: on a large scale, such can be factories and plants, in small scale - up to working tools. Either way, the original private ownership of the means of production and their uneven distribution among the population are the cause of income inequality. A trivial example may be the initial differences between the starting opportunities of the offspring of oligarchs, who receive large means of capital reproduction in the inheritance, and the heirs of the average citizens. And if this is a negative feature of the capitalist system itself, most of the following reasons result from individual qualities.
2. Different abilities.It is not a secret that people have excellent intellectual and physical abilities. Someone, possessing exceptional physical data, implements them in the sports industry, someone is good in the financial sphere and so on. These characteristics lead people into different spheres of social activity, each with its own average level and ceiling of earnings.
3. Different level of education.In addition to individual abilities, people also have differences in education. The cardinal difference of this reason from the previous one is that the educational level is often the result of the conscious choice of each person (not always, but usually it is so). Of course, having a greater stock of professional and general knowledge, has more chances to profitable to realize their own work, followed by income inequality.
4. Various professional experience.In the conditions of the modern domestic labor market, professional experience is highly valued. As a rule, in practice this means lower wages for young workers and its increase with professional growth and accumulation of experience.
5. Income inequality may also give rise to some additional factors. Such as luck or failure, access to valuable resources and so on.

Income inequality. The Lorentz curve

For a graphic representation of the degree of inequality in society, economists apply the curve of Otto Lorenz. It is an image of the distribution function

income, which accumulates all the numerical shares and incomes of the population. That is, it reflects the income of a particular category of the population relative to its size.

Income inequality and its consequences

Among the consequences of this phenomenon areeconomic and social. The first, for example, is the growing stratification of the categories of the population: that is, a small number of people are concentrating in their hands more and more resources, selecting them from the poor. The consequence of this is discontent in society, social tension, unrest and so on.