Income Disparity
March 23, 2009
Overview
Income disparity can also be referred to as wage gap. It describes the irregularities and unfairness in the processes of wealth and income distribution among social-economic classes within a given society. Income disparity can also be used to refer to the disparities in average per capita incomes in countries.
Gender Gap
In light to income disparity, the gender gap refers to the dissimilarities in the wages of men and women or the boys and the girls. It is however debatable as to what extent gender gap is as a result of gender differences, discrimination or lifestyle choices where for instance one decide on the number of hours to work. For example, the wage ratio is reached at by calculating the number of hours individuals work and not the sex of the workers.
The Causes of escalating Income disparity
The cause of escalating income disparity is probably the biggest questions in socio-economics today. Important to note is that alterations in labor’s share of income do not play any role in escalating disparities of labor income. There are various aspects of rising income inequality such as disparity at the bottom of the income distribution chain- inclusive of labor mobility, a skill-prejudiced technological change, disparity amongst high income groups, and inequality in consumption, geographical inequality and the international dissimilarities in income distribution, especially at the top.
More specifically speaking, income disparity caused by physical factors e.g. soil, climate, communication facilities and natural resources can be termed as development-based factors. In this context, the wide notable margin is due to an economy’s development.
The composition of income itself in an economy can cause a disparity in earnings. In a developed economy, the sources of income become increasingly varied. It is not surprising to find citizens tackling more than one job simultaneously or citizens who have more than one sources of income. Logically, an income gap will evolve from this as not everyone does the same thing.
Necessary elements e.g. working skills and capital equally plays a role in wealth distribution. Typically, capital and up-to-date working skills contributes more to the economic growth than mere labor, thus, individuals who possess them are able to acquire more wealth than normal laborers. An income gap between these two groups of people reflects an income disparity between surpluses from capital input and income from plain labor.
Types of income disparity
In a much broader sense, there are three types of income disparity; per capita income difference between urban and rural residents, per capita income difference between different localities and per capita income difference between citizens in the same locality.
Steps to shorten the wage gap
When a lot of countries industrialize, it is believed that socioeconomic disequilibrium occurs, therefore manifested by the widening income gaps between different social groups. Income disparity caused by income composition can be resolved by having effective labor laws and rules in place, and correctly protecting intellectual property rights. Further, a workable policy ought to be formulated regarding labor mobility.
Additionally, an effective economic legislation will be required to shorten income disparity in an economy. Legislation such as a resources law will ensure that less developed parts of the economy are in an advantaged position to utilize the rich resources.
Income disparity is caused by policy based factors thus, to weed out these factors and shorten the gap, financial policies and preferential tax should be executed in an economy to support the development of small start ups businesses and medium-sized enterprises. Whatever malady is causing income disparity should be tackled with transparency by the concerned authorities. To get rid of whatever contributing factor will hugely determine the economy’s sustainable development in the future.
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