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Inequalities Of Income

 Inequality of Income, Effects of Inequality


            Inequality of income is a dominant feature of all capitalist countries. There are extreme inequalities of income and wealth in such societies which have not been narrowed down despite the best efforts of the governments. Inequalities are more pronounced in underdeveloped countries than in advanced countries.

Causes of Inequality

  1. Differences in Ability

    People differ widely in education, intelligence, motivation, energy and talent. These differences lead to increased income differentials. A person, who is more efficient than others, gets highly paid. There may be differences in people having same qualifications. Some may be more intelligent, hardworking, daring and resourceful. Thus they may be in a higher scale of social values and earn more in the same occupation.

  1. Differences in Age

    Young persons who enter job market as fresher and old people who retire from service, have lower incomes than those in mid career.

  1. Existence of non-competence Group

    The existence of non-competing groups in every society is another cause of inequalities of income. It is distinguished in five segments and they are:

    1. the unskilled workers like ordinary labourers who carry earth, sand or bricks in construction work;

    2. the semi skilled workers like those who can mix sand and cement in the required proportions;

    3. the skilled workers like those who require special training and skills like the mechanic, the locomotive driver, the plumber etc.

    4. the clerical workers who posses some minimum academic qualification and

    5. the professional groups such as lawyers, teachers, doctors, engineers, actors and the manager. There are vast income differences in these groups and also within each group. But they are more pronounced in the last group.
  1. Differences in Risk, Uncertainty and Security

    Professions vary in risk, uncertainty and safety. These differences ar4e reflected in earnings. People prefer government jobs due to greater security. Conversely, jobs in private organisations carry risk and uncertainty. Employees in government jobs usually earn less than their counterparts in private industries.

Effects of Inequality

Inequalities of income and wealth lead to more harmful effects than beneficial effects.

  1. Mal Allocation of Resources

    Inequalities of income and wealth lead to mal allocation of resources within the economy. The purchasing power of the well to do being large, it influences the effective demand of community. Goods are produced to satisfy the wants and preferences of the upper income groups. Thus larger resources are diverted towards the production of articles of comfort and luxury while necessities needed by the masses are neglected. As a result, there is surplus of former goods and deficient of the latte. This is a social waste and loss of economic welfare.

  1. Wastage of Resources

    Inequalities lead to wastage of resources in the economy. The new rich who own the mines, plantations, factories and business firms earn huge profits. They roll in wealth and spend extravagantly on conspicuous consumption, gold jewellery, palatial buildings, speculations etc. conversely, the masses live in abject poverty, in extremely unsanitary conditions, without any proper medical care. They do not have the means to educate their kids. Being ill fed, ill clothed and ill educated their standard of living is extremely low. So is their efficiency which leads to a huge wastage of the man power of the economy.

  1. Discontentment and Unrest

    Unequal distribution of income and wealth in a society breeds dissatisfaction and unrest among the masses. It divides the nation into two nations, the haves and have-nots or the propertied or non-propertied. The former exploit the latter in order to earn large profits or income. The factory manager or the landlord does not pay the workers either in factory or on the farm, remunerative wages. Rather they adopt labour saving techniques so that less labour is required. This leads to unemployment. All this breeds discontentment and unrest among working classes which take the form of agitations, strikes and even violence.

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