INCOME AND WEALTH
Income
Types of Income
Income is the amount of money received by a household over a period of time. This income may come from employment, self-employment, dividends, rent or a variety of other sources.
Distribution of Income
Income distribution is the way in which total income is shared out between households. Not everyone receives the same amount of money each year because of wage differences and the uneven ownership of wealth.
Wages
Methods of Payment
Workers sell their labour to employers in return for:
Salaries. Usually salaries are paid monthly to non-manual workers such as managers irrespective of the number of hours worked.
Wages. Wages are weekly payments for work done and are paid by:
Piece rate or piece work: an amount for every item made.
Time rate: an amount for every hour worked.
Deductions
The gross wage is made up of basic wages plus overtime and bonus payments. Deducting income tax and national insurance contributions leaves net wages or take-home pay.
Money and Real Wages
Money wages refers to pay without any adjustment for inflation. Real Wages are the amount of goods and services money wages can buy; this is given by the equation:
Real wages = Money wages/Retail price index x 100
Wage Differences
The wage for a job is determined by the supply and demand for labour in that particular occupation. A job where labour is in high demand but in short supply will pay higher wages.
Demand for Workers
The demand for labour is found (derived) from the demand for the finished good. There will be an increased demand for workers if:
There is an increased demand for the finished good.
Workers increase their productivity.
Supply of Workers
There will be a limited supply of workers if the job:
Requires special qualifications, skills, training or ability/
Is unpleasant, dirty or boring.
Is stressful or carries great responsibility.
Involves antisocial hours.
Wage Drift
Wage drift occurs when the earnings of some workers rise above the average for the industry. Workers doing the same job within the same industry may be paid differently because:
Workers in cities are sometimes paid more to meet the higher cost of living.
In spite of equal-opportunities legislation women tend to earn less because their careers are interrupted by family commitments, or they suffer from sex discrimination.
Older workers tend to earn more because they are paid a bonus to reward their experience.
Some workers are paid more for working harder.
Some workers receive overtime, bonuses, etc.
Wealth
Types of Wealth
Wealth is the value of all the assets (items) owned by a household at a particular moment in time.
Wealth Distribution
Wealth Distribution means the way the ownership of assets is shared out between households. Wealth is much more unevenly distributed in the UK than incomes.
Table 8.1 suggests that while the top 1 per cent and 10 per cent now own a smaller share of total wealth than in 1971, half the population still own only 4 per cent of all assets.
Table 8.1 Wealth trends
|
Share of total wealth |
|
|
1971 |
1983 |
Most wealthy 1% |
31% |
20% |
Most wealthy 10% |
65% |
54% |
Most wealthy 50% |
95% |
96% |