Income inequality is the extent to which income is distributed in an uneven manner among a population in a given state. Income in this case means the returns on the people from work done, which is in form of salaries, wages, interests on savings accounts, dividends from shares of stocks and rents and profits accumulated from selling goods and services. The disparity that emerges in the distribution of resources that have accrued from people’s investments and government anticipated dues in great manner contributes to income inequality. The economist believe that the main reasons that inequality induces economic incentive is because material well-being and conspicuous consumption relate to status. The differences in national income equality around the world is measured by the national Gini coefficient. The role of the government in setting policies, laws and regulations that ensure its people’s welfare are ay their interests and the business environment gives fair and adequate returns.
The economists focus on economic disparity on three major dimensions including wealth, income and consumption. Inequality is a general social problem that at long term hinders economic growth and may result to economic crisis of entire nation. A proper running economic system that is thought to adhere to the principle and mechanism of income equality is based on free trade, low government corruption, foreign investment and low foreign debt. These factors contributes to a stable state of economic growth which ensures currency circulation, open market economy and rich opportunities for investments. Economic inequality usually varies between societies, economic structures and systems and historical periods. The economic metrics of wealth, income and consumption are highly dependent on the people given that they are free to decide the time to create wealth, consume or save for the future (Fletcher, 2013).
There are economies with high income inequality and relatively low wealth inequality for instance Japan. There are other economies that are characterized with low income inequality and relatively high wealth inequalit….
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