Income Distribution: Determining Inequality On Share Of Income

Income Distribution

Income distribution is the overall share of income in a country. It shows the contribution of the top, middle and low income earners on the overall earnings of the country. Survey and research are made to collect data for analyzing distribution of income.

Analysis of income distribution is used to determine the effect of age, education, race and other factors to income. It’s also used to determine which industries or jobs pay higher. When checking for income distribution, the population is divided into groups based on their earnings. The percentage of the earnings shared by each group is then calculated to determine if distribution is equal or not. When there’s no difference between the income shares of each group, then distribution of income is equal, if there’s a difference then it means distribution of income is unequal. Distribution of income is usually not equal. However, the difference on the inequality is also important in analyzing the earnings of people. If there’s only slight difference on the share of earnings, this means that all group categories, from bottom to top are all earning properly. However, if there is a big difference on the share of earnings, this can be caused by a lot of factors that the government needs to look into. For example, if the top group shares 70% of the total earnings, the middle group shares 25% of the total earnings and bottom group shares 5% of the total earnings, this means that there is a big difference in the inequality of share of income. Adding the total number earnings of the middle and bottom group is not even half the earnings of the top group. This may mean that the gap of rich and poor is getting bigger.

By analyzing the different factors of income distribution, economists and government will be able to understand better the causes of inequality of income share and do something about it.