Earnings and Income Inequality across Borders - Essay Example

Earnings and Income Inequality across Borders Introduction: The term economics has a wider scope that applies to the aspects of production, distribution and marketing of business. Therefore, economics is treated as the science of a business. For the efficient and effective growth and development of marketing concept, economics plays a crucial role. Economics is a wider concept, which deals with manufacturing and proper distribution of appropriate goods and services. Therefore it is important to focus on the marketing growth and development. Earnings and Income Inequality across Borders: Earnings are an economic concept which play a significant role in the overall development of a nation. Generally, in economics there are mainly four factors required for production: land, labor, capital and resources. Among all these factors, labors are the key assets of an organization, and only they are eligible to obtain the reward for the work being done by them. An earnings means the total outcome or output of a stipulated process. The concept of income is a major component in economics, which is closely related with the demand, supply, and consumer tastes and preferences. But as far the research or the analysis of the economists is taken in to consideration, there is dissimilarity between the concept of earnings and income. The term income inequality indicates that there is an irregular distribution of income among the individuals. Generally, the term income may be of in two ways, such as personal income and house hold income. If there is dissimilarity between earnings and income inequality, it is necessary to analyze the reasons for such difference, and also essential to compare such differences among two nations. Due to the difference in income and earnings potentiality, there should be a chance that it will affect the overall economic impact of the nation also. Besides, there is a close relation between the income inequality and the impact of globalization. While analyzing the point of view of economists, it is necessary to give stress for making comparisons of the variations in income and earnings of different nations, but such comparison should not be fair, if it takes place between developing and developed countries, both are different in their level of economy. Organization for Economic Co-operation and Development (OECD) is a global entity, giving stress for various economic and social concepts for improving the overall economic development of various countries. It is very clear that the monetary income is some what related to the economic and social well being of both humans as well as the society as a whole. In addition to this, there is a great impact that globalization has in the matter of macro economic policy environment, because both fiscal and monetary policy are also somewhat significant in contributing towards the overall economy. “Economic growth has often been given priority as an anti-poverty measure. But, the negative link between growth and inequality has been ignored by policymakers. Rising inequality threatens growth and poverty reduction targets calling for more distributionally favorable pro-growth policies.” (Heshmati. P.4. 2003). One of the major problems associated with the concept of this variation between earnings and income inequality is the adoption or implementation of fiscal and monetary policies followed by different countries. So, it is essential to establish a common fiscal policy for solving this problem. Fiscal policy is related with two major concepts like allocation of resources and proper distribution of income. The proper implementation of fiscal policy is very essential for maintaining a constant price level, elimination of job redundancy, and there by the fulfillment of effective economic growth. So, it can be seen that the fiscal policy play a very important role for the proper accomplishment of economic objective. As far as the present economic situation is taken into consideration, it is very clear that for the overall development of the economy, there should be a better resource allocation and income distribution is crucial. It is also crucial to have a clear understanding of the system of fiscal policy and its effectiveness. For the proper implementation of an economy, the fiscal policy is giving stress for certain major concepts like effectiveness and efficiency, rather than the policy being stable and goal attainable in nature. Monetary policy is one of the great tools and technique adopted by the government for improving the economic growth. This policy gives emphasis for two concepts, such as the rate prevailing for the borrowal and the supply of money, based on accepting of deposits and lending of money. In addition to this, it is necessary to give stress for distribution of earnings in various OECD countries. “Earnings inequality in the OECD countries is commonly seen to have widened considerably since 1980 - and this is generally explained by the steady increase in relative demand for skilled labor due to skill-biased technical change and the growing exposure of unskilled workers to international competition through globalization. But this single explanation now looks questionable: the increase in inequality has been uneven across countries, and greater earnings dispersion has mostly been occurring at the top of the distribution.” (Atkinson. 2007). For the effective implementation of the economic policies as well as the attainment of the overall economy, it is necessary to evaluate the relation between the inequality among income and earnings. It becomes desirable to undertake the analysis of earnings and income inequality among various nations, especially in OECD countries for evaluating the fundamental problems and issues that may ultimately be affecting the nation’s development. Moreover, the earnings and employment level as well as the capital income are considered to be the major factors affecting the disposable income of a population group prevailing in a country. “The influence of labor market conditions on inequality and poverty at the level of market income reflects changes in both the weight of earnings, self-employment and capital income, and in the degree of inequality of each component.” (Forster and d’Ercole. P.26. 2005). It is essential to take into consideration the impact of economic trends in causing the disproportion of income and earnings, because it will ultimately affect the economic stability of a nation. It is analyzed that majority of the divergence of income distribution is taking place mostly in advanced or developed nations. If there is an increase in the impact of income discrimination, sometimes it will ultimately affect the population belonging to low income group. Moreover, it is also significant that mainly recent technological innovations and globalization have turned out to be the reasons for the increasing inequality in the level of income. Moreover, the level of income of the ageing population also affects the market scenario and the buying behavior of consumers in an effective manner. This is because, the income or earning capacity of the consumers determines the buying motives of the consumers, and then only it is possible to improve the marketability and financial viability as a whole. “In the past two decades economic growth has slowed and pressures tending to widen wage and income distributions appear to have intensified in many OECD countries. Although the factors behind these two macroeconomic developments are still the subject of research and lively debate, it is clear that policy-makers are being faced with increasingly difficult choices regarding budgetary priorities in an era of limited fiscal resources and expanding demands, the need to reform labor and product markets to enhance economic performance and the desire to safeguard social program and equity objectives.” (Income Distribution and Poverty in selected OECD countries- Organization for Economic Cooperation and Development. 1997). For accomplishing economic development, it becomes necessary to implement major economic policies in an effective manner by mitigating several issues related to economics, marketing and other relevant areas supporting the country’s development. Apart from this, it is also necessary that major steps should be taken to reduce various problems related with the measurement and distribution impact of income among several nations. In addition to this, the level of inequality in the income distribution is increasing in a rapid manner, especially in OECD nations during recent years. Better utilization of economic resources and proper implementation of various economic policies are fundamental for minimizing the problems related to the uneven distribution of income and earnings among various countries. “A large body of research has documented comparative levels of inequality among nations and also the substantial change in inequality across and within nations. Political scientists, sociologists, and economists have used these databases to make a number of claims about changes in inequality and their interrelations with economic and political life, patterns of redistribution, social institutions, and social and individual wellbeing more generally.” (Brandolini and Smeeding 2006). Conclusion: For the attainment of both organizational as well as the national goals the implementation of well developed policies and norms are crucial. Earnings and wealth inequality are not only affecting a particular organization or an individual, but also it will create a major difference in the economy of nations. The divergence in the distribution pattern of income will create a huge variation in the country’s taxation impact also. So, it is important to analyze the situation, and to take effective remedial measures in the form of enacted norms and rules for minimizing the level of such earnings and income inequality. For the effective utilization of the all available resources, and through which the enhancement of the economic conditions globally, it is essential to implement various measures for solving the problems of inequality, and to maintain a proper balance between the distribution impact of earnings and income in a stable manner. Works cited Heshmati, Almas. The relationship between income inequality and Globalization. Globalization –inequality-poverty links. P.4. 2003. 30 Nov. 2007 . Atkinson, Anthony B. International Labor Review. The distribution of earnings in OECD countries. Blackwell Synergy. Abstract. 2007. 30 Nov. 2007 . Forster, Michael and d’Ercole, Marco Mira. Income Distribution and poverty in OECD countries in the second half of 1990s. The Influence of Labor Markets. P.26. 2005. 30 Nov. 2007 . Income Distribution and Poverty in selected OECD countries- Organization for Economic Cooperation and Development. Introduction and Summary. BNET. 1997. 30 Nov. 2007 . Brandolini, Andrea and Smeeding, Timothy M. Patterns of economic inequality in Western democracies: Some facts on levels and trends. Cambridge Journals. Symposium. 2006. 30 Nov. 2007 . Read More