Abstract
This paper focuses on one of the significant microeconomic concepts—income inequality. This term applies to all cases where the difference between population income is tangible. The high importance of factors associated with residual inequality, as well as territorial factors and characteristics of enterprises, leads to the conclusion that the sources of differentiation are related to the institutional features of the economy.
Introduction
The existence of differences in the price of various factors is the fundamental basis for the functioning of a market economy. However, when it comes to income inequality, there is a heated discussion regarding the injustice arising from it. Several different factors explain the growing inequality in income and well-being. These include the stagnation of wages and a decrease in the share of labor income, the gradual deterioration of the social situation in developed countries, and others. This topic was selected because inequality is a key global challenge for sustainable development.
Article Review
The first study is dedicated to exploring the influence of income level on social activity. It is claimed that affluent people are more likely to give to charities and engage in other prosocial actions when they live in areas with higher levels of economic disparity (Suss, 2023). When viewed through this more focused local lens, local inequality increased the generosity of wealthier groups in the U.K. and the U.S. (Suss, 2023). The author considers that the concept is often viewed macroeconomically since it stems from the local perspective.
The second article discloses inequality in income in Columbus, Ohio. Homelessness increased by 20%, while food banks lacked resources (King, 2023). It is conditioned by the fact that while the city is getting bigger, the rich population starts earning more while the poor are getting poorer (King, 2023). While the city’s influential layer and crime may increase more quickly than the city itself, its population may increase more quickly than its infrastructure. The author suggests that if the overpopulation issue keeps gaining momentum and there is still insufficient infrastructure, income inequality will likely apply to more population groups.
The last article discussed how the U.S. stock market increased its shares while creating an income gap. Since the beginning of this year, the proportion of Americans with stock market investments has increased once again to its highest level since 2008 (Richter, 2023). Most rich Americans preserved their employment and benefited from the high increase in stock values, while low-paid employees suffered disproportionately from job losses. It is because stocks were not in demand, and some people bought them promptly.
Discussion
Employment protection laws can reduce inequality by bolstering the salaries of those who lose their jobs. However, overly rigorous labor rules can increase an employer’s costs during hiring and firing, which in turn can lead to an increase in unemployment, which then supports the rise in inequality (Taylor & Greenlaw, 2016). The following chart suggests that even if there is legislation, people with money will affect those in lower positions.
Conclusion
In summary, the transition to a market economy was accompanied by increased wage differentiation. Nonetheless, the income gap was too big to sustain the economy. Currently, the rich are becoming more affluent, while the poor are becoming poorer. This makes economists wonder how to create more employment opportunities and avoid overinvestments. Even though the rich group seems more generous locally, it only slightly impacts the overall income gap bridging.
References
King, D. (2023). Can Columbus turn the tide of rising homelessness and food insecurity? Officials think so. The Columbus Dispatch. Web.
Richter, F. (2023). U.S. stock ownership rebounds, income gap remains. Statista. Web.
Suss, J.H. (2023). Higher income individuals are more generous when local economic inequality is high. PLoS ONE, 18(6), e0286273. Web.
Taylor, T., & Greenlaw, S. (2016). Principles of microeconomics. OpenStax College.