Income
The second of the three economic issues is the question of income, that is, income distribution, the way in which income - that's what people earn - is distributed or shared around.
You, and your family, have an income. You have an annual income, that is what you earn in a year. This income allows you to enjoy various goods and services. It means you have a certain standard of living, although doesn't just cover the necessities of life; it also includes recreation, whether that's sport or TV or a holiday.
The standard of living is defined as the level of prosperity in terms of material or social benefits (which are related to income and wealth). The cost of living is the amount of money that must be paid for food, housing, clothing, and so on.
Money paid, usually weekly and often in cash, to a worker for a work done is called a wage (or wages).
A salary is a regular payment made to an employee, usually by a bank transfer or cheque at the end of the month. A real wage is an actual wage divided by the consumer price index; this gives the purchasing power of an hour's work.
Income is the flow of money earned or collected during a given period, including wages and salaries, interest payments, rental income, and profits from business. Progressive or redistributive taxation can reduce income inequality. Wealth is the net stock of tangible and financial assets owned at any particular time.
Subsistence wages are the minimum amount needed to support a person's life. Fortunately, most people in industrial and post-industrial countries earn rather more than this. If higher wages tempt people to work longer hours, this is known as the substitution effect. But after a certain point, higher wages mean that workers can afford to work fewer hours; this is the income effect.
Just as you and your family have an income, so nations, different countries, also have an income - the national income, it's often called. The national income is the sum total of the incomes of all the people living in that country, in other words, everyone's income added together. In the same way one can think of world income as the total of all the incomes earned by all people in the world.
Concerning the distribution of national and world income, some questions are to be asked: who, in the world, gets what share of these incomes? The distribution of incomes, either in the world or in the country, tells us how income is divided between different groups or individuals.
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