The income of the population is the sum of material goods and Money produced or received over a certain period of time. The role of income is that the level of consumption directly depends on the size of it.
Cash income includes all financial receipts in income from entrepreneurial activity, various allowances, pensions, scholarships, from property, interest on deposits, rent, dividends, profits from sales valuable papers services rendered, and so on.
income level is important indicator the well-being of members of society, since it determines the possibilities of the spiritual and material life of the individual: getting a good education, rest, meeting needs, maintaining health.
To analyze the level of income and their dynamics, indicators such as nominal, real and disposable income are used. Let's consider them in more detail.
There is also another definition of the concept, according to which it is understood as a part of the national income intended to meet the needs of the population and created in the production process. Thus, the gross national disposable income must compensate for labor costs, that is, all the mental and physical abilities of the population that have been spent in production.
However, in modern society there is an uneven distribution of national income. As a result, certain categories the resources of the population are insufficient to maintain vitality at the required level. In this case, the state is forced at the expense of the budget, and entrepreneurs, through own profit replenish the finances of the population and thereby increase disposable income.
At each stage of life, a citizen of the country and his family have different opportunities to receive money. At the same time, at each stage they have their own needs, they face tasks corresponding to the stages of life. And they seek to meet the needs in different ways.
Disposable income depends on lifestyle, class, working capacity, health, market opportunities, labor market conditions, risk situation and other factors.
Belonging to a social class obliges a citizen to lead a certain way of life inherent in such. To ensure the ability to act according to value ideas, satisfy needs and interests, a certain level of income is required.
Stable consumption is ensured through the accumulation of funds, the creation of funds and their redistribution. Those surpluses that were formed in favorable years are redistributed and then used in less profitable periods. This allows you to meet the needs of the population and maintain a stable
Disposable personal income (DPI) is the income used, those. available households.
It is less than personal income by the amount individual taxes to be paid by owners economic resources in the form of direct, primarily income taxes, as well as personal interest payments on loans, etc.:
RLD = LD - Individual taxes.
Households spend their disposable income on personal consumption (WITH) and personal savings (S):
RLD \u003d Y d \u003d C + S.
SNA indicators give quantification total output and total income and do not fully reflect the change in the quality of life. To characterize the level of well-being, we use per capita indicators, such as the:
The value of GDP per capita:
the value of national income per capita:
To enable cross-country comparisons, these figures are calculated in US dollars.
However, these indicators are very imperfect and fail to accurately reflect the quality of life. Their main limitations are that they:
averaged(if one person has two cars, and the other does not have one, then on average everyone has one car);
do not take into account many qualitative characteristics of the level of well-being(two countries with the same per capita national income may have different levels of education, life expectancy, morbidity and mortality rates, crime rates, etc.);
are calculated in a single unit (usually US dollars), but ignore different purchasing power dollar in different countries(for 1 dollar in the USA and, for example, in India, you can buy a different amount of goods);
do not take into account the negative consequences of economic growth(degree of environmental pollution, noise, gas contamination, etc.).
Pure economic well-being
In order to more accurately assess the level of well-being in 1972, two American economists - laureate Nobel Prize James Tobin and William Nordhaus proposed a method for calculating the indicator called net economic wealth.
This indicator, in addition to GDP, includes the valuation of everything that improves well-being, but is not taken into account in GDP, for example: the amount of free time for raising children and self-improvement; labor for oneself; raising the level of education; improving the level and quality of medical care, etc. At the same time, when calculating this indicator, the value of everything that worsens the quality of life and reduces the level of well-being, for example, the level of morbidity and mortality, the level of crime, environmental pollution, the negative consequences of urbanization, etc., is subtracted from the value of GDP.
Factor Composition of National Income
national income
national income - is the total income from the use during the year in the economy of all factors of production. It is expressed as the amount of monetary income received by the population for participation in the economic life of society.
Special purpose national income (NI) - to form a consumption fund of the population and an accumulation fund to expand production, therefore, on the one hand, it characterizes the level of well-being of the population at the present time, and on the other hand, the possibility of economic growth in the future.
The indicator of national income is the leading element of the system of national accounts, which tracks its distribution not only in the household, but also among joint-stock companies, government agencies, financial institutions and private non-profit organizations.
When determining the amount of ND, four elements of factor income are distinguished:
1. wages - payment for hired labor of workers and employees with social charges (insurance payments per employee, social security, private pension funds);
2. rental income - rent for land, housing, premises, equipment, property;
3. interest income- a positive result of operations in the securities market and income from individual investments in the business;
4. profit - income of the unincorporated sector of the economy (sole proprietorships, partners, cooperatives, etc.) and corporations, the profit of which, due to its breakdown into dividends and the undistributed part used to expand production, is taxed twice - as the income of the company and as the income of the shareholder .
Disposable personal income is the total income available for direct use by households (DPI). ).
Disposable personal income is based on national income:
RLD = ND - corporate profits + dividends on shares of individuals - taxes (direct) + transfer payments (social payments).
Corporate profits, being part of the national income, are divided into three parts:
1. taxes on corporate profits that go to the state revenue - therefore, this part of the profits of corporations cannot be included in the RLD;
2. retained earnings - part of the profits of corporations, remaining at their disposal and intended for the expansion of production, that is, for the growth of investments;
3. the remaining profit can be paid to the owners of shares in the form of dividends. Shareholders can be individuals (households) and firms. Disposable personal income includes dividends received only by private individuals.
If we ignore the existence of the state, and also neglect the fact that corporations pay only part of their profits to households in the form of dividends, then between national income and there is no difference in disposable personal income.
Figure 1 shows a diagram of household use disposable personal income.
Use of RLD.
consumer interest personal
costs ( With) savings payments( S)-
Personal consumer spending (With in the system of national accounts) - household spending on the purchase of consumer goods(excluding real estate purchases).
Interest payments represent mainly payments for consumer credit(very small share of RLD, so we will neglect them in our further analysis).
personal savings (S in the system of national accounts) represent the portion of personal disposable income that people use to save (increase wealth). Forms of personal savings: increasing a bank account, buying securities, buying real estate, paying off old debts. The personal savings rate is the share of personal savings in RLD. (Saving not are part of GDP!)
Having gained an idea about the calculation of the main macroeconomic aggregates and the relationships between them, one can proceed to the actual macroeconomic analysis, in which macroeconomic models serve as the main methodological tool.
So, generalizing indicators of the results of the functioning of the national economy are GNP and GDP, which reflect the total value of the product created on the scale of society for final consumption. GDP and GNP can be calculated using the three methods discussed above. The difference lies in the fact that when calculating GDP, only the product produced within the borders of a given country is taken into account, excluding foreign branches and branches of individual firms, while GNP takes into account the product produced by national capital located outside the country.
If we subtract from GDP the sum of values created in the territory of a given country with the help of foreign capital, and add the sum of values produced abroad using resources owned by the citizens of this country, then we get GNP.
Now consider the most important indicators of the SNA, characterizing the movement of GNP (GDP) at its various stages.
It is less than GNP by the amount of depreciation.
NNP measures the annual output of goods and services that a country produces and consumes. It is a more advanced measure of output, but NNP has the disadvantage that it is distorted by the government in the structure of market prices. Without government intervention market prices of all goods without a remainder is decomposed into factor incomes of households. However, the state, by introducing indirect taxes, on the one hand, and providing subsidies to firms, on the other hand, actually contributes to overestimation of market prices in the first case and underestimation in the second.
ND shows what production in a given year has added to the welfare of society. The only component of NNP that does not reflect the current contribution of economic resources are indirect taxes for business. Therefore, the value of the latter, when calculating the ND, is subtracted from the monetary volume of the NNP. NI is understood as the sum of incomes of the owners of factors of production, i.e. sum wages, profit, interest and rent.
The national income acts as earned but not received income, tk. not all earned income is actually received by the population and not all income received is earned income.
The nominal value of GNP and GDP calculated on the basis of the SNA serves as the basis for determining all other indicators of the social product, as well as for indicators characterizing the distribution of national income. These include: personal income,disposable income
Personal income (LD) represents income received, which, unlike NI, is earned income. The differences between personal and national income are as follows: firstly, the share of income earned (social insurance contributions, corporate income taxes, the amount retained earnings) is not supplied to the public; secondly, a part of the received FA goes to an individual household not in the form of factor income, but in the form of state transfer payments (pensions, scholarships, allowances). The amount of transfer receipts is determined by the current regulations and social position family or individual, and not his participation in the production of a social product.
Disposable income (DI) characterizes that part of personal income that the population can spend at its discretion. To calculate it, the total amount of direct taxes paid by the population from personal income is deducted from the LD. The main types of taxes paid out of personal income are income tax, income tax in the unincorporated sector of the economy, property tax and inheritance tax.
