# income

Income refers to the benefits that a natural or legal person receives in the form of money or a thing over a certain period of time . Colloquially, natural persons are also referred to as earnings, while legal persons refer to profit or surplus.

In economics , income as primary income or, what is equivalent, as national income represents the sum of all domestic added value of social production . In microeconomics, as in macroeconomics, it is one of the variables for assessing economic welfare .

## Economic concepts of income

### Income in microeconomics

Income is understood to be the net wealth of a natural person or a household in the economic sense within a certain period of time (usually a calendar year or a financial year ).

#### Income and net worth

Income is the difference between the net worth at the end of the year and the net worth at the beginning of the year plus what was consumed during this period.

• Income = net worth (31.12.) - net worth (1.1.) + Consumption (1.1. To 31.12)

#### Labor income and capital income

Income from work arises from the production or exchange of goods , performance of dependent labor for wages and other claims in a market .

Investment income comes from interest , dividends , income from rent and lease .

#### Transfer income

As transfer income is referred to income, which is provided by the state or other institutions without a concrete contribution will be (for example, social assistance , unemployment benefits , etc.).

But income is also generated through inheritance or gifts .

### Income in Macroeconomics

In macroeconomics , income is taken into account for the cumulative measurement of the wealth inflows of an economy . The different economic concepts of income are standardized internationally by the national accounts (VGR), among other things as the European system of national accounts (ESA). This in turn uses the definitions from the United Nations statistical system " System of National Accounts " (SNA). The starting point there is the primary income , which is conceptually identical to the national income (or earlier social product). In its gross form before depreciation as gross national income , it is of great importance for the European Union as an indicator of the income level of the respective member states or their population, and therefore provides (in addition to the sales tax portion) the yardstick for the membership fees that make up the EU's own resources . The term net national income (formerly net national product), which is also used internationally, is gross national income minus depreciation. The term national income used in the German-speaking area is net national income less indirect taxes (statistical technical term here: taxes on goods ) plus subsidies. Mathematically, the amount of national income in a certain country compared to its national income is primarily based on the extent to which the state draws its income from direct taxes or indirect taxes .

The relationship between the various income components can be calculated using the distribution calculation. The two main macroeconomic quantities used to measure income are there

Average gross hourly earnings in some craft trades in Germany from 2003 to 2005.

Since income increases in the presence of inflation do not necessarily mean increases in prosperity , real income is also measured in addition to the (nominal) income derived above .

#### Real income

This is understood to be the price-adjusted nominal income. It is determined by dividing the index (comparative value) of the nominal income by a suitable price index . Real income can only be given as a comparative figure in the form of a change or an index. It serves as an indicator of the actual purchasing power of income. Illustratively, it is about the amount of goods and services that one can buy based on current prices.

Example index

With an inflation rate of 4% and an increase in nominal income of 3%, the real income index is 99.04% according to the calculation formula:

${\ displaystyle {\ frac {1 {,} 03} {1 {,} 04}} = 0 {,} 9903846 \ approx 99 {,} 04 \, \%}$.

The amount of goods and services that one can afford is only 99.04% compared to the previous year.

Example change

With an inflation rate of 4% and an increase in nominal income of 3%, real income falls by 0.96% according to the calculation formula:

${\ displaystyle {\ frac {1 {,} 03} {1 {,} 04}} - 1 \ approx -0 {,} 0096 = -0 {,} 96 \, \%}$.

The amount of goods and services that can be afforded has decreased by around 0.96% compared to the previous year.

### Adjustment of income for taxes and duties

Not all of the income can be used for private consumption or investments , since a considerable part of the income is consumed through taxes and duties , for example . For this reason, the disposable income only takes into account that part of the income remaining for consumption or saving. Income taxes, wealth taxes, social contributions and other current transfers are deducted from income, social benefits received and current transfers received are added.

## Tax definition of income

The income tax law in Germany distinguishes between revenue , earnings , income and taxable income .

## Distribution of income

The income distribution examines the distribution of income in different social groups. Income is unevenly distributed in all OECD countries. The term “income gap” is also used to symbolize the difference between low and high incomes in a society .

In addition to the distribution of income, the development of incomes over time for certain groups (e.g. occupational groups, men, women; cf.Gender Pay Gap ) and the income dynamics of individuals (often associated with social advancement or decline) are subjects of research. The latter are often determined with longitudinal studies .

### Germany

According to the microcensus , 5.5% of the population in Germany live below the poverty line despite having a job . Semi-skilled and unskilled workers and self-employed without employees are particularly affected. See also: Working Poor . The average income of all workers in Germany in 2006 was around EUR 1,503 per person per month.

One-person households with a net income of more than EUR 2,700 per month no longer belong to the middle class, even if those affected often do not see it that way. They can be called "wealthy". From a net income of 3,600 euros, science describes a person as rich.

Manager salaries have risen significantly compared to the wages of average employees in Germany in the last few decades, more than three times more between 1987 and 2006:

year Manager: employee wage ratio
1987 14: 1
2006 44: 1
2018 150: 1

According to the OECD, income inequality increased more sharply in Germany in 2008 than in any other OECD country. The disposable income was highest in the group of self-employed with more than ten employees. It was lowest among unskilled workers and farmers . The farmers had even less disposable income than the unskilled; the median income ( median ) was 1,252 euros per month, the average income was more than twice as high at 2,706 euros per month.

In 2010 the average gross income in Germany was € 2,136 per month; Women earned an average of 23% less than men. The difference between the individual economic sectors was also partly clear: On average, a full-time employee in the hospitality industry earned 1,972 euros in the fourth quarter of 2011, and a full-time employee in the information and communications industry earned 4,430 euros, each before deduction of taxes and employee's share of social security contributions .

An OECD study presented at the end of 2011 confirmed this trend: In 2008, the 10% of the population with the highest income earned around eight times the bottom 10%; In addition, the gap between the top income and the bottom 10% of full-time workers increased by 20% between 1995 and 2010.

### France

In France, the mean net annual income of employed persons was 20,670 euros.

### Austria

In Austria in 2010 the employed (excluding apprentices) had an average net annual income of 18,366 euros.

### United States

American President Theodore Roosevelt gave a speech to 30,000 people in Osawatomie , Kansas state , in August 1910 that went down in the history books. He denounced the huge income inequality and spoke of the need for a regulated economy and a strong government. "Human welfare" is more important than the profit of the individual. He called his program to strengthen the middle class "New Nationalism".

In the United States, the ratio of manager salaries to average employees was 35: 1 in 1980 and 319: 1 in 2008.

American society “lacks the center. The rich and poor in the country have diverged rapidly, so rapidly that the top percent of citizens draw almost a quarter of all incomes - twice as much as 25 years ago. In the end, America grew almost exclusively for its rich, the middle and lower classes even lost purchasing power on average. And jobs too. "

President Barack Obama gave a keynote speech in December 2011 - also in Osawatomie - in which he also denounced economic inequality. Growing inequality belies the promise of the American dream that anyone could do it if they just wanted to. This is not about any political debate, but about "the crucial question of our time".

Wiktionary: income  - explanations of meanings, word origins, synonyms, translations
Wikiquote: Income  - Quotes

## Individual evidence

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2. ^ A b Norbert Dautzenberg: Income. In : wirtschaftslexikon.gabler.de. Springer Gabler, accessed November 10, 2016 .
3. ^ Vimentis - Lexicon: Income scissors
4. Psychology and Privilege - The Unpleasant Truth of Social Injustice. In: Deutschlandfunk Kultur. Deutschlandradio, accessed on July 19, 2019 (German).
5. Florian Rötzer: Why have manager salaries soared in the last few decades? In: heise.de, Telepolis, September 19, 2010 (last accessed: September 22, 2010)
6. Theodor Schaarschmidt: The cherries in the neighbor's garden. Spektrum.de, accessed on May 3, 2019 .
7. ^ Rainer Geissler: The social structure of Germany . VS Verlag für Sozialwissenschaften, Wiesbaden 2006, ISBN 3-531-42923-X , p. 82.
8. Jan Goebel, Martin Gornig, Hartmut Häußermann: Polarization of incomes: The middle class is losing. In: diw.de, weekly report of DIW Berlin No. 24/2010 (PDF; 469 kB)
9. ^ Rheinisch-Westfälisches Institut für Wirtschaftsforschung: On the income situation of private households in Germany. (PDF; 1.1 MB) April 2009.
10. infografiken.com
11. de.statista.com
12. ^ The gap between rich and poor is widening - Badische Zeitung , December 6, 2011.
13. Le revenu salarial s'établit à 20 670 euros en moyenne en 2014. INSEE , accessed on 19 May 2017 (French).
14. Annual personal income . Statistics Austria , March 1, 2012, accessed on May 23, 2012 .
15. ^ Theodore Roosevelt's Osawatomie Speech. Kansas Historical Quarterly, accessed May 23, 2012 .
16. So in the US, the average manager earns 319 times as much as the average employee. Florian Rötzer: Why have manager salaries soared in the last few decades? In: Telepolis . Status: September 19, 2010; Last accessed: September 22, 2010.
17. Uwe Jean Heuser in zeit.de of June 3, 2011: "More Greek than the Greeks" - The United States has horrific debts. How do you get out of there? In: The time. 23/2011.
18. spiegel.de: Occupy America.
19. ^ Guardian.co.uk: Full text of Barack Obama's speech in Osawatomie, Kansas.