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Income Equality and Well Being

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Income Inequality and Economic Well Being

Income inequality is prevalent in the entire economic global economy with its effects clearly visible in form of differences in pay scales, distribution per household etc. The economic well-being is not measured in the terms of income alone, but also by other factors such as satisfaction levels, education standards, quality of life etc contribute towards well-being. The causes of the income inequality broadly fall into two categories: the market forces and the institutional forces. The market forces includes the technological advances and the increased trade, making the highly educated and more skill work force more productive thus increasing their wages whereas the institutional forces like deregulation leading to decline of unions and stagnation in the minimum wage in the recent years. Despite the fact that the level of income distribution has become skewed over the decade, the quality of life, due to various advancements has improved. Better quality products can be purchased at lower prices, which in-turn has improved the standard of living over the past decade.

It is a common fact that the richer are happier than the poor. But well being is a matter of perception as well. People asses their well being by comparing their past and current circumstances, and by comparing their current standard with that of others. The Easterlin Paradox, which was developed by Richard Easterlin,, states that “although at some point in time richer individuals are happier, over time economic growth is not accompanied with an increase in aggregate happiness.” . According to studies, once an income level of approximately $10,000 is reached, any increase in income has limited effect on subjective wellbeing. The Trading economics defines Gini index, as measures the extent to which the distribution of income among individuals or households

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