Income (West's Encyclopedia of American Law)
The return in money from one's business, labor, or capital invested; gains, profits, salary, wages, etc.
The gain derived from capital, from labor or effort, or both combined, including profit or gain through sale or conversion of capital. Income is not a gain accruing to capital or a growth in the value of the investment, but is a profit, something of exchangeable value, proceeding from the property and being received or drawn by the recipient for separate use, benefit, and disposal. That which comes in or is received from any business, or investment of capital, without reference to outgoing expenditures.
(The entire section is 100 words.)
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Income (Encyclopedia of Business and Finance)
By working and being productive, households earn an income and businesses make a profit. The total amount that households and businesses receive before taxes and other expenses are deducted is called aggregate income. The amount of money that is left after taxes and other expenses have been deducted from one's pay is called disposable income. Discretionary income is what consumers (households) have to pay for the goods and services they desire. We shall focus only on households and how they consume their income. Households spend most of their discretionary income on con sumption. Some consumers spend even more than their current discretionary income on consumption by borrowing. Consumption consists of almost everything that consumers purchase, from durable to nondurable goods as well as all types of services. The only exception to this rule is the purchase of a new home: It is counted as an investment because homes tend to appreciate in value.
Households (individuals) cannot spend all their earnings on consumer goods and services. Part of the income each household receives must be used to pay different kinds of taxes, such as income taxes to federal, state, and local governments. Most state and local governments also impose sales taxes. In addition to paying income and sales taxes, households may also have to pay property taxes to local governments. After paying taxes and spending income on consumables, some households put aside money as savings to be used for consumption at a later time.
Earnings differ among individuals and households because of several factors: (1) inborn differences, (2) human-capital differences, (3) work and job performance, (4) discrimination,(5) age, (6) labor mobility, (7) government programs and policies, and (8) luck.
Inborn differences are those characteristics that one is blessed with, such as strength, energy, stamina, mental capacity, natural ability, and motivation.
Human-capital differences reflect how people invest various amounts of both their physical and mental capacities toward the achievement of specific goals.
Work and job performance indicates how individuals differ in their preferences regarding the trade-off between work and leisure. Those who wish to work more usually receive a higher income; others prefer more leisure at the cost of earning a lower income. People also prefer different types of jobs. These specific job choices will affect the distribution of income.
Discrimination is treating people differently solely on the basis of factors unrelated to productivity.
Age affects earnings significantly. Most individuals earn little before the age of eighteen. Earnings tend to increase as workers gain experience and their productivity increases.
Labor mobilityhe willingness to go where the jobs are or to move wherever the company has a neednhances an individual's income potential. Immobility limits workers' response to changes in wage rates and can contribute to an unequal distribution of income.
Government policies and programs, such as benefit programs and the progressive income tax, reduce income inequality. The minimum wage may also increase income inequality.
Luck plays a role in determining the distribution of income, but choices are perhaps the most important factor.
Mings, Turley. (2000). The Study of Economics: Principles, Concepts, and Applications, 6th ed. Guilford, CT: Dushkin Publishing Group.