Reasons of İncome inequality

it is time, at last, to speak about the reasons for income inequality. At this point, we have to clarify

two expressions ‘'Income distribution'' and ‘' Income inequality.'' Income distribution can be

characterized by the distribution of nation output or income in a country over an exact period of

time between individuals, groups or production items (Demirci, 2011). On the other hand, income

inequality can be defined as unfairness in income distribution. To fix a great mistake, income

distribution is a broader concept than poverty because it determines the distribution of the entire

population relative to the distribution of individuals or household below a certain poverty line. To

clarify the topic, what are the causes of inequality? What are the underlying aspects of society that

cause the gap between rich and poor to widen? Based on some articles and personal experiments

toward increasing income inequality across Turkey, this essay explores some causes of it such as

technological and industrial movements, taxes and educational level.

Initially, the first issue will be addressed is movements which mean technological and industrial

movements. Because technological development and change will cause increases in productivity of

the workforce, this causes consequences in favor of the workforce. Only qualified workers have the

advantage of gaining technological advances. In the modern era, all companies are looking for

people which will be most beneficial for them. Hence, they try to find the qualified one to gain the

advantage. Common technological changes (robot technology etc.) can affect the non-qualified

workforce negatively. What I mean, the machines do their works without mistake. So, employers

determine to use these machines to don’t make any mistake. There is a revolution in organizational

meaning in the industrialized countries. The main elements are the changes in the organization of

production, work, product design, planning and organization of companies. The organizational

change also affects the structure of income distribution. At this point, we have to realize that

technology is a result of industrial development.

The other point is the reduction of taxes. Lower taxes are not capable to provide better equality.

The reduction of top tax rates either for business or for top income individuals is based on

arguments that fewer taxes induce higher investments and thus translate into higher growth.

However, expected higher investments through a reduction of top marginal income tax rates which

translate into growth have not materialized( Piketty, Saez, and Stantcheva, 2013). I personally

believe that taxes must be regulated according to each person's wage. If we don't achieve this issue,

income inequality will increase day by day. To put it other words, ıf we behave poor people like rich

people, this will cause to income inequality as well.

The other significant cause of income inequality is level of education in Turkey. Because human

capital is the most significant production factor nowadays, it makes education more important than

past. Some acts in education make it as a cause of income inequality. Inequalities in education are

one of the factors leading to inequalities in income distribution. There is a natural limit to the

information a person can have, even if there is no limit to the amount that any person has in

production factors such as land and physical capital. For this reason, as the education level of the

society increases, the inequality in the distribution of income will tend to decrease. We should

explain that technological change plays the most effective fragment in education as a cause of

income inequality. Some researcher point out that a common explanation for the increase in the

education premium is skill-biased technological change (SBTC). The SBTC hypothesis suggests

that the introduction of computers increased returns to skills, education, and experience, and

therefore resulted in a rise in inequality (see, for example, Juhn, Murphy, and Pierce 1993).

However, more recent studies challenge this hypothesis by noting that the return to skills grew only

in the 1980s and SBTC should have resulted in an increase in the demand for skills in both the

1980s and the 1990s since technological improvements continued into the 1990s (see, for example,

Card and Dinardo 2002).

Briefly, Although we mentioned just two reasons of income inequality, there are various causes

income inequality two such as the distribution of factors of production, supply, and demands,

inflation, globalization, social norms, and regulations. To summarize these two features, if

education is provided for all humans equally, that will provide an income equality. However, we are

not able to stop the changes. Murat Demirci (2011) insists that even though causes of income

inequality have changed during history, it always exist.