The policy of incomes and payment for labor

     Money and total incomes are divided into general and clear.

     General include all incomes and calculated before taxes and mandatory payments.

     Clean income - a result re-distribution processes. These are those incomes that remain after the implementation of these payments.

     Clean incomes are adjusted taking into account the natural social transfers. Adjusted clean incomes include clean income and balance of natural transfers. To incomes of population also includes funds that have taken in his debt.  
Final income includes adjusted clean incomes and net public debts.  (table 1.2.)

     More and more importance today is the definition of income of households, needed for address help to the population, rational taxation.

     Household - one of the subjects of economic activity, which provides economy by resources, especially labor and money, and uses the funds for the life of people. Often the number of household members coincides to family. Family - a related persons living together and are keeping house. However, in some cases a household may consist of several families as well as hired labor. 

     Table 1.2.

       
 
 
 
 
 
 
 
 
 
 
 

     Structure of total income of population 

     Budget of the family consists of two parts - a profitable and expenditure items. Income and expenditure of families are influenced by factors, caused by the type of family, which in turn depends on the numerical and socio-demographic composition, the ratio of employees and dependents, etc., the character  of employment, income level, providing housing, cultural and household items of , residence, nature of the settlement, the district of residence and so on.

     In the structure of total family income sources ( as well as personal, and the whole population) in recent years, certain changes took place. Share of income in the form of wages, which is the main part of total income of families tend to decrease, increasing the share of income from personal subsidiary farms, the shares of other sources also tends to increase. The structure of aggregate income in state policy, directed on, that in the conditions of a market economy  every working                      person will be  responsible for their financial well-being.

              Using of aggregate income, which is including in the family budget, realized by the following areas:

• consumer expenses;
• Taxes, fees, charges;
• others costs;
• accumulation.

     In the process of realization of income, their part is used for consumption of material goods, some - on consumption of services. On the structure of consumption affects not only the growth of income, but also changes in the structure of the population, increase its educational and cultural level.

     I decided to show the example of structure of consumer expenses of population by information of selective inspection of households (1992-2001).

     Table 1.3.

     Structure of consumer expenses of population 

     So from this table we see that expenses for products for feeding are increasing, reduction for non nutrition products and increasing a payment for services, this testify that population are getting poorer.

     Depending on the sources of generation incomes can be earn and non-earned. Earned income - is income that the employee receives as a result of their economic activities as paid work force or in the case of self-employment. income represents income from activities conducted with deviation from the state law, rules of morality and behavior of citizens. In modern conditions, a significant  part of income is hidden. They related the shadow economy, which is represented as a hidden economic activities. It include:

• types of economic activities that are not illegal business, but  income is hidden or reduced there, that is not showing some completed work , employing people without correct documents, reducing the salary for avoiding the taxes, transfers and other liabilities;
• informal economic activities that belong to legitimate activities or keeping by unincorporated enterprises, ie enterprises owned to individuals, households that are not registered as individuals, conducting economic activity;
• illegal activities, covering types of illegal production and services and is under criminal responsibility (production and sale of drugs, contraband).

     In addition, the hidden income includes income of those people who conducts unregistered individual entrepreneurial activity (income from production of sales of personal household plots, sale of goods by private individuals in the marketplaces, from services in building sphere by informal brigades, juridical services, repair of clothing, footwear, household equipment, personal services in the field of education and culture, etc.).

     Depending on the cycles of human vital activity there are incomes that are received:

• before  participation in the work (before working age);
• from the participation in the labor, business, social activities;
• temporary not working persons (unemployed, migrants, etc.);
• after the ending of work activity (pensioners).

     Differentiation of income

     Differentiation of income is determined by level of development of productive forces and social relations, depends from the economic, demographic and social factors. Differentiation can be demonstrated through the ratio of financial provision levels - the most 10% of the most secured groups of population and 10% least secured groups.

     One of the indexes of differentiation by the level of income in the socio-economic statistics is the index of income concentration or Gini coefficient, which reflects the character of distribution of the total amount of income between different groups of population. The value might vary from 0 to 1. For uniform distribution of income coefficient is close to 0. The higher rate, that is closer to 1, the irregular distributed income in society.

     The basis of Gini coefficient, which is calculated using the Lorens curve is the idea that extreme positions in the income distribution or wealth between groups of people are egalitarian (everyone who participates in the distribution receive equal shares) and anti-egalitarian (a participant receives the distribution of all goods). In the first case we have full equality, in the second - the absolute inequality in the distribution.

     Calculation of Gini coefficient is realized on the basis of information about  the distribution of households (population) by the level of average income per household (member of household). The numbers of persons who receive income, divided into five equal quintal groups and determine what share of income has each group of households (population). Then by received results being obtained Lorenz curve (a graphic level of concentration of the phenomenon).

     To show the Lorenz curve on the coordinate axes of the interest scale from 0 to 100 deposited cumulative (accumulated) results of distributions: the horizontal axis – quintile of persons who receive income, on the vertical – quintile of received income.

     For uniform distribution of income every 20 percent population would have a fifth part of all income of society. On the graph it is shown as diagonal of square and is a line of uniform distribution. With uneven distribution «line of concentration» is a concave downward curve. The more the Lorenz curve deviation from the diagonal of square, the more uneven distributed income in society. Gini coefficient is a ratio between area of segment created by Lorenz curve and the line of uniform distribution to the triangle area below the line of uniform distribution.

                Graph 1.1.

   Income

       

      
             Population sorted in order of increasing income

       The line of uniform distribution 

       The line of virtual distribution 

     Fig. 1.1. The Lorenz curve

     Gini coefficient reveals the average difference in income between two recipients. For example, if the Gini coefficient is 0.2, this means that the average difference between income of recipients who belong to this aggregate is 40% of the aggregate income.

     Size of income and the difference between them caused by the influence of these factors:

• socio-political factors;
• Socio-demographic (sex, age, availability of talent and abilities, etc.);
• socio-professional (career, profession, education, qualifications, experience, etc.);
• social status (occupied or unoccupied person by socially useful activities, child, youth, that learning, employees, property owner, businessman, farmer, retired, disabled, etc.);
• socio-economic (the type of classes or activities, production, labor conditions, etc.);
• socio-geographical (natural and climatic features of residency, density and nature of resettlement, national).

     In addition, on the formation of income, their size influence leveling and differentiate factors.

     Leveling factors – putting together the family earnings, pensions of retirees living in the family and make their pensions to the family budget, helping that members of the family receive.

     Differentiate – the presence of the employment members of family, their number in the family, the ratio of employment and unemployment members of family.  
 
 
 
 
 
 
 
 

     1.4. The concept and indicators of living standards

     Quality of life - a socio-economic category, which reflects the degree of development and satisfaction the physical, spiritual and social needs of the population and conditions in society for development and satisfaction these needs.

     Structure of the matter of this question can be submitted in the form of complex needs and resources for their satisfaction. Persons’ needs are different. In this regard and different set of needs of each person. To determine the degree of satisfaction the actual consumption of goods and services correlates to minimal and rational standards of consumption.

     Factors that influence on the needs and level of life:

• the level of development of production and sphere of services
• science-technical progress
• cultural-educational level of population
• other factors

     According to the conventions of International Labor Organization (ILO), each person has the right to such a standard of living (including food, clothing, shelter, medical care, social services), which is necessary for the health and welfare of himself and his family, also the right of security in the event of unemployment, disability, etc.

     Increased life level promotes better quality of life, the conditions of human existence.

     Quality of life is characterized by lever of consumption of consumer goods and services and includes the social results of economic and political development, namely: average the life duration, the level of diseases, conditions and labor protection, social protection of population, improving of social environment, human rights.

     According to ILO recommendations the life level such indicators are showing: the volume of fund consumption per one person, real income, life expectancy, education, amount of consumption of products in physical terms, housing, utilities and social services, transport and communication; the health security and social insurance. Based on international standards it’s should be also considered: employment and working conditions, the existing social security, demographic, environmental, household goods, etc.. In addition, it’s have to take into attention the negative socio-economic phenomena such as inflation, unemployment, poverty, crime, discrimination in its various manifestations.

     In the world practice to describe the level of life is used such integral indicator as the Human Development Index, which includes three indicators: national or gross domestic product (GDP), life expectancy, level of education. These values correspond to the highest international levels of these indicators.

     National income or gross domestic product (GDP) is calculated in the so-called dollar purchasing power parity (PPP), life - in years, level of education - years of education and literacy of the adult population - in a percentage.

     Human Development Index is a simple calculation, flexible, statistical availability, but it does not fully cover the living conditions of all major components of life. Therefore, for calculating the integral index of living standards should determine indices of its components in the per capita: food (for its calorie and protein content), fund of the household (in comparable prices), housing (area in the light of benefits), health and health care (for the dynamics of life expectancy, mortality rates, spending on health), education and culture (the number of training places and the cost of education and culture), services (in comparable prices), etc.. The main indicator is the improvement of living standards is to increase life expectancy.

     Life level depends on the economic potential and in considerable extent is determined by size of GDP and the structure of its use. The source of raising living standards is the growth of national income, which is a part of total social product, after deduction of used in the production means of labor and material costs, the newly created value.

     The size and dynamics of national income depends on many factors such as productivity, employment, industrial structure, investments, the level of social services, etc..

     National income divided by the accumulation fund and fund of consumption.

Fund of accumulation – is a part of national income that is used on extended reproduction, increasing non-productive funds, and also creation of state reserves and stocks. By the second part of the national income a fund of consumption, which is used for satisfaction of the and also on the maintenance of non-productive spheres. The source is a necessary product and part of the additional product.

     Further development of society is accompanied by rising real wages and incomes, improving of the quality of goods and services etc. As the increasing of consumption fund has some boundaries, it’s necessary to provide the optimal correlation between consumption and accumulation funds, for providing as high and stable speed of economic development as and rising the level of life.

     Indicators of living conditions of population are getting much worse due to growing inflationary trends, which is reflected in the accelerated dynamics of prices on consumer goods and services, the ratio of nominal and real wages. Rising prices for consumer goods and services leads to a significant slowdown in nominal wage growth and falling of real wages.

     For evaluation of changes in living standards define the cost of living index, which rely on a set of goods and services for different socio-demographic groups and for the minimum set:

            I=P₁*g₁/P₀*          (1.2.)

     Where P₀ and P₁ - the price of purchase accordingly to the basic and current periods;

     g₁ and g₀ - volume purchase of basis and current periods.

     For the characteristics of life level in domestic and foreign practices used indicators of poverty: absolute and relative.

     For absolute poverty, the poor are part of households that can not provide themselves by a necessary amount of welfares, absolutely necessary for saving health and maintaining a moderately active working life. With relative poverty, the poor are part of households that have low incomes.

     The efficiency of labor to some extent determined by the current system of salary. Wages as a socio-economic category, on the one hand, is the main source of income, so its value is largely characterized the level of welfare of all members of society. On the other hand, its right organization attracted workers to improve production efficiency, and therefore directly affects the rate and scales of socio-economic development of the country.  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

2. The base of payment of work
1. Wage

     Wage as an element of labor market is the price of labor force and expenses item for the production, which are included in the cost of production, works (services) on a separate enterprise.

     While the definition of wages as the price of labor it’s necessary to take into consideration a single payment, the criterion of which is the real cost of employee life and his family. As the price of labor, wage is formed in a labor market and is external relatively foreign company.

     As an element price of production wage should be determined by part of the cost of established enterprises. During the forming the part of wage it’s should not be prevented the refund of surplus labor costs and provide its increase only in connection with the growing number of launched products, more efficient using of resources and increase of productivity.

     Wage is the most effective tool for the activation of human factors and using of labor capacity.

     As international experience affirms cardinal shifts in the technical equipment of production, structure and functions of workers, introducing new forms of work organization have led to that the basic purpose of economic policies and financial incentives of modern companies and firms was not the achievement of quantitative indicators of production and quality production parameters, such as better equipment, working time, improve the working force, improving product quality and production efficiency.