Income distribution is an essential economic concept that shows where the income of the whole nation goes. It usually concerns the distribution of GDP and results in a disproportionate spread of costs among individuals participating in the economy. Income inequality is measured as a percentage of income opposed to the percentage of the population that receives it. Yet in the 1980s, nearly 30 percent of national income in the US went to 10 percent of residents at the top of the country, and since then the amount of GDP owned by higher social classes steadily increased. If 10 percent percent of earners get 50 percent of the national income, the remaining 90 percent shall do with the remaining 50 percent. Income inequality is the main explanation why the extreme poverty exists.
Distribution of income depends on such factors as education, competition, and social interactions. Certain people cannot have a higher income because of poor education or a degree in a non-demanded field. To get a proper education, people need money they do not have. From this point of view distribution of income is a vicious circle. The amount of earned income depends on workers who have unequal opportunities to improve their skills.
Distribution of income is graphically represented by the Lorenz curve. Economists also use Gini coefficient to calculate the income distribution and define its place between the perfect equality and perfect inequality on the Lorenz curve.