Explain why the productivity standard for the distribution of income entails rewarding people based on their contribution to society s total output. Why does the productivity standard typically fail to yield an equal distribution of income?
The productivity standard for distributing income is based on the idea that individuals should be rewarded according to their contribution to society's overall output or productivity. Under this standard, individuals who contribute more to the production of goods and services are typically expected to receive a higher share of the income.
This standard is based on the assumption that productivity is directly linked to individual effort and skill. It emphasizes the idea that those who work harder or possess more valuable skills should be compensated accordingly. By rewarding productive individuals, it is believed that the overall level of productivity and economic efficiency can be maximized.
However, the productivity standard often fails to yield an equal distribution of income for several reasons:
1. Unequal starting positions: Individuals do not start on an equal footing in terms of resources, education, or opportunities. Some people are born into affluent families and have access to better education and resources, while others may face systemic disadvantages. As a result, the initial conditions of people's lives greatly influence their ability to be productive and earn higher incomes.
2. Market imperfections: The labor market does not always reflect the true value of an individual's contribution to society. Factors such as bargaining power, discrimination, and monopolistic practices can lead to disparities in wages that do not align with productivity levels. Additionally, some jobs that are crucial for society's functioning, like caregiving or certain social services, may not be adequately rewarded despite their importance.
3. External influences: Productivity is not solely determined by individual effort or skill. It is influenced by a multitude of external factors, including access to infrastructure, technology, and social support systems. Individuals who have access to better resources and support may be able to achieve higher levels of productivity, while others may be limited by their circumstances.
4. Inequality perpetuation: Unequal distributions of income can lead to unequal opportunities. People with lower incomes may struggle to invest in education or acquire the necessary skills to increase their productivity. As a result, the cycle of inequality can persist across generations.
It is important to note that while the productivity standard is often used as a basis for income distribution, it is not the only approach. Alternative standards, such as need-based or merit-based systems, have been proposed as ways to address the limitations of the productivity standard and strive for a more equitable distribution of income.