Thus, one finds, over longer periods of time, alternating shifts in the distribution of income as each group attempts to catch the other. When a severe imbalance occurs, the government may step in to redress the problem by redistributing income. In other instances, where workers wage income falls behind such that the standard of living falls, policies designed to increase labor's share may be executed. Income can be redistributed through a progressive tax structure, by shifting the tax burden from personal to business income taxes and back again, or by subsidizing the affected low-income group. Alternatively, the government can use wage and price controls to adjust income shares and tax incentives to adhere compliance to a redistribution scheme.
Income inequality results from differences in the quality of labor resources.
Some people have more brain or brawn than others. Some have invested time and money in education and training to develop special skills that earn high salaries. In general, the greater the education, the higher the income. Finally, income inequality is often the result of discrimination . Blacks and hispanics tend to have the lowest incomes, while white non-hispanics and Asians tend to have the highest incomes.