There is another type of income distribution that illustrates the point that we do not have an equal distribution of personal income. From 1975 to 1980 the pattern of the distribution did not change much, but the lowest fifth from 1980 to 1987 fell from 5.2 percent to 4.6 percent, while the highest fifth rose from 41.5 percent to 43.7 percent. This table shows the Percent of Aggregate Income Received by Each Fifth of Families in the United States. We have to ask ourselves why these differences in the distribution of income. The marginal productivity theory will be part of our answer.
Resources have different productivity and, hence, value when measured at the margin.
Individuals may be equal under the precepts of our nation's founding legal documents, but not in the impersonal marketplace. Not everyone receives the same compensation because there are differences in talent, sex, age, occupation, mobility factors, and also the ownership of the other factors of production like land is not shared equally. Also, certain sectors of our economy are characterized by monopolies which can influence the distribution of income. Gains in technology are not shared equally among firms and the resources that they employ. It may be good now to examine the details of the marginal productivity theory in some detail.