The national income consists of the sum of all the income of the productive sector that a country had, specifically for a whole year. It is important to point out that national income is only the internal income that the country has or that produced by citizens, no matter if it is outside the country since its earnings are added to the national income due to its nationality.
In the national income, the goods that were used for the income of assets are not added. This would be a tool of great help for all companies since it allows analyzing and knowing the results of all the financial processes that go through it, which in the end will contribute to social welfare.
National income characteristics
The main characteristics of national income are:
- Within the national income are all the payments or salaries of the workers of the company, in addition, all the benefits they receive, such as bonuses are added.
- The benefits received by the stockholders, the owner of the capital of the companies are considered within the national income.
- When the national income varies, either with an increase or a decrease, it greatly affects the national population.
- National income is distributed among the population of that country, therefore, this has been an essential factor for the well-being of the people.
- When there is an increase in national income, people’s life, and stability benefits, since, therefore, economic progress is remarkable, and the sources of work increase.
- It is important to note that this national income is not obtained by all the inhabitants of the country, only a percentage uses it.
- The increase in national income does not represent the progress of the country, it only speaks of a better personal income of individuals.
National income or gross domestic product?
Many times there is confusion about these two terms since they tend to be similar due to their similarities. The gross domestic product is an indicator of the final financial values produced by a country, at a specific time, usually in a year, This has a clear purpose, to measure the wealth of the country. In short, this measures the final production of the goods.
On the other hand, national income expresses clearly the final value of the productive sector of a given country. For example, there is talk of a company based in the United States, but the owner is nationalized French, the final value of production is directed to the national income of France, regardless of whether it is in America, but instead, the gross domestic product is for the United States.
Calculation of national income
With the calculation of the national income of a country, we managed to know the following things:
- It allows to know the way in which the income is distributed among the population of the country, and if these are distributed equally and to the right people.
- The national income allows knowing if the “progress” of the country remains stagnant or increases, this varies according to the amount of income at the end of the year.
- The calculation of income allows us to know what its contributions are to the economic activities carried out in the country, in favor of its progress and the social welfare of the population.
How is the national income calculated?
To calculate the national income of a country, the following must be done:
- All the values paid to the employees must be added since these would be active for the companies. It includes all the benefits that workers receive.
- You also have to add all the goods and services of the country, all in a period of 1 year.
Constant criteria for national income
National income is criticized for a certain percentage of the population for various well-valued reasons, such as:
- When the national income is calculated, they do not include other jobs that are not salaried, but also contribute to the progress and give great value to the population. These jobs are usually the most belittled by society and governments, they are volunteers in charities, caregivers of adults and children in deplorable situations and housewives.
- During the process of obtaining goods that will later be included in the national income, various actions are carried out that can be harmful to the environment, which is highly criticized, since they do not give it the importance and recognition it needs because the only objective is to look for economic goods. During these processes, natural species are lost, be they animals or plants, in addition to generating a high concentration of pollution that in turn is harmful to living things. All these facts are not added to the calculation of income.
- Many times the income is not distributed as it should be and most of the time these benefits do not reach the hands of the population that needs them. That happens when there is no good government administration.
What is included in the national income?
The elements included in the national income are:
- Land income: are the goods that result from the production of the land. The profits are obtained after subtracting the money invested in the production of the resulting goods.
- Workers’ salaries: this is the money granted to people for a certain period of work, as a reward for the activities carried out. This can be granted monthly, biweekly or daily.
- Utilities or interests: it is the money that turns out to be part of the profits of the companies, these must be distributed as an obligation to the workers thanks to the provision of their services.
These elements do not include the retirements of workers, which is when a worker stops to be active for the company, that is, stops working for it due to age or some disability. The subsidies are also not included, this is an aid that the company provides for worker benefits.