Indicators of education and income distribution

The SNA examines income at the stage of generation, distribution and end-use. The income that institutional units receive as a result of their participation in the production process or the ownership of assets is called primary income. They are paid from the added value created in the production process.

The analysis of distribution processes begins with the compilation of an account of the formation of income by industry, sector and the economy as a whole. Its purpose is to show what components GVA and GDP consist of, what costs directly related to the production process should be reimbursed.

For this purpose, an income generation account is compiled. It is compiled both for the economy as a whole and for the industry (sector) (Table 32).

The “Resources” column of this account contains the GVA, which is carried over from the “Uses” section of the “Production” account.

The uses of this account show the producers’ expenses. But these amounts represent not only the expenditures of producers, but also the incomes of the respective institutional units.

Gross profit for the economy as a whole can be determined by summing the gross profit by sectors (branches) of the economy.

Table 32

Income Generation Account

The remuneration of employees is remuneration in cash or in kind, which must be paid by the employer to the employee in exchange for work performed during the reporting period. It consists of two main components:

gross wages; deductions for social protection of employees.

Wages in cash include:

the amount of remuneration accrued to employees at piece-rate rates, tariff rates; salaries; incentive payments (bonuses, additional payments for seniority); compensation payments related to working hours and working conditions (overtime payments, night hours); payment for unworked time in accordance with the law (payment of annual and additional leaves); salary of employees during their part-time training in the system of advanced training and training of personnel.

Wages in kind – goods and services that are not necessary for work and are used by workers to meet their own needs or the needs of other household members.

Wages do not include:

intermediate consumption costs incurred in the interests of production (travel expenses, the cost of issued overalls, etc.); payments to workers that are not remuneration for work (benefits for temporary disability, children’s benefits, pensions, etc.); the cost of workers’ ownership of housing and the cost of repaying loans issued to workers to improve housing conditions.

Deductions for social protection of employees are formed from the actual deductions of enterprises and imputed deductions.

Actual social insurance contributions consist of contributions made to State and non-State social insurance funds in accordance with social security and social insurance schemes. These payments are the main source of funds for the payment of social benefits under certain conditions, which reduce the level of well-being of the employee.

Conditionally accrued deductions for social insurance are social benefits paid directly by entrepreneurs to their employees, former employees, their dependents at their own expense.

These include:

severance pay; payments for the period of employment to dismissed employees in the event of reorganization, liquidation of the enterprise or reduction; additional payments to employees in case of temporary disability; disability benefits due to work injury.

Production taxes consist of taxes on products that are paid for goods and services produced as products and other taxes on production.

Other taxes on production consist of all taxes except taxes on products, which are levied on enterprises as a result of their participation in the production process. They do not directly depend on the volume and profitability of production. These include: taxes on wages and labor, periodic taxes on land, buildings and structures, licenses for conducting economic and professional activities, for conducting operations with financial and material assets, etc.

Subsidies – transfers, reverse taxes. They are intended to stimulate production by the state, the prices for products of which are below market prices, to compensate for losses to trading organizations engaged in the sale of these products.

Subsidies are divided into:

food subsidies; other subsidies.

They can be provided for domestically produced products and for imported products.

Gross profit (gross mixed income) is the part of the GVA that remains with producers after deducting the costs associated with the remuneration of employees and the payment of taxes.

This item measures the profit (or loss) made from production before accounting for property income. The term “mixed income” is used in relation to the household sector and includes total income from the work of independent owners and from capital. It is almost impossible to divide these types of household income, so they are shown together for a given production account:

VPE = GVA – OT – H + S

The net profit of the economy is an indicator of macroeconomic profit in the SNA. It is calculated by subtracting from the gross profit of the consumption economy of fixed capital (QEE):

PEE = VPE – POC

In the “Income Generation” account for the “Government Agencies”, “Non-Profit Organizations” sectors, there is no net profit element, since these sectors create non-market products, which are estimated by the amount of current costs, including POCs.

In determining gross domestic product by the distributive method, it includes the following types of primary income paid by resident production units:

remuneration of employees; net taxes on production and imports (taxes on production and imports minus subsidies on production and imports); gross profit of the economy and gross mixed income:

GDP = OT + NPV + DNP + VPE,

where: NPV – net taxes on production and imports;

DNPs are other taxes on production.

For statistical analysis, it is necessary to determine the structure of GDP and identify patterns in its change.

Analysis of factors affecting the growth of certain types of primary income is carried out using the index method. In this case, the following indexes can be used:

average wages; average gross salary; the level of remuneration.

To analyze the average value of wages and the average gross wage, you can calculate indices of variable and constant composition, as well as indices of structural shifts.

Analysis of the change in the amount of remuneration can also be carried out using the following index model:

.

Index models for CHP and VPE work similarly:

,

.

Table 33

Primary Income Distribution Account

Income earned for owning assets is called property income. They are formed at the stage of primary distribution. Together with income from production, income from property is recorded in the primary income distribution account. In it, institutional units – residents or sectors – act as recipients of primary incomes, rather than producers creating primary incomes. Unlike the income generation account, an income distribution account can only be maintained for institutional units and sectors.

The right side of the account (see Table 33) shows resources that can be divided into two groups:

primary income received by resident units involved in the production of products and services; income from property.

The amount of primary income, including the remuneration of employees, taxes (net of subsidies), interest, dividends, etc., also takes into account income received from non-resident institutional units.

Compensation for resident employees by non-resident institutional units is the salary and social protection contributions of citizens of the Republic employed in foreign embassies and consulates, artists who go on tour abroad, etc.

Property income is received by owners of financial and tangible unproductive assets. Owners of financial assets receive income in the form of interest, dividends, reinvested income from foreign direct investment; owners of tangible non-productive assets – in the form of rent.

Rent is the payment to the owners of non-reproducible tangible assets (land and subsoil) to allow another institutional unit to exploit those assets.

Interest is the income received by the owners of securities (except shares), deposits (deposits) and persons who have provided loans and funds for use.

Dividends are property income received by stockholders.

Reinvested income from foreign direct investment is characterized by the amount of retained income of enterprises with foreign direct investment, which may include branches of foreign enterprises, as well as enterprises with at least one foreign investor owning a share of capital sufficient to influence its management. Reinvested income can come in the form of interest, dividends, withdrawals from the income of quasi-corporations.

The sum of factor income and the balance of income from property forms the value of the balance of primary income. The composition of primary income varies by sector. The primary income of the sectors of non-financial enterprises and financial institutions is formed from profits and equivalent income and the balance of income from property; the general government sector – from net taxes on production and imports and from the balance of income from property; the household sector – from the remuneration of employees, the balance of income from property and profits and equivalent income from housing services; sector of non-profit organizations serving households – from the balance of primary income.

The primary income balance is a balancing item in the primary income distribution account, which is obtained by summing up all the primary income of institutional units or sectors reduced by the amount of primary income paid to other institutional units or sectors.

On the basis of the primary income distribution account, indicators of net and gross national income can be obtained. Gross national income (GNI) is equal to the sum of the gross balance of primary income of all sectors of the economy. GNI is identical to gross national product, but GNI is a characteristic of income and GNP is a characteristic of product. Gross national product is obtained by summing up the GVA of all institutional units and adding to the resulting value the amount of taxes not included in the value of output.

Net national income is equal to GNI less consumption of fixed assets:

CND = GND – POK

In the second stage of income distribution, income is redistributed mainly through current transfers. These processes are carried out through a secondary income distribution account, in which there is a transition from the balance of primary income of an institutional unit or sector to disposable income.

The resource part of this account takes into account the balance of primary income and current transfers. Current transfers show current income taxes, social security contributions, social benefits and other current transfers. The expenditure side shows the use of current transfers and disposable income. The right side of the account takes into account current transfers received by institutional units or sectors, and the left side takes into account those to be transferred to other institutional units or sectors. Transferred and received transfers in size may not coincide.

Table 34

Secondary income distribution account

Current taxes and wealth taxes consist of household income taxes, corporate profits, and wealth taxes. For the household, financial, non-financial and non-profit sectors, they are shown in the “uses” section, and for the government sector, they are shown in the “resources” section.

Social insurance contributions can be actual or imputed. They are produced by employers, independent employees or unemployed persons. In this account, they are recorded as resources for government and insurance corporations. For the household sector, they are shown on the “uses” side of the account. Social benefits can take the form of social assistance benefits (medical care, medicines). This type of current transfer is recorded in the secondary income distribution account as resources for the household sector and for all other sectors of the economy in the “uses” section.

The group of other current transfers accounted for in this account consists of insurance premiums and insurance claims (other than insurance premiums and life insurance claims), current transfers between public authorities at different levels of government, between different households (remittances and gifts in kind), between the central government and the governments of other states.

The balancing item of this account, disposable income, is determined by summing up the balance of primary income and the balance of all current transfers. The balance of current transfers is defined as the difference between the current transfers received and transferred by sector. A distinction is made between gross and net disposable income. The difference between them is determined by the amount of consumption of fixed capital. To obtain the value of national disposable income, it is necessary to add to the disposable income in the economy the balance of current transfers between institutional units.

Table 35

Income redistribution account in kind

The distribution of income is completed in the income redistribution account in kind. It shows the processes by which the disposable income of the sectors of government agencies, non-profit organizations serving households and households is transformed into adjusted disposable income of these sectors.

Redistributive processes consist in the fact that government agencies and non-profit organizations transfer social transfers to households in kind. These include social benefits in kind and transfers of non-market goods and services for individual use.

Social transfers in kind include non-tradable products from governments and non-profit organizations that have been made available to households free of charge or at negligible prices, as well as goods and services purchased from producers and provided to households free of charge or at negligible prices. That is, this account reflects the cross-sectoral redistribution of disposable income, as a result of which the amount of disposable income in the household account increases, and in the account of the sectors of government agencies and non-profit organizations decreases. In the economy as a whole, disposable income should coincide with the amount of adjusted disposable income.