National Income (What it is, Characteristics and Calculation)

The national income It consists of the sum of all the income of the productive sector that a country had, specifically during an entire year. It is important to note that national income is only the internal income that that country has or that produces the citizens, it does not matter if you are outside the country, since your earnings are added to the national income due to your nationality.

Assets that were used for asset income are not added to national income. This would be a very helpful tool for all companies, since it allows to analyze and know the results of all the financial processes that it goes through, which in the end will contribute to well-being Social.

Characteristics of national income

The main characteristics of national income are:

• Within the national income are all wages or salaries of the company's workers, plus all the benefits they receive, such as bonuses, are added.
• The benefits received by shareholders, the owner or the capital of the companies are reflected within the national income.
• When the national income varies, either with an increase or a reduction, 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 lives and stability benefit, since, consequently, economic progress is remarkable, and 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 enjoys 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 a confusion about these two terms, since they are usually similar due to their similarities. It is known as gross domestic product to the indicator of the final financial values ​​that a country produces, in a specific time, generally in a year. This has a clear purpose, to measure the wealth of the country. In short, it measures the final production of the goods.

On the other hand the national income speaks clearly of the final value of the productive sector of a given country. For example, we are talking about a company based in Spain, but the owner of it is a nationalized American, the final production value is directed to the national income of the United States, regardless of whether it is in European territory, but instead, the gross domestic product is for Spain.

Calculation of national income

With the calculation of national income of a country, we learned the following things:

• It allows to know the way in which income is distributed among the population of the country, and if it is distributed equitably and to the correct people.
• The national income allows to know 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 knowing what the contributions of the same 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, do the following:

• All the values ​​that are paid to the employees must be added, since these would be assets for the companies. It includes all the benefits that workers receive.
• You also have to add up all the goods and services of the country, all in a period of 1 year.

Constant criticism of national income

National income is criticized by a certain percentage of the population for various well-valued reasons, such as:

• When national income is calculated, they do not include other non-salaried jobs, but they still contribute to progress and place great value within the population. These jobs are usually the most undervalued by society and governments, they are: volunteers in charities, caregivers of adults and children in a deplorable situation and the Housewives.
• During the process of obtaining goods that will later be included in the national income, various actions are carried out that can be detrimental 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 search for goods economic. During these processes, natural species, whether animals or plants, are lost, in addition to generating a high concentration of pollution that in turn is harmful to living beings. All of these facts are not added to the income calculation.
• Income is often not distributed as it should be and most of the time these benefits do not reach the hands of the population who need them. That happens when there is no good government administration.

What is included in the national income?

The elements that are included within the national income are:

• Land rents: 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' wages: is the money that is granted to people for a certain time of work, as a remuneration for the activities carried out. This can be granted on a monthly, biweekly or daily basis.
• Profits 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 their services.

These elements do not include workers' pensions, which is when a worker stops being active for the company, that is, stops working for it due to age or some incapacitation. Subsidies are not included either, this is an aid provided by the company for worker benefits.