Question

1.) How does discrimination impact income inequality?

2.)How do workers abilities and monopoly power impact income inequality?

Answer 1

There are different sort of discrimination prevailed in the society. It influence the inequality in income. Generally the discrimination increases the inequality in income by means of deprivation and social supemency means. Some racial discrimination still prevail in the labour market which reduce the bargaining power of underprivileged class of society. Black race still considered lower section of society and comparing the income with white they have very large gap. Similarly gender discrimination causes women to lack of access of good economic facility and high quality job. There are some legitimacy and supremacy thinking which cause such a discrimination which ultimately influence the income level through labour market or in society at large. Such discrimination make the bargaining power lower and causes income inequality. Discrimination in economic sense deprivation from accessing the equal right and facility unequally therefore it create ambiguity about the ability and capacity of lower section in the market. Starting from the the education to the the labour market leads to reduction in income level.  

2. Bargaining power of worker and the Monopoly power of the firm work in opposite direction. Monopoly power off from make the labour supply depend upon the demand. Monopolist will hire according to to his profit maximizing wage. Therefore the share of capital will be higher and higher. With the abundance of labour supply generally it seems that it create the Monopoly power for the employer and so income inequality rises. While the bargaining power also depend upon worker ability. If worker has higher ability to bargain by means of trade union or Government support it will able to to get better share in the income. Han it will reduce the income inequality by way of dominating the Monopoly power of the firm.