The Kuznets ratio is a measurement of the ratio of income going to the highest-earning households (usually defined by the upper 20%) and the income going to the lowest-earning households, which is commonly measured by either the lowest 20% or lowest 40% of income. Comparing 20% to 20%, perfect equality is expressed as 1; 20% to 40% changes this value to 0.5.
Kuznets had two similar explanations for this historical phenomenon:
- workers migrated from agriculture to industry; and
- rural workers moved to urban jobs.
In both explanations, inequality will decrease after 50% of the shift force switches over to the higher paying sector.
Read more about this topic: Kuznets Curve
Famous quotes containing the word ratio:
“People are lucky and unlucky not according to what they get absolutely, but according to the ratio between what they get and what they have been led to expect.”
—Samuel Butler (1835–1902)