The market principle of revenue generation is significantly different from the administrative one. In its simplest terms, incomes in a market economy are understood as means, expressed in cash or in kind, that are put at the complete disposal of an individual for any specified or certain period.
Based on this statement, it is possible to reveal the differences between the methods of generating income. The main one is that the market mechanism takes into account not only labor costs, but also the effectiveness of participation in market competition.
A state of affairs is considered fair when the income comes not only from labor activity, but also from competitive advantages and profit derived from them. Indirectly, this factor significantly expands the list of incomes themselves, which this or that subject can receive.
Modern science explores the principles and mechanisms of income generation on the basis of existing factors of production: labor, land, capital, entrepreneurial talent. Labor, as a rule, brings income in the form of wages, capital - in the form of interest, land - in the form of rent.
When using the functional approach, remuneration and its size depend on the efficiency of using the production factors themselves.
For a general assessment of the nature, level and dynamics of incomes, classification methods are applied that, with all the differences between them, distinguish the following types as traditional: disposable income, nominal and real income.
Disposable income is used, as a rule, for personal consumption and represents the amount obtained from subtracting the amount of taxes from the amount of total nominal income.
Real income is the amount of goods and services that a particular entity can acquire for any period, depending on the prevailing price situation in the consumer market.
And finally, the nominal income is formed from all the money received by someone for the entire specified period.
Most of the income is of labor origin, and there is no particular difference between the worker at the machine tool at the factory or the manager of the enterprise, or a broker on the exchange. The problem is that isolating the labor component is generally quite difficult, sometimes impossible, so its parameters are often evaluative, conditional in nature. The reason is that in some types of activities unpredictable factors affect the size of income, such as risks, luck, market dynamics, and so on.
In most cases, nominal income is formed, first of all, at the expense of salary. For example, in some countries its share in national income rises to 75% of its total value.
Just as they distinguish between nominal income and real, they distinguish between the corresponding types of salaries: nominal and real. The first of these is the entire amount of money that is paid to an employee for his direct work at the enterprise. By its size, they traditionally judge the welfare of a person and his potential capabilities. At the same time, by its size it is impossible to say definitely about the level of consumption. To reflect this indicator, a real salary is used, which is defined as a certain set of real goods and services that a person can afford to buy in the consumer market, taking into account its dynamics, market conditions and the nature of the instant state. At the same time, a natural, directly proportional dependence of the real salary on the value represented by the nominal income is established, and its inverse proportion to the level of market prices for goods and services.
In addition, the size of the salary is also determined by such “intangible” factors as the level of professionalism, the nature of the work itself, based on its emotional and psychological tension, the degree of development of the innovative potential of the enterprise and its implementation in each workplace, and, ultimately, the quality of work. Consequently, the reflection of nominal income in the wages of employees is indirect and calculated.