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:
“Official dignity tends to increase in inverse ratio to the importance of the country in which the office is held.”
—Aldous Huxley (1894–1963)