FEATURES OF FORMATION OF PRIMARY AND SECONDARY INCOMES OF THE POPULATION: THEORETICAL ASPECT AND REALITIES IN UKRAINE

Abstract

This article is devoted to the theoretical and analytical study of the peculiarities of the formation and distribution of incomes of the population. Based on the synthesis of existing scientific achievements, we have determined the order of formation of primary and secondary incomes by stages of GDP distribution. We provе that the first stage of distribution of the created GDP is formed by factor primary incomes (from labor activity, property and productive capital). Thereafter, the redistribution of income occurs through the use of the fiscal mechanism and the accumulation of funds in public financial funds, from which secondary incomes such as wages of public sector employees, military salaries, scholarships, social benefits, pensions, social insurance payments and other social transfers are paid. Based on the analysis, we find that the share of primary income in Ukraine prevails over secondary income (57% vs. 43% in 2020). It is substantiated that the formation and distribution of personal income in Ukraine is characterized by the following main patterns: the growth of primary income is significantly higher than secondary income (the exception was only in 2020); the share of primary income tends to increase, and the share of secondary income decreases. We state that wages and salaries account for more than 60% of primary income, while social benefits and current transfers account for almost 80% of secondary income. Important sources of secondary incomes in Ukraine are the consolidated state budget and the Pension Fund (in their total expenditures, almost half and more than two-thirds, respectively, are the basis for the formation of secondary incomes). The author’s calculations showed that in Ukraine, almost half of all secondary incomes of the population are redistributed through the consolidated state budget and the Pension Fund (with a corresponding distribution of 30% and 13-23% during 2014-2020). At the same time, the level of redistribution of total income through these public financial funds is significantly lower (24.8-29.3% during 2014-2020). We prove that not only primary incomes are a factor in the formation of secondary incomes, but also secondary incomes determine the growth of factor incomes through the so-called multiplier effect, which is manifested in the following pattern: formation of secondary incomes → formation / growth of consumer demand → GDP growth → growth of primary incomes in terms of those employed in the production of relevant goods and services. During 2014-2020, secondary income in Ukraine led to expanded GDP growth, as the multiplier of social expenditures in Ukraine ranged from UAH 1.19 to UAH 1.65. Finally, the paper calculates the increase in primary income due to the multiplier effect of secondary income (the corresponding increase ranged from UAH 318 billion in 2014 to UAH 922 billion in 2020).