Earned and Unearned Income
The simplest definition of unearned income is non-wage income, but some kinds of non-wage income are called earned. Since the basic definition of "earn" involves effort or services, the question whether dividends and other forms of profit income are unearned or not hinges on whether effort or service is involved sufficient to make the profit earned.
The owner of a small business may work hard and provide a great service for a small profit. It that case it would make sense to call the profit earned income. Many owners of a large corporations inherited big money, and their managers do most of the work of investing their money. There may be doubt whether those owners have "earned" the profits they receive. However hard it may be to know just what is earned or not, the IRS has its own definition of unearned income, which is unequivocal. From the IRS form W4(2004), "Note: You cannot claim exemption from with- holding if: (a) your income exceeds $800 and includes more than $250 of unearned income (e.g., interest and dividends) and (b) another person can claim you as a dependent on their tax return." It's interesting how much effort is put into showing the various ways how the rentiers really deserve their income. Maybe they deserve it, but earned income must involve some kind of work. Does taking a risk when making an investment justify a claim that the profit is earned? What about gamblers? In rare cases unearned income was derived from saved wages, rather than from one of the other ways to get rich. Most big fortunes have been inherited, derived from colonial plunder, or some other kind of theft Even speculation has many defenders as a source of merited income, but merited and earned are different things. We can never deserve the gifts we have received. Since we are parasites on natural systems, which are free to us, unearned income is our most basic kind of income. Unearned income is legal, and there is nothing wrong with it. Why must we try deny its existence? It is rather odd that unearned income has so few public friends. Where are the defenders of un-corrupted capitalism? My point is just that some unearned income exists. It is legal, respectable, and might be taken as the defining feature of capitalism. Non-wage income is already available within the present system, whether we call it unearned or not. We may feel that unearned income is bad because it violates the work-ethic rule: only wages are really respectable. The idea that only wages are respectable is a bit too socialistic for any direct public expression. Many wealthy people do some work to gain self-respect. They are socialists at heart, unable to enjoy their unearned income due to misplaced guilt. Many of the new-rich have been unable to enjoy the old status symbol of conspicuous idleness, which was once the mark of true distinction among the wealthy, even in America. Since many people would like to receive unearned income one might expect a proposal for a basic income to be popular if people believed it will work. The acceptance of a basic income will reflect the reality of the something-for-nothing we get from nature, and it will end our need to squander resources to stay busy. The dictionary definitions:
The Century Dictionary Online
Main Entry: earn
1.To gain by labor, service, or performance; acquire; merit or deserve as compensation or reward for service, or as one's real or apparent desert; gain a right to or the possession of: as, to earn a dollar a day; to earn a fortune in trade; to earn the reputation of being stingy.
2. In base-ball, to gain or secure by batting or base-running, and not by the errors or bad play of opponents.
3. To glean. To gather grain left after a reaper has taken the main crop.
Main Entry: un·earned
Not earned; not merited by labor or services.
Merriam-Webster online:
Main Entry: earn
Function: transitive verb Etymology: Middle English ernen, from Old English earnian; akin to Old High German arnOn to reap, Czech jesen autumn 1 a: to receive as return for effort and especially for work done or services rendered b: to bring in by way of return (bonds earning 10% interest) 2 a: to come to be duly worthy of or entitled or suited to (she earned a promotion) b: to make worthy of or obtain for (the suggestion earned him a promotion) - earn·er noun
Main Entry: un·earned
Function: adjective 1 : not gained by labor, service, or skill ( unearned income) 2 : scored as a result of an error by the opposing team (an unearned run)
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