Expanded Key Terms

An economic system in which the means of production are privately owned.

In capitalism, the goal is to accumulate wealth and money over time. Capitalism encourages competition between companies and the generation of new ideas for products, but it also comes with a set of drawbacks. Capitalism causes unequal distribution of wealth and causes a social hierarchy with the elites containing the most wealth on top and poor individuals at the bottom with little wealth and social power.

A formal organization that has a legal existence.

Corporation are the name for a large entity that operates specific services or businesses within the economy. Corporations are largely understood under a capitalistic viewpoint to make a profit by selling a good or service to the public for a monetary cost.

The extent of the economic difference between the rich and the poor.

Economic inequality can be calculated through formulas that determine the differences between the wealth held in the top one percent and the wealth held in the bottom one percent, as well as other margins throughout society. Economic inequality can be assessed from a variety of perspectives, but often, a common analysis for economic inequality in a nation is assessing the general distribution of wealth across all members. Additionally, poverty indexes are a form of economic inequality analysis used to classify nations according to the level of poverty in different nations and countries.

A social institution that organizes the production, distribution, and consumption of a society’s goods and services.

The economy is essentially the lifeblood of societies, and money functions as the source of interaction and exchange for accumulating and distributing wealth. Economies can be structured in many forms, but the U.S. economic system is based on capitalism.

A free-market system in which temporary, flexible jobs are performed by independent workers who are hired by organizations for short-term commitments.

The term gig economy refers to a free market system in which temporary inflexible jobs are performed by independent workers who are hired for short-term contracts. Gig economies are not ideal from a worker standpoint, as it is not sustainable or predictable, in terms of income and work overtime, but gig economies are beneficial for corporations as they can often reduce prices and complete more work for less cost.

The segment of the population either employed or actively seeking employment. 

The labor force is the total number of people who are looking for jobs and/or who are currently in a job. The labor force is often a marker used to determine how successful an economy is based on the ratio of workers employed, the number of unemployed workers looking for jobs, and the number of available jobs.

A practice in which a business subcontracts with a third party to provide business services.

The term outsourcing refers to the practice in which businesses partner with subcontractors or other third parties to provide services. Outsourcing can provide a more cost-affordable way to meet or obtain services for a company than having to develop entirely on their own. Outsourcing is also beneficial to the economy as the need for a company to hire another company to do work results in the creation of more jobs.

The sector of the economy centered on farming, fishing, and the extraction of raw materials.

The primary sector is referred to as such by financial and economic professionals as well as businesses and corporations that provide various goods and services. The primary sector comprises services that often relate to the accumulation of food and raw natural resources to use for production and consumption by humans later on. Primary sector corporations are often more closely related to the direct use and harm of the planet than other sectors of the economy.

A significant decline in economic activity spread across the economy and lasting for at least 6 months.

The term recession refers to a significant decline in economic activity, spread across the economy and lasting for at least six months. Recessions are significant negatives in an economic growth cycle for a nation but tend to be historical trends that repeat over time. Economic recessions are often extremely destructive to nations’ socioeconomic status and global political power.

Financial compensation paid on a monthly or bimonthly basis and not directly tied to the number of hours worked.

Salaries are ideal forms of payment for workers, as they do not have to work specific hours to make their pay and can have a more predictable and sustainable form of income. However, salaried employees may end up working over 40 hours per week, which can be detrimental to the physical, emotional, and mental well-being of the individual workers. Many jobs that require workers to work over 40 hours a week do not provide additional benefits or compensation that equitably make up for the substantial increase in time worked.

The sector of the economy that includes manufacturing and other activities that produce material goods.

The secondary sector is referred to as such by financial and economic professionals as well as businesses and corporations that provide various goods and services. The secondary sector comprises services that often relate to the manufacturing of material goods for members of society. Examples of such material goods include cars, kitchen appliances, mattresses, televisions, and more. Secondary sector corporations that are famous globally include the Coca-Cola Corporation (Coke, Diet Coke, etc.), McDonald’s (Big Mac, hamburgers, cheeseburgers, etc.), and 7-11 (Slurpee, pizza, etc.).

The sector of the economy that provides services such as education, healthcare, and government.

The term service sector, also known as the tertiary sector, refers to the economy as it is centered on providing services in areas such as education, healthcare, and government. The service sector is named this due to the services being completed that relate to the provision of systems and services for people who are required to keep peace and stability in society.

An economic system in which the means of production are collectively owned, usually by the government.

Socialism is an attempt to structure the economy in a way that benefits all people equally and helps produce a more equal distribution of goods, services, and wealth. Socialist societies hold values that favor equality of resource allocation and use among all members, for example, as a priority to ensure society remains fair. While socialism seems perfect in its ideology, challenges arise when socialism is attempted to be integrated as the primary social structure for many nations. Socialism can result in a slowed economy and less competition to produce and sell new products within the economy.

Work environments that are characterized by less than minimum wage pay, excessively long hours of work, unsafe or inhumane conditions, or abusive treatment.

The term sweatshops refers to work environments around the world that are characterized by less than minimum wage pay and excessively long hours of work, often paired with unsafe or inhumane conditions and abusive treatment. Sweatshops exist for the sole purpose of companies being able to produce goods at an extremely low cost through the decreased pay and poor work environments the sweatshop workers face. Many sweatshops utilize female or child labor.

A widespread availability of paid work that is unoccupied by members of society. 

Underemployment refers to the mass availability of jobs that are unoccupied. Underemployment is often accelerated by low wages for workers, poor benefits and promotional cycles, and more. Underemployment only generally occurs when other aspects of society are ignored and result in harm to members of society.

A sum of money paid on an hourly basis.

Wages are often viewed under the ideology that they allow all individuals to meet the necessities of life at an hourly rate, but the reality is that many states in the U.S. and many places around the world pay workers an unfair and unlivable wage. The push for livable wages across all areas of society is a current hot topic among many politicians, which often means increasing the minimum wage for many workers.