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There are wide varieties of economic inequality, most notably measured using the
distribution of incomeIn economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and ...
(the amount of money people are paid) and the
distribution of wealth The distribution of wealth is a comparison of the wealth Wealth is the abundance (economics), abundance of Value (economics), valuable financial assets or property, physical possessions which can be converted into a form that can be used fo ...
(the amount of wealth people own). Besides economic inequality between countries or states, there are important types of economic inequality between different groups of people. Important types of economic measurements focus on
wealth Wealth is the abundance of valuable financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as deposit (finance), bank deposits, bond (finance), bonds, and participations in companies' sh ...

wealth
,
income In microeconomics, income is the Consumption (economics), consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms.Smith's financial dictionary. Smith, Howard Irving. 190 ...
, and
consumption Consumption may refer to: *Resource consumption *Tuberculosis, an infectious disease, historically in biology: * Consumption (ecology), receipt of energy by consuming other organisms in social sciences: * Consumption (economics), the purchasing of ...
. There are
many methods Many may refer to: * plural *A Quantifier (linguistics), quantifier that can be used with count nouns - often preceded by "as" or "too" or "so" or "that"; amounting to a large but indefinite number; "many temptations"; "a good many"; "many directio ...
for measuring economic inequality, the
Gini coefficient In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption o ...

Gini coefficient
being a widely used one. Another type of measure is the Inequality-adjusted Human Development Index, which is a statistic composite index that takes inequality into account. Important concepts of equality include
equity Equity may refer to: Finance, accounting and ownership *Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the differe ...
,
equality of outcome Equality of outcome, equality of condition, or equality of results is a political Politics (from , ) is the set of activities that are associated with Decision-making, making decisions in Social group, groups, or other forms of Power (social ...
, and
equality of opportunity Equal opportunity is a state of fairness in which individuals are treated similarly, unhampered by artificial barriers or Prejudice, prejudices or preferences, except when particular distinctions can be explicitly justified. The intent is that the ...
. Research suggests that greater inequality hinders economic growth, and that land and
human capital Human capital is a concept used by human resource professionals to designate personal attributes considered useful in the production process. It encompasses employee knowledge Knowledge is a familiarity or awareness, of someone or someth ...

human capital
inequality reduce growth more than inequality of income. Whereas globalization has reduced global inequality (between nations), it has increased inequality within nations. Research has generally linked economic inequality to political instability, including
revolution In political science Political science is the scientific study of politics Politics (from , ) is the set of activities that are associated with making decisions in groups, or other forms of power relations between individuals, suc ...

revolution
, democratic breakdown and civil conflict. Global income inequality peaked approximately in the 1970s, when world income was
distributed bimodally
distributed bimodally
into "rich" and "poor" countries with little overlap. Since then, inequality has been rapidly decreasing, and this trend seems to be accelerating. Income distribution is now unimodal, with most people living in middle-income countries.


Measurements

In 1820, the ratio between the income of the top and bottom 20 percent of the world's population was three to one. By 1991, it was eighty-six to one. A 2011 study titled "Divided we Stand: Why Inequality Keeps Rising" by the
Organisation for Economic Co-operation and Development The Organisation for Economic Co-operation and Development (OECD; french: Organisation de Coopération et de Développement Économiques, OCDE) is an intergovernmental economic organisation with 38 member countries, founded in 1961 to st ...

Organisation for Economic Co-operation and Development
(OECD) sought to explain the causes for this rising inequality by investigating economic inequality in OECD countries; it concluded that the following factors played a role: * Changes in the structure of households can play an important role. Single-headed households in OECD countries have risen from an average of 15% in the late 1980s to 20% in the mid-2000s, resulting in higher inequality. *
Assortative mating Assortative mating (also referred to as positive assortative mating or homogamy) is a mating pattern and a form of sexual selection in which individuals with similar phenotypes mating, mate with one another more frequently than would be expected ...
refers to the phenomenon of people marrying people with similar background, for example doctors marrying other doctors rather than nurses. OECD found out that 40% of couples where both partners work belonged to the same or neighbouring earnings deciles compared with 33% some 20 years before. * In the bottom percentiles, number of hours worked has decreased. * The main reason for increasing inequality seems to be the difference between the demand for and supply of skills. The study made the following conclusions about the level of economic inequality: * Income inequality in OECD countries is at its highest level for the past half century. The ratio between the bottom 10% and the top 10% has increased from 1:7 to 1:9 in 25 years. * There are tentative signs of a possible convergence of inequality levels towards a common and higher average level across OECD countries. * With very few exceptions (
France France (), officially the French Republic (french: link=no, République française), is a transcontinental country This is a list of countries located on more than one continent A continent is one of several large landmasses ...

France
,
Japan Japan ( ja, 日本, or , and formally ) is an island country An island country or an island nation is a country A country is a distinct territory, territorial body or political entity. It is often referred to as the land of an in ...

Japan
, and
Spain , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = , national_anthem = , image_map = , map_caption = , image_map2 ...

Spain
), the wages of the 10% best-paid workers have risen relative to those of the 10% lowest paid. A 2011 OECD study investigated economic inequality in
Argentina Argentina (), officially the Argentine Republic ( es, link=no, República Argentina), is a country located mostly in the southern half of South America South America is a continent A continent is any of several large landmasse ...

Argentina
,
Brazil Brazil ( pt, Brasil; ), officially the Federative Republic of Brazil (Portuguese: ), is the largest country in both South America and Latin America. At 8.5 million square kilometers (3.2 million square miles) and with over 211 mill ...

Brazil
,
China China (), officially the People's Republic of China (PRC; ), is a country in East Asia East Asia is the eastern region of Asia Asia () is Earth's largest and most populous continent, located primarily in the Eastern Hemisphere ...

China
,
India India, officially the Republic of India (Hindi Hindi (Devanagari: , हिंदी, ISO 15919, ISO: ), or more precisely Modern Standard Hindi (Devanagari: , ISO 15919, ISO: ), is an Indo-Aryan language spoken chiefly in Hindi Belt, ...
,
Indonesia Indonesia ( ), officially the Republic of Indonesia ( id, Republik Indonesia, links=yes ), is a country in Southeast Asia Southeast Asia, also spelled South East Asia and South-East Asia, and also known as Southeastern Asia or SEA, is t ...

Indonesia
,
Russia Russia ( rus, link=no, Россия, Rossiya, ), or the Russian Federation, is a country spanning Eastern Europe Eastern Europe is the eastern region of . There is no consistent definition of the precise area it covers, partly because th ...

Russia
and
South Africa South Africa, officially the Republic of South Africa (RSA), is the southernmost country in Africa. With over 60 million people, it is the world's 23rd-most populous nation and covers an area of . South Africa has three capital citie ...

South Africa
. It concluded that key sources of inequality in these countries include "a large, persistent
informal sector An informal economy (informal sector or grey economy) is the part of any economy An economy (; ) is an area of the Production (economics), production, Distribution (economics), distribution and trade, as well as Consumption (economics), con ...
, widespread regional divides (e.g. urban-rural), gaps in access to education, and barriers to employment and career progression for women." A study by the World Institute for Development Economics Research at
United Nations University The (UNU) is the academic and research arm of the United Nations The United Nations (UN) is an intergovernmental organization that aims to maintain international peace and international security, security, develop friendly relations am ...

United Nations University
reports that the richest 1% of adults alone owned 40% of global assets in the year 2000. The ''three'' richest people in the world possess more financial assets than the lowest 48 nations combined. The combined wealth of the "10 million dollar millionaires" grew to nearly $41 trillion in 2008.
Oxfam Oxfam is a British founded confederation of 21 independent charitable organization A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, Religion, religious ...
's 2021 report on global inequality said that the
COVID-19 pandemic The COVID-19 pandemic is an ongoing global pandemic A pandemic (from , , "all" and , , "local people" the 'crowd') is an of an that has spread across a large region, for instance multiple or worldwide, affecting a substantial numbe ...

COVID-19 pandemic
has increased economic inequality substantially; the wealthiest people across the globe were impacted the least by the pandemic and their fortunes recovered quickest, with billionaires seeing their wealth increase by $3.9 trillion, while at the same time those living on less than $5.50 a day likely increased by 500 million. The report also emphasized that the wealthiest 1% are by far the biggest polluters and main drivers of
climate change Contemporary climate change includes both the global warming caused by humans, and its impacts on Earth's weather patterns. There have been previous periods of climate change, but the current changes are more rapid than any known even ...
, and said that government policy should focus on fighting both inequality and climate change simultaneously. According to
PolitiFact PolitiFact.com is an American Nonprofit organization, nonprofit project operated by the Poynter Institute in St. Petersburg, Florida, with offices there and in Washington, D.C. It began in 2007 as a project of the ''Tampa Bay Times'' (then the ' ...
, the top 400 richest Americans "have more wealth than half of all Americans combined." According to ''
The New York Times ''The New York Times'' is an American daily newspaper based in New York City with a worldwide readership. Founded in 1851, the ''Times'' has since won List of Pulitzer Prizes awarded to The New York Times, 132 Pulitzer Prizes, the most of a ...

The New York Times
'' on July 22, 2014, the "richest 1 percent in the United States now own more wealth than the bottom 90 percent".
Inherited wealth Inheritance is the practice of passing on private property Private property is a legal designation for the ownership of property by non-governmental Legal personality, legal entities. Private property is distinguishable from public property ...
may help explain why many Americans who have become rich may have had a "substantial head start". A 2017 report by the IPS said that three individuals,
Jeff Bezos Jeffrey Preston Bezos ( ; né Jorgensen; born January 12, 1964) is an American entrepreneur, media proprietor, investor, computer engineer, and commercial astronaut. He is the founder and executive chairman of Amazon (company), Amazon, where ...

Jeff Bezos
,
Bill Gates William Henry Gates III (born October 28, 1955) is an American business magnate A business magnate is someone who has achieved great success and enormous wealth through the ownership of multiple lines of enterprise. The term characterist ...
and
Warren Buffett Warren Edward Buffett ( ; born August 30, 1930) is an American business magnate, investor, and philanthropist. He is currently the chairman and CEO of Berkshire Hathaway Berkshire Hathaway () is an American multinational Multinational may ...
, own as much wealth as the bottom half of the population, or 160 million people, and that the growing disparity between the wealthy and the poor has created a "moral crisis", noting that "we have not witnessed such extreme levels of concentrated wealth and power since the first
gilded age In History of the United States, United States history, the Gilded Age was an era that occurred during the late 19th century, from the 1870s to about 1900. The Gilded Age was an era of rapid economic growth, especially in the Northern United St ...
a century ago." In 2016, the world's billionaires increased their combined global wealth to a record $6 trillion. In 2017, they increased their collective wealth to 8.9 trillion. In 2018, U.S. income inequality reached the highest level ever recorded by the
Census Bureau The United States Census Bureau (USCB), officially the Bureau of the Census, is a principal agency of the U.S. Federal Statistical System, responsible for producing data about the American people A people is a plurality of person A p ...
. The existing data and estimates suggest a large increase in international (and more generally inter-macroregional) components between 1820 and 1960. It might have slightly decreased since that time at the expense of increasing inequality within countries. The
United Nations Development Programme The United Nations Development Programme (UNDP)french: Programme des Nations unies pour le développement, PNUD is a United Nations The United Nations (UN) is an intergovernmental organization that aims to maintain international peace ...
in 2014 asserted that greater investments in social security, jobs and laws that protect vulnerable populations are necessary to prevent widening income inequality. There is a significant difference in the measured wealth distribution and the public's understanding of wealth distribution. Michael Norton of the
Harvard Business School Harvard Business School (HBS) is the graduate Graduate refers to someone who has been the subject of a graduation, namely, someone who has completed the requirements of an academic degree. Education * Graduate, an alumnus * Graduate diploma, ...
and Dan Ariely of the Department of Psychology at
Duke University Duke University is a Private university, private research university in Durham, North Carolina. Founded by Methodists and Quakers in the present-day town of Trinity, North Carolina, Trinity in 1838, the school moved to Durham in 1892. In 1924, t ...
found this to be true in their research conducted in 2011. The actual wealth going to the top quintile in 2011 was around 84%, whereas the average amount of wealth that the general public estimated to go to the top quintile was around 58%. According to a 2020 study, global earnings inequality has decreased substantially since 1970. During the 2000s and 2010s, the share of earnings by the world's poorest half doubled. Two researchers claim that global income inequality is decreasing due to strong economic growth in developing countries. According to a January 2020 report by the
United Nations Department of Economic and Social Affairs The United Nations Department of Economic and Social Affairs (UN DESA) is part of the United Nations Secretariat The United Nations Secretariat (french: link=no, Secrétariat des Nations unies) is one of the six major organs of the United N ...
, economic inequality between states had declined, but intrastate inequality has increased for 70% of the
world population In demography, demographics, the world population is the total number of humans currently living, and was estimated to have exceeded 7.9 billion people . It took over 2 million years of prehistory, human prehistory and human history, history fo ...

world population
over the period 1990–2015. In 2015, the OECD reported in 2015 that income inequality is higher than it has ever been within OECD member nations and is at increased levels in many emerging economies. According to a June 2015 report by the
International Monetary Fund The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C. ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument The ...

International Monetary Fund
:
Widening income inequality is the defining challenge of our time. In advanced economies, the gap between the rich and poor is at its highest level in decades. Inequality trends have been more mixed in emerging markets and developing countries (EMDCs), with some countries experiencing declining inequality, but pervasive inequities in access to education, health care, and finance remain.
In October 2017, the IMF warned that inequality within nations, in spite of global inequality falling in recent decades, has risen so sharply that it threatens economic growth and could result in further
political polarization Political polarization (see American and British English spelling differences Despite the various English dialects spoken from country to country and within different regions of the same country, there are only slight regional variations in ...
. The Fund's Fiscal Monitor report said that "progressive taxation and transfers are key components of efficient fiscal redistribution." In October 2018
Oxfam Oxfam is a British founded confederation of 21 independent charitable organization A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, Religion, religious ...
published a ''Reducing Inequality Index'' which measured social spending, tax and workers' rights to show which countries were best at closing the gap between the rich and the poor. The 2022 World Inequality Report, a four year research project organized by the economists Lucas Chancel,
Thomas Piketty Thomas Piketty (; born 7 May 1971) is a French economist An economist is a professional and practitioner in the social science Social science is the Branches of science, branch of science devoted to the study of society, societies an ...

Thomas Piketty
,
Emmanuel Saez Emmanuel Saez (born November 26, 1972) is a French, naturalized American economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and co ...
, and
Gabriel Zucman Gabriel Zucman (born 30 October 1986) is a French economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics ...
, shows that "the world is marked by a very high level of income inequality and an extreme level of wealth inequality" and that these inequalities "seem to be about as great today as they were at the peak of western imperialism in the early 20th century." According to the report, the bottom half of the population owns 2% of global wealth, while the top 10% owns 76% of it. The top 1% owns 38%.


Wealth distribution within individual countries

The following table shows information about individual wealth distribution in different countries from a 2018 report by Crédit Suisse. October 10, 2018 article
Global Wealth Report 2018: US and China in the leadReportDatabook
See Table 3.1 (page 114) of databook for mean and median wealth by country.
The
wealth Wealth is the abundance of valuable financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as deposit (finance), bank deposits, bond (finance), bonds, and participations in companies' sh ...

wealth
is calculated by various factor, for instance: liabilities, debts,
exchange rate In finance Finance is the study of financial institutions, financial markets and how they operate within the financial system. It is concerned with the creation and management of money and investments. Savers and investors have money availa ...
s and their expected development, real estate prices,
human resources Human resources is the set of people who make up the workforce of an organization An organization, or organisation (English in the Commonwealth of Nations, Commonwealth English; American and British English spelling differences#-ise, - ...

human resources
,
natural resource Natural resources are resource Resource refers to all the materials available in our environment which help us to satisfy our needs and wants. Resources can broadly be classified upon their availability — they are classified into renewabl ...
s and technical advancements etc.


Income distribution within individual countries

Income inequality is measured by
Gini coefficient In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption o ...

Gini coefficient
(expressed in percent %) that is a number between 0 and 1. Here 0 expresses perfect equality, meaning that everyone has the same income, whereas 1 represents perfect inequality, meaning that one person has all the income and others have none. A
Gini index In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of ...
value above 50% is considered high; countries including Brazil, Colombia, South Africa, Botswana, and Honduras can be found in this category. A Gini index value of 30% or above is considered medium; countries including Vietnam, Mexico, Poland, the United States, Argentina, Russia and Uruguay can be found in this category. A Gini index value lower than 30% is considered low; countries including Austria, Germany, Denmark, Norway, Slovenia, Sweden, and Ukraine can be found in this category. In the low income inequality category (below 30%) is a wide representation of countries previously being part of Soviet Union or its satellites, like Slovakia, Czech Republic, Ukraine and Hungary. In 2012 the Gini index for income inequality for whole European Union was only 30.6%. Income distribution can differ from wealth distribution within each country. The wealth inequality is also measured in Gini index. There the higher Gini index signify greater inequality within the wealth distribution in country, 0 means total wealth equality and 1 represents situation, where everyone has no wealth, except an individual that has everything.  For instance countries like Denmark, Norway and Netherlands, all belonging to the last category (below 30%, low income inequality) also have very high Gini index in wealth distribution, ranging from 70% up to 90%.


Various proposed causes of economic inequality

There are various reasons for economic inequality within societies, including both global market functions (such as trade, development, and regulation) as well as social factors (including gender, race, and education). Recent growth in overall income inequality, at least within the OECD countries, has been driven mostly by increasing inequality in wages and salaries. Economist
Thomas Piketty Thomas Piketty (; born 7 May 1971) is a French economist An economist is a professional and practitioner in the social science Social science is the Branches of science, branch of science devoted to the study of society, societies an ...

Thomas Piketty
argues that widening economic disparity is an inevitable phenomenon of
free market In economics Economics () is a social science Social science is the branch A branch ( or , ) or tree branch (sometimes referred to in botany Botany, also called , plant biology or phytology, is the science of pl ...
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
when the rate of return of capital (r) is greater than the rate of growth of the economy (g).


Labour market

A major cause of economic inequality within modern
market economies A market economy is an economic system An economic system, or economic order, is a system of Production (economics), production, allocation of resources, resource allocation and Distribution (economics), distribution of goods and services wit ...
is the determination of wages by the
market Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finland and Sweden Art, entertainment, and media Films *Market (1965 film), ''Market'' (1965 ...
. Where competition is imperfect; information unevenly distributed; opportunities to acquire education and skills unequal;
market failure In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. Market failures can be viewed as scenarios where indivi ...
results. Since many such imperfect conditions exist in virtually every market, there is in fact little presumption that markets are in general efficient. According to
Joseph Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American economist An economist is a professional and practitioner in the social science Social science is the Branches of science, branch of science devoted to the study of societ ...

Joseph Stiglitz
this means that there is an enormous potential role for government to correct such market failures. In his book, '' The Price of Inequality'' published in 2012'','' Stiglitz argues that the economical inequality is inevitable and permanent, because it is caused by the great amount of political power the richest have.
''"While there may be underlying economic forces at play, politics have shaped the market, and shaped it in ways that advantage the top at the expense of the rest.”- The Price of Inequality''


Malthusian argument

Thomas Malthus was originally a demographer, but later in his life he focused on studying economy, mainly inequalities across population. In his work he raised questions related to population growth and economy. In his Essay on Principle of Population, published in 1798,
Thomas Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) was an English cleric Clergy are formal leaders within established religion Religion is a social system, social-cultural system of designated religious behaviour, be ...

Thomas Malthus
claims that the population grows at geometrical speed, but the resources can only grow at arithmetical speed. In his theory, also referred to as
Malthusianism Malthusianism is the idea that population growth is potentially exponential while the growth of the food supply Food security is a measure of the availability of food and individuals' Economic inequality, ability to access it. According the Comm ...
, he explains that whenever there is spare food or resources, the population will grow faster to fulfill the gap.
''"The happiness of a country does not depend, absolutely, upon its poverty, or its riches, upon its youth, or its age, upon its being thinly, or fully inhabited, but upon the rapidity with which it is increasing, upon the degree in which the yearly increase of food approaches to the yearly increase of an unrestricted population."'' - ''
An Essay on the Principle of Population The book ''An Essay on the Principle of Population'' was first published anonymously in 1798, but the author was soon identified as Thomas Robert Malthus Thomas Robert Malthus (; 13/14 February 1766 – 23 December 1834) was an English cler ...

An Essay on the Principle of Population
''
The malthusian argument could be described as ''"Despite the population getting bigger, the quality of life will not increase"''. Even with new technologies and more effective ways of providing resources, the population will grow to the size at which the quality is the same as before per capita. This would lead to the point at which there would be not enough food for everyone, cause great famine or war for resources among the people and potentially die out of the whole population. This event is called Malthusian catastrophe and causes reduction of population back to the sustainable level. In his theory, Malthus uses “checks” - terms describing the limiting factors of the population size at any time. He divided them into 2 groups: the preventive checks and the positive checks. A ''preventive check'' is a conscious decision to abstain from procreation based on material or spiritual belief, for example a lack of resources or sex abstinence. Malthus explained this by his statement that people are perceiving the possible consequences of uncontrolled population growth and so wouldn't knowingly contribute to that. A ''positive check'' is, on the other hand, any event that shortens the human life span, for example war, diseases or famine. This also includes poor financial or health situation. The Malthusian catastrophe occurs when the rate of early death is too high in the population


Taxes

Another cause is the rate at which income is taxed coupled with the progressivity of the tax system. A
progressive tax A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progre ...
is a tax by which the
tax rate In a tax A tax is a compulsory financial charge or some other type of levy imposed on a taxpayer (an individual or legal entity In law, a legal person is any person A person (plural people or persons) is a being that has certain capaci ...
increases as the taxable base amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX In a progressive tax system, the level of the top tax rate will often have a direct impact on the level of inequality within a society, either increasing it or decreasing it, provided that income does not change as a result of the change in tax regime. Additionally, steeper tax progressivity applied to social spending can result in a more equal distribution of income across the board. Tax credits such as the Earned Income Tax Credit in the US can also decrease income inequality. The difference between the
Gini index In economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of ...
for an income distribution before taxation and the Gini index after taxation is an indicator for the effects of such taxation.


Education

An important factor in the creation of inequality is variation in individuals' access to education. Education, especially in an area where there is a high demand for workers, creates high wages for those with this education. However, increases in education first increase and then decrease growth as well as income inequality. As a result, those who are unable to afford an education, or choose not to pursue optional education, generally receive much lower wages. The justification for this is that a lack of education leads directly to lower incomes, and thus lower aggregate saving and investment. Conversely, raises incomes and promotes growth because it helps to unleash the productive potential of the poor. Access to education was in turn influenced by land inequalities. In the less industrialized parts of 19th century Europe, for example, landowners still held more political power than industrialists. These landowners did not benefit from educating their workers as much as industrialists did, since "educated workers have more incentives to migrate to urban, industrial areas than their less educated counterparts." Consequently, lower incentives to promote education in regions where land inequality was high led to lower levels of
numeracy File:Number bingo improves math skills LPB Laos.jpg, Number bingo improves math skills LPB Laos Numeracy is the ability to reason and to apply simple numerical concepts. Basic numeracy skills consist of comprehending fundamental arithmetical opera ...
in these regions.


Economic liberalism, deregulation and decline of unions

John Schmitt and Ben Zipperer (2006) of the CEPR point to
economic liberalism Economic liberalism (also known as fiscal conservatism in United States politics) is a political Politics (from , ) is the set of activities that are associated with Decision-making, making decisions in Social group, groups, or other form ...
and the reduction of business
regulation Regulation is the management of complex systems A complex system is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea of a two-way e ...

regulation
along with the decline of union membership as one of the causes of economic inequality. In an analysis of the effects of intensive Anglo-American
liberal Liberal or liberalism may refer to: Politics *a supporter of liberalism, a political and moral philosophy **Liberalism by country *an adherent of a Liberal Party Arts, entertainment and media *''El Liberal'', a Spanish newspaper published betw ...
policies in comparison to continental European liberalism, where unions have remained strong, they concluded "The U.S. economic and social model is associated with substantial levels of social exclusion, including high levels of income inequality, high relative and absolute poverty rates, poor and unequal educational outcomes, poor health outcomes, and high rates of crime and incarceration. At the same time, the available evidence provides little support for the view that U.S.-style labor market flexibility dramatically improves labor-market outcomes. Despite popular prejudices to the contrary, the U.S. economy consistently affords a lower level of economic mobility than all the continental European countries for which data is available." More recently, the
International Monetary Fund The International Monetary Fund (IMF) is an international financial institution, headquartered in Washington, D.C. ) , image_skyline = , image_caption = Clockwise from top left: the Washington Monument The ...

International Monetary Fund
has published studies which found that the decline of unionization in many advanced economies and the establishment of
neoliberal Neoliberalism, or neo-liberalism, is a term used to describe the 20th-century resurgence of 19th-century ideas associated with free-market In economics Economics () is the social science that studies how people interact with valu ...

neoliberal
economics have fueled rising income inequality.


Information technology

The growth in importance of information technology has been credited with increasing income inequality. Technology has been called "the main driver of the recent increases in inequality" by Erik Brynjolfsson, of
MIT Massachusetts Institute of Technology (MIT) is a private land-grant research university A research university is a university A university ( la, universitas, 'a whole') is an educational institution, institution of higher education, hi ...

MIT
. In arguing against this explanation, Jonathan Rothwell notes that if technological advancement is measured by high rates of invention, there is a negative correlation between it and inequality. Countries with high invention rates — "as measured by patent applications filed under the Patent Cooperation Treaty" — exhibit lower inequality than those with less. In one country, the United States, "salaries of engineers and software developers rarely reach" above $390,000/year (the lower limit for the top 1% earners). Some researchers, such as Juliet B. Schor, highlight the role of for-profit online sharing economy platforms as an accelerator of income inequality and calls into question their supposed contribution in empowering outsiders of the labour market. Taking the example of TaskRabbit, a labour service platform, she shows that a large proportion of providers already have a stable full-time job and participate part-time in the platform as an opportunity to increase their income by diversifying their activities outside employment, which tends to restrict the volume of work remaining for the minority of platform workers. In addition, there is an important phenomenon of labour substitution as manual tasks traditionally performed by workers without a degree (or just a college degree) integrated into the labour market in the traditional economy sectors are now performed by workers with a high level of education, (in 2013, 70% of TaskRabbit's workforce held a bachelor's degree, 20% a master's degree and 5% a PhD. The development of platforms, which are increasingly capturing demand for these manual services at the expense of non-platform companies, may therefore benefit mainly skilled workers who are offered more earning opportunities that can be used as supplemental or transitional work during periods of unemployment.


Globalization

Trade liberalization Free trade is a trade policy A commercial policy (also referred to as a trade policy or international trade policy) is a government's policy governing international trade International trade is the exchange of capital, goods, and service ...
may shift economic inequality from a global to a domestic scale. When rich countries trade with poor countries, the low-skilled workers in the rich countries may see reduced wages as a result of the competition, while low-skilled workers in the poor countries may see increased wages. Trade economist Paul Krugman estimates that trade liberalisation has had a measurable effect on the rising inequality in the United States. He attributes this trend to increased trade with poor countries and the fragmentation of the
means of production The means of production is a concept that encompasses the social use and ownership Ownership is the state or fact of exclusive right In Anglo-Saxon law Anglo-Saxon law (Old English Old English (, ), or Anglo-Saxon, is the earliest record ...
, resulting in low skilled jobs becoming more tradeable. Anthropologist Jason Hickel contends that globalization and "
structural adjustment Structural adjustment programs (SAPs) consist of loans (structural adjustment loans; SALs) provided by the International Monetary Fund The International Monetary Fund (IMF) is an international financial institution, headquartered in Washing ...
" set off the "
race to the bottom The race to the bottom is a socio-economic phrase to describe government deregulation of the business environment, or reduction in tax rates, in order to attract or retain economic activity in their jurisdictions. While this phenomenon can happen ...
", a significant driver of surging global inequality. Another driver Hickel mentions is the
debt Debt is an obligation that requires one party, the debtor A debtor or debitor is a legal entity (legal person) that owes a debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to ...

debt
system which advanced the need for structural adjustment in the first place.


Gender

In many countries, there is a
gender pay gap The gender pay gap or gender wage gap is the average difference between the for men and women who are working. Women are generally considered to be paid less than men. There are two distinct numbers regarding the pay gap: non-adjusted versus ...

gender pay gap
in favor of males in the
labor market Labour economics seeks to understand the functioning and dynamics of the markets Market may refer to: *Market (economics) *Market economy *Marketplace, a physical marketplace or public market Geography *Märket, an island shared by Finlan ...
. Several factors other than discrimination contribute to this gap. On average, women are more likely than men to consider factors other than pay when looking for work, and may be less willing to travel or relocate.
Thomas Sowell Thomas Sowell (; born June 30, 1930) is an American economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economi ...
, in his book Knowledge and Decisions, claims that this difference is due to women not taking jobs due to marriage or pregnancy. A U.S. Census's report stated that in US once other factors are accounted for there is still a difference in earnings between women and men. A study done on three post-soviet countries
Armenia Armenia (; hy, Հայաստան, translit=Hayastan, ), officially the Republic of Armenia,, is a landlocked country A landlocked country is a country A country is a distinct territory, territorial body or political entity. It is ...

Armenia
,
Georgia Georgia usually refers to: * Georgia (country) Georgia (, ; ) is a country located at the intersection of Eastern Europe and Western Asia. It is a part of the Caucasus region, bounded to the west by the Black Sea, to the north and east by ...
, and
Azerbaijan Azerbaijan (, ; az, Azərbaycan ), officially the Republic of Azerbaijan ( az, Azərbaycan Respublikası ), is a country in the Transcaucasia, Caucasus region of Eurasia. Located at the crossroads of Eastern Europe and Western Asia, it is boun ...

Azerbaijan
reveals that gender is one of the driving forces of income inequality, and being a female have significant negative effect on income, when other factors are held equal. The results show more than 50% gender pay gap in all three countries. These findings are because usually employers tend to avoid hiring women because of possible maternity leave. Other reason for this can be
occupational segregation Occupational segregation is the distribution of workers across and within Job, occupations, based upon demographic characteristics, most often gender. Other types of occupational segregation include Racial segregation, racial and ethnicity segregati ...
, which implies that women are usually accumulated in lower-paid positions and sectors, such as social services and education.


Race

There is also a globally recognized disparity in the wealth, income, and economic welfare of people of different races. In many nations, data exists to suggest that members of certain racial demographics experience lower wages, fewer opportunities for career and educational advancement, and intergenerational wealth gaps. Studies have uncovered the emergence of what is called "ethnic capital", by which people belonging to a race that has experienced discrimination are born into a disadvantaged family from the beginning and therefore have less resources and opportunities at their disposal. The universal lack of education, technical and cognitive skills, and inheritable wealth within a particular race is often passed down between generations, compounding in effect to make escaping these racialized cycles of poverty increasingly difficult. Additionally, ethnic groups that experience significant disparities are often also minorities, at least in representation though often in number as well, in the nations where they experience the harshest disadvantage. As a result, they are often segregated either by government policy or social stratification, leading to ethnic communities that experience widespread gaps in wealth and aid. As a general rule, races which have been historically and systematically colonized (typically indigenous ethnicities) continue to experience lower levels of financial stability in the present day. The
global South The concept of Global North and Global South (or North–South divide in a global context) is used to describe a grouping of countries along socio-economic Socioeconomics (also known as social economics) is the social science that studies ho ...
is considered to be particularly victimized by this phenomenon, though the exact socioeconomic manifestations change across different regions.


Westernized Nations

Even in economically developed societies with high levels of
modernization Modernization theory is used to explain the process of modernization within societies. Modernization theory originated from the ideas of German sociologist Max Weber Maximilian Karl Emil Weber (; ; 21 April 186414 June 1920) was a German socio ...
such as may be found in Western Europe, North America, and Australia, minority ethnic groups and immigrant populations in particular experience financial discrimination. While the progression of civil rights movements and justice reform has improved access to education and other economic opportunities in politically advanced nations, racial income and wealth disparity still prove significant. In the United States for example, a survey of African-American populations show that they are more likely to drop out of high school and college, are typically employed for fewer hours at lower wages, have lower than average intergenerational wealth, and are more likely to use welfare as young adults than their white counterparts. Mexican-Americans, while suffering less debilitating socioeconomic factors than black Americans, experience deficiencies in the same areas when compared to whites and have not assimilated financially to the level of stability experienced by white Americans as a whole. These experiences are the effects of the measured disparity due to race in countries like the US, where studies show that in comparison to whites, blacks suffer from drastically lower levels of upward
mobility Mobility may refer to: Social sciences and humanities * Economic mobility, ability of individuals or families to improve their economic status * Geographic mobility, the measure of how populations and goods move over time * Mobilities, a contempo ...
, higher levels of downward mobility, and poverty that is more easily transmitted to offspring as a result of the disadvantage stemming from the era of slavery and post-slavery
racism Racism is the belief that groups of humans possess different behavioral traits corresponding to inherited attributes and can be divided based on the superiority Superior may refer to: *Superior (hierarchy), something which is higher in a hie ...

racism
that has been passed through racial generations to the present. These are lasting financial inequalities that apply in varying magnitudes to most non-white populations in nations such as the US, the UK, France, Spain, Australia, etc.


Latin America

In the countries of the Caribbean, Central America, and South America, many ethnicities continue to deal with the effects of European colonization, and in general nonwhites tend to be noticeably poorer than whites in this region. In many countries with significant populations of indigenous races and those of Afro-descent (such as Mexico, Colombia, Chile, etc.) income levels can be roughly half as high as those experiences by white demographics, and this inequity is accompanied by systematically unequal access to education, career opportunities, and poverty relief. This region of the world, apart from urbanizing areas like Brazil and Costa Rica, continues to be understudied and often the racial disparity is denied by Latin Americans who consider themselves to be living in post-racial and post-colonial societies far removed from intense social and economic stratification despite the evidence to the contrary.


Africa

African countries, too, continue to deal with the effects of the
Trans-Atlantic Slave Trade The Atlantic slave trade, transatlantic slave trade, or Euro-American slave trade involved the transportation by slave traders of various enslaved List of ethnic groups of Africa, African people, mainly to the Americas. The slave trade regularl ...
, which set back economic development as a whole for blacks of African citizenship more than any other region. The degree to which colonizers stratified their holdings on the continent on the basis of race has had a direct correlation in the magnitude of disparity experienced by nonwhites in the nations that eventually rose from their colonial status. Former French colonies, for example, see much higher rates of income inequality between whites and nonwhites as a result of the rigid hierarchy imposed by the French who lived in Africa at the time. Another example is found in South Africa, which, still reeling from the socioeconomic impacts of
Apartheid Apartheid (South African English South African English (SAfrE, SAfrEng, SAE, en-ZA) is the set of English language dialects native to South Africans. History British British may refer to: Peoples, culture, and language * B ...

Apartheid
, experiences some of the highest racial income and wealth inequality in all of Africa. In these and other countries like Nigeria, Zimbabwe, and Sierra Leone, movements of civil reform have initially led to improved access to financial advancement opportunities, but data shows that for nonwhites this progress is either stalling or erasing itself in the newest generation of blacks that seek education and improved transgenerational wealth. The economic status of one's parents continues to define and predict the financial futures of African and minority ethnic groups.


Asia

Asian regions and countries such as China, the Middle East, and Central Asia have been vastly understudied in terms of racial disparity, but even here the effects of Western colonization provide similar results to those found in other parts of the globe. Additionally, cultural and historical practices such as the
caste system Caste is a form of social stratification characterized by endogamy, hereditary transmission of a style of life which often includes an occupation, ritual status in a hierarchy, and customary social interaction and exclusion based on cultural no ...
in India leave their marks as well. While the disparity is greatly improving in the case of India, there still exists social stratification between peoples of lighter and darker skin tones that cumulatively result in income and wealth inequality, manifesting in many of the same poverty traps seen elsewhere.


Economic development

Economist
Simon Kuznets Simon Smith Kuznets (; rus, Семён Абра́мович Кузне́ц, p=sʲɪˈmʲɵn ɐˈbraməvʲɪtɕ kʊzʲˈnʲɛts; April 30, 1901 – July 8, 1985) was an American American(s) may refer to: * American, something of, from, or relate ...
argued that levels of economic inequality are in large part the result of stages of
development Development or developing may refer to: Arts *Development hell, when a project is stuck in development *Filmmaking#Development, Filmmaking, development phase, including finance and budgeting *Development (music), the process thematic material i ...
. According to Kuznets, countries with low levels of development have relatively equal distributions of wealth. As a country develops, it acquires more capital, which leads to the owners of this capital having more wealth and income and introducing inequality. Eventually, through various possible redistribution mechanisms such as
social welfare Welfare (or commonly, social welfare) is a type of government support intended to ensure that members of a society can meet basic human needs Maslow's hierarchy of needs is an idea in psychology Psychology is the science of mind and ...
programs, more developed countries move back to lower levels of inequality.
Andranik Tangian Andranik Ozanian, commonly known as General Andranik or simply Andranik;. Also spelled Antranik or Antranig 25 February 186531 August 1927), was an Armenian military commander and statesman, the best known '' fedayi'' and a key figure of the A ...
argues that the growing productivity due to advanced technologies results in increasing wages' purchase power for most commodities, which enables employers underpay workers in "labor equivalents", maintaining nevertheless an impression of fair pay. This illusion is dismantled by the wages' decreasing purchase power for the commodities with a significant share of hand labor. This difference between the appropriate and factual pay goes to enterprise owners and top earners, increasing the inequality.


Wealth concentration

Wealth concentration is the process by which, under certain conditions, newly created
wealth Wealth is the abundance of valuable financial asset A financial asset is a non-physical asset whose value is derived from a contractual claim, such as deposit (finance), bank deposits, bond (finance), bonds, and participations in companies' sh ...

wealth
concentrates in the possession of already-wealthy individuals or entities. Accordingly, those who already hold wealth have the means to
invest Investment is the dedication of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance Finance is the study of financial institution ...
in new sources of creating wealth or to otherwise leverage the accumulation of wealth, and thus they are the beneficiaries of the new wealth. Over time, wealth concentration can significantly contribute to the persistence of inequality within society. Thomas Piketty in his book ''
Capital in the Twenty-First Century ''Capital in the Twenty-First Century'' is the ''magnum opus 's ''The Creation of Adam ''The Creation of Adam'' () is a fresco Fresco (plural ''frescos'' or ''frescoes'') is a technique of Mural, mural painting executed upon freshly laid (" ...
'' argues that the fundamental force for divergence is the usually greater return of capital (r) than economic growth (g), and that larger fortunes generate higher returns. According to a 2020 study by the
RAND Corporation The RAND Corporation ("research and development") is an American nonprofit A nonprofit organization (NPO), also known as a non-business entity, not-for-profit organization, or nonprofit institution, is a legal entity organized and ope ...
, the top 1% of U.S. income earners have taken $50 trillion from the bottom 90% between 1975 and 2018.


Rent seeking

Economist
Joseph Stiglitz Joseph Eugene Stiglitz (; born February 9, 1943) is an American economist An economist is a professional and practitioner in the social science Social science is the Branches of science, branch of science devoted to the study of societ ...

Joseph Stiglitz
argues that rather than explaining concentrations of wealth and income, market forces should serve as a brake on such concentration, which may better be explained by the non-market force known as "
rent-seeking In public-choice theory, as well as in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumpt ...
". While the market will bid up compensation for rare and desired skills to reward wealth creation, greater productivity, etc., it will also prevent successful entrepreneurs from earning excess profits by fostering competition to cut prices, profits and large compensation.Stiglitz, Joseph E. (June 4, 2012). The Price of Inequality: How Today's Divided Society Endangers Our Future (pp. 30–1, 35–6). Norton. Kindle Edition. A better explainer of growing inequality, according to Stiglitz, is the use of political power generated by wealth by certain groups to shape government policies financially beneficial to them. This process, known to economists as
rent-seeking In public-choice theory, as well as in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumpt ...
, brings income not from creation of wealth but from "grabbing a larger share of the wealth that would otherwise have been produced without their effort"Stiglitz, Joseph E. (June 4, 2012). The Price of Inequality: How Today's Divided Society Endangers Our Future (p. 32). Norton. Kindle Edition.


Finance industry

Jamie Galbraith argues that countries with larger financial sectors have greater inequality, and the link is not an accident.


Global warming

A 2019 study published in ''
PNAS ''Proceedings of the National Academy of Sciences of the United States of America'' (often abbreviated ''PNAS'' or ''PNAS USA'') is a peer-review Peer review is the evaluation of work by one or more people with similar competencies as the ...
'' found that
global warming Contemporary climate change includes both the global warming caused by humans, and its impacts on Earth's weather patterns. There have been previous periods of climate change, but the current changes are more rapid than any known even ...

global warming
plays a role in increasing economic inequality between countries, boosting economic growth in developed countries while hampering such growth in developing nations of the
Global South The concept of Global North and Global South (or North–South divide in a global context) is used to describe a grouping of countries along socio-economic Socioeconomics (also known as social economics) is the social science that studies ho ...
. The study says that 25% of gap between the developed world and the developing world can be attributed to global warming. A 2020 report by
Oxfam Oxfam is a British founded confederation of 21 independent charitable organization A charitable organization or charity is an organization whose primary objectives are philanthropy and social well-being (e.g. educational, Religion, religious ...
and the
Stockholm Environment Institute The Stockholm Environment Institute, or SEI, is a non-profit, independent research and policy institute specialising in sustainable development Sustainable development is the organizing principle for meeting human development goals while sim ...
says that the wealthiest 10% of the global population were responsible for more than half of global carbon dioxide emissions from 1990 to 2015, which increased by 60%. According to a 2020 report by the
UNEP The United Nations Environment Programme (UNEP) is responsible for coordinating responses to environmental issues within the United Nations system. It was established by Maurice Strong Maurice Frederick Strong, (April 29, 1929 – November 27, 201 ...
,
overconsumption Overconsumption describes a situation where the use of a natural resource has exceeded the Sustainable yield, sustainable capacity of a system. A prolonged pattern of overconsumption leads to the eventual loss of resource bases. The term overconsu ...
by the rich is a significant driver of the
climate crisis Climate crisis is a term describing global warming and climate change, and their consequences. The term has been used to describe the threat of global warming to the planet, and to urge aggressive climate change mitigation. For example, a Janu ...
, and the wealthiest 1% of the world's population are responsible for more than double the greenhouse gas emissions of the poorest 50% combined. Inger Andersen, in the foreword to the report, said "this elite will need to reduce their footprint by a factor of 30 to stay in line with the Paris Agreement targets."


Mitigating factors

Countries with a
left-leaning Left-wing politics support social equality Social equality is a state of affairs in which all people within a specific society A society is a Social group, group of individuals involved in persistent Social relation, social int ...
legislature A legislature is an deliberative assembly, assembly with the authority to make laws for a Polity, political entity such as a Sovereign state, country or city. They are often contrasted with the Executive (government), executive and Judiciary, ...
generally have lower levels of inequality. Many factors constrain economic inequality – they may be divided into two classes: government sponsored, and market driven. The relative merits and effectiveness of each approach is a subject of debate. Typical
government A government is the system or group of people governing an organized community, generally a state State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Departmen ...

government
initiatives to reduce economic inequality include: *
Public education State schools (in England, Wales, and New Zealand) or public schools (Scottish English Scottish English ( gd, Beurla Albannach) is the set of varieties Variety may refer to: Science and technology Mathematics * Algebraic variety, th ...
: increasing the supply of skilled labor and reducing income inequality due to education differentials. *
Progressive tax A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progre ...
ation: the rich are taxed proportionally more than the poor, reducing the amount of income inequality in society if the change in taxation does not cause changes in income.
Market forces A market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in Exchange (economics), exchange. While parties may exchange goods and services by barter, most markets rely on sellers of ...
outside of government intervention that can reduce economic inequality include: * propensity to spend: with rising wealth & income, a person may spend more. In an extreme example, if one person owned everything, they would immediately need to hire people to maintain their properties, thus reducing the wealth concentration. On the other hand, high-income persons have higher propensity to save. Robin Maialeh then shows that increasing economic wealth decreases propensity to spend and increases propensity to invest which consequently leads to even greater growth rate of already rich agents. Research shows that since 1300, the only periods with significant declines in wealth inequality in Europe were the
Black Death The Black Death (also known as the Pestilence, the Great Mortality or the Plague) was a bubonic plague Bubonic plague is one of three types of plague caused by the plague bacterium Bacteria (; common noun bacteria, singular bact ...
and the two World Wars. Historian Walter Scheidel posits that, since the Stone Age, only extreme violence, catastrophes and upheaval in the form of total war, Communist revolution, pestilence and state collapse have significantly reduced inequality. He has stated that "only all-out thermonuclear war might fundamentally reset the existing distribution of resources" and that "peaceful policy reform may well prove unequal to the growing challenges ahead."


Effects

A lot of research has been done about the effects of economic inequality on different aspects in society: *Health: For long time the higher material living standards lead to longer life, as those people were able to get enough food, water and access to warmth. British researchers Richard G. Wilkinson and Kate Pickett have found higher rates of health and social problems (obesity, mental illness, homicides, teenage births, List of countries by incarceration rate, incarceration, child conflict, drug use) in countries and states with higher inequality. Their research included 24 developed countries, including most U.S. states, and found that in the more developed countries, such as Finland and Japan, the heath issues are much lower than in states with rather higher inequality rates, such as Utah and New Hampshire. Some studies link a surge in "deaths of despair", suicide, drug overdoses and alcohol related deaths, to widening income inequality. Conversely, other research did not find these effects or concluded that research suffered from issues of confounding variables. *Social goods: British researchers Richard G. Wilkinson and Kate Pickett have found lower rates of social goods (List of countries by life expectancy, life expectancy by country, educational performance, Trust (social sciences), trust among strangers, Women's rights#2011 study of status by country, women's status, social mobility, even numbers of patents issued) in countries and states with higher inequality. *Social cohesion: Research has shown an inverse link between income inequality and social cohesion. In more equal societies, people are much more likely to Trust (sociology), trust each other, measures of social capital (the benefits of goodwill, fellowship, mutual sympathy and social connectedness among groups who make up a social units) suggest greater community involvement. *Crime: The cross national research shows that in societies with less economic inequality the homicide rates are consistently lower. A 2016 study finds that interregional inequality increases terrorism. Other research has argued inequality has little effect on crime rates. *Welfare: Studies have found evidence that in societies where inequality is lower, population-wide satisfaction and happiness tend to be higher."Happiness: Has Social Science A Clue?" Richard Layard
2003
*Poverty: Study made by Jared Bernstein and Elise Gould suggest, that the poverty in the United States could have been reduced by the lowering of economic inequality for the past few decades. *Debt: Income inequality has been the driving factor in the growing household debt,"Conservative Inequality Denialism,"
by Timothy Noah ''The New Republic'' (October 25, 2012)
as high earners bid up the price of real estate and middle income earners go deeper into debt trying to maintain what once was a middle class lifestyle. *Economic growth: A 2016 meta-analysis found that "the effect of inequality on growth is negative and more pronounced in less developed countries than in rich countries", though the average impact on growth was not significant. The study also found that wealth inequality is more pernicious to growth than income inequality. * Civic participation: Higher income inequality led to less of all forms of social, cultural, and civic participation among the less wealthy. *Political instability: Studies indicate that economic inequality leads to greater political instability, including an increased risk of democratic breakdown and civil conflict. A significant impact of inequality on civil war probability has been found through anthropometric methods. *Political party responses: One study finds that economic inequality prompts attempts by left-leaning politicians to pursue redistributive policies while right-leaning politicians seek to repress the redistributive policies.


Perspectives


Fairness vs. equality

According to Christina Starmans et al. (Nature Hum. Beh., 2017), the research literature contains no evidence on people having an aversion on inequality. In all studies analyzed, the subjects preferred fair distributions to equal distributions, in both laboratory and real-world situations. In public, researchers may loosely speak of equality instead of fairness, when referring to studies where fairness happens to coincide with equality, but in many studies fairness is carefully separated from equality and the results are univocal. Already very young children seem to prefer fairness over equality. When people were asked, what would be the wealth of each quintile in their ideal society, they gave a 50-fold sum to the richest quintile than to the poorest quintile. The preference for inequality increases in adolescence, and so do the capabilities to favor fortune, effort and ability in the distribution. Preference for unequal distribution has been developed to the human race possibly because it allows for better co-operation and allows a person to work with a more productive person so that both parties benefit from the co-operation. Inequality is also said to be able to solve the problems of free-riders, cheaters and ill-behaving people, although this is heavily debated. Researches demonstrate that people usually underestimate the level of actual inequality, which is also much higher than their desired level of inequality. In many societies, such as the USSR, the distribution led to protests from wealthier landowners. In the current U.S., many feel that the distribution is unfair in being too unequal. In both cases, the cause is unfairness, not inequality, the researchers conclude.


Socialist perspectives

Socialists attribute the vast disparities in wealth to the private ownership of the
means of production The means of production is a concept that encompasses the social use and ownership Ownership is the state or fact of exclusive right In Anglo-Saxon law Anglo-Saxon law (Old English Old English (, ), or Anglo-Saxon, is the earliest record ...
by a class of owners, creating a situation where a small portion of the population lives off unearned income, unearned property income by virtue of ownership titles in capital equipment, financial assets and corporate stock. By contrast, the vast majority of the population is dependent on income in the form of a wage or salary. In order to rectify this situation, socialists argue that the means of production should be Social ownership, socially owned so that income differentials would be reflective of To each according to his contribution, individual contributions to the social product. Marxian economics attributes rising inequality to job automation and capital deepening within capitalism. The process of job automation conflicts with the capitalist property form and its attendant system of wage labor. In this analysis, capitalist firms increasingly substitute capital equipment for labor inputs (workers) under competitive pressure to reduce costs and maximize profits. Over the long term, this trend increases the organic composition of capital, meaning that less workers are required in proportion to capital inputs, increasing unemployment (the "reserve army of labour"). This process exerts a downward pressure on wages. The substitution of capital equipment for labor (mechanization and automation) raises the productivity of each worker, resulting in a situation of relatively stagnant wages for the working class amidst rising levels of property income for the capitalist class. Marxist socialists ultimately predict the emergence of a communist society based on the common ownership of the means of production, where each individual citizen would have free access to the articles of consumption (''From each according to his ability, to each according to his need''). According to Marxist philosophy, equality in the sense of free access is essential for freeing individuals from dependent relationships, thereby allowing them to transcend Marx's theory of alienation, alienation.


Meritocracy

Meritocracy favors an eventual society where an individual's success is a direct function of his merit, or contribution. Economic inequality would be a natural consequence of the wide range in individual skill, talent and effort in human population. David Landes stated that the progression of Western economic development that led to the Industrial Revolution was facilitated by men advancing through their own merit rather than because of family or political connections.


Liberal perspectives

Most modern social liberalism, social liberals, including centrist or left-of-center political groups, believe that the capitalist economic system should be fundamentally preserved, but the status quo regarding the income gap must be reformed. Social liberals favor a capitalist system with active Keynesian economics, Keynesian macroeconomic policies and progressive taxation (to even out differences in income inequality). Research indicates that people who hold liberal beliefs tend to see greater income inequality as morally wrong. However, contemporary classical liberals and libertarians generally do not take a stance on wealth inequality, but believe in legal egalitarianism, equality under the law regardless of whether it leads to unequal wealth distribution. In 1966 Ludwig von Mises, a prominent figure in the Austrian School of economic thought, explains:
The liberal champions of equality under the law were fully aware of the fact that men are born unequal and that it is precisely their inequality that generates social cooperation and civilization. Equality under the law was in their opinion not designed to correct the inexorable facts of the universe and to make natural inequality disappear. It was, on the contrary, the device to secure for the whole of mankind the maximum of benefits it can derive from it. Henceforth no man-made institutions should prevent a man from attaining that station in which he can best serve his fellow citizens.
Robert Nozick argued that government redistributes wealth by force (usually in the form of taxation), and that the ideal moral society would be one where all individuals are free from force. However, Nozick recognized that some modern economic inequalities were the result of forceful taking of property, and a certain amount of redistribution would be justified to compensate for this force but not because of the inequalities themselves. John Rawls argued in ''A Theory of Justice'' that inequalities in the distribution of wealth are only justified when they improve society as a whole, including the poorest members. Rawls does not discuss the full implications of his theory of justice. Some see Rawls's argument as a justification for
capitalism Capitalism is an economic system An economic system, or economic order, is a system A system is a group of interacting Interaction is a kind of action that occurs as two or more objects have an effect upon one another. The idea o ...

capitalism
since even the poorest members of society theoretically benefit from increased innovations under capitalism; others believe only a strong welfare state can satisfy Rawls's theory of justice. Classical liberal Milton Friedman believed that if government action is taken in pursuit of economic equality then political freedom would suffer. In a famous quote, he said:
A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.
Economist Tyler Cowen has argued that though income inequality has increased within nations, globally it has fallen over the 20 years leading up to 2014. He argues that though income inequality may make individual nations worse off, overall, the world has improved as global inequality has been reduced.


Social justice arguments

Patrick Diamond and Anthony Giddens (professors of Economics and Sociology, respectively) hold that 'pure meritocracy is incoherent because, without redistribution, one generation's successful individuals would become the next generation's embedded caste, hoarding the wealth they had accumulated'. They also state that social justice requires redistribution of high incomes and large concentrations of wealth in a way that spreads it more widely, in order to "recognise the contribution made by all sections of the community to building the nation's wealth." (Patrick Diamond and Anthony Giddens, June 27, 2005, New Statesman) Pope Francis stated in his ''Evangelii gaudium'', that "as long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world's problems or, for that matter, to any problems." He later declared that "inequality is the root of social evil." When income inequality is low, aggregate demand will be relatively high, because more people who want ordinary consumer goods and services will be able to afford them, while the labor force will not be as relatively monopolization, monopolized by the wealthy.
The Economics of Welfare
', Arthur Cecil Pigou


Effects on social welfare

In most western democracies, the desire to eliminate or reduce economic inequality is generally associated with the political left. One practical argument in favor of reduction is the idea that economic inequality reduces social cohesion and increases social unrest, thereby weakening the society. There is evidence that this is true (see inequity aversion) and it is intuitive, at least for small face-to-face groups of people. Alberto Alesina, Rafael Di Tella, and Robert MacCulloch find that inequality negatively affects happiness in Europe but not in the United States. It has also been argued that economic inequality invariably translates to political inequality, which further aggravates the problem. Even in cases where an increase in economic inequality makes nobody economically poorer, an increased inequality of resources is disadvantageous, as increased economic inequality can lead to a power shift due to an increased inequality in the ability to participate in democratic processes.


Capabilities approach

The capabilities approach – sometimes called the human development approach – looks at income inequality and poverty as form of "capability deprivation". Unlike neoliberalism, which "defines well-being as utility maximization", economic growth and income are considered a means to an end rather than the end itself. Its goal is to "wid[en] people's choices and the level of their achieved well-being"
UNDP (1990) Human Deuelopment Report, Oxford University Press, New York
through increasing functionings (the things a person values doing), capabilities (the freedom to enjoy functionings) and agency (the ability to pursue valued goals). When a person's capabilities are lowered, they are in some way deprived of earning as much income as they would otherwise. An old, ill man cannot earn as much as a healthy young man; gender roles and customs may prevent a woman from receiving an education or working outside the home. There may be an epidemic that causes widespread panic, or there could be rampant violence in the area that prevents people from going to work for fear of their lives. As a result, income inequality increases, and it becomes more difficult to reduce the gap without additional aid. To prevent such inequality, this approach believes it is important to have political freedom, economic facilities, social opportunities, transparency guarantees, and protective security to ensure that people aren't denied their functionings, capabilities, and agency and can thus work towards a better relevant income.


Policy responses intended to mitigate

A 2011 OECD study makes a number of suggestions to its member countries, including: * Well-targeted income-support policies. * Facilitation and encouragement of access to employment. * Better job-related training and education for the low-skilled (on-the-job training) would help to boost their productivity potential and future earnings. * Better access to formal education.
Progressive tax A progressive tax is a tax in which the tax rate increases as the taxable amount increases.Sommerfeld, Ray M., Silvia A. Madeo, Kenneth E. Anderson, Betty R. Jackson (1992), ''Concepts of Taxation'', Dryden Press: Fort Worth, TX The term ''progre ...
ation reduces absolute income inequality when the higher rates on higher-income individuals are paid and not Tax evasion, evaded, and transfer payments and social safety nets result in progressive gross fixed capital formation#Economic analysis, government spending. Wage ratio legislation has also been proposed as a means of reducing income inequality. The OECD asserts that public spending is vital in reducing the ever-expanding wealth gap.Wealth Gap Widens In Rich Countries As Austerity Threatens To Worsen Inequality: OECD
''The Huffington Post.'' Retrieved May 14, 2013
The economists
Emmanuel Saez Emmanuel Saez (born November 26, 1972) is a French, naturalized American economist An economist is a practitioner in the social sciences, social science discipline of economics. The individual may also study, develop, and apply theories and co ...
and
Thomas Piketty Thomas Piketty (; born 7 May 1971) is a French economist An economist is a professional and practitioner in the social science Social science is the Branches of science, branch of science devoted to the study of society, societies an ...

Thomas Piketty
recommend much higher top marginal tax rates on the wealthy, up to 50 percent, 70 percent or even 90 percent. Ralph Nader, Jeffrey Sachs, the United Front Against Austerity, among others, call for a financial transactions tax (also known as the Robin Hood tax) to bolster the social safety net and the public sector. ''The Economist'' wrote in December 2013: "A minimum wage, providing it is not set too high, could thus boost pay with no ill effects on jobs....America's federal minimum wage, at 38% of median income, is one of the rich world's lowest. Some studies find no harm to employment from federal or state minimum wages, others see a small one, but none finds any serious damage." General limitations on and taxation of
rent-seeking In public-choice theory, as well as in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumpt ...
are popular across the political spectrum. Public policy responses addressing causes and effects of income inequality in the US include: progressive tax, progressive tax incidence adjustments, strengthening social safety net provisions such as Aid to Families with Dependent Children, Social programs in the United States, welfare, the Supplemental Nutrition Assistance Program, food stamp program, Social Security (United States), Social Security, Medicare (United States), Medicare, and Medicaid, Ohio Organizing Collaborative, organizing community interest groups, increasing and reforming higher education subsidies, increasing infrastructure spending, and placing limits on and taxing
rent-seeking In public-choice theory, as well as in economics Economics () is the social science that studies how people interact with value; in particular, the Production (economics), production, distribution (economics), distribution, and Consumpt ...
. A 2017 study in the ''Journal of Political Economy'' by Daron Acemoglu, James A. Robinson (economist), James Robinson and Thierry Verdier argues that American "cutthroat" capitalism and inequality gives rise to technology and innovation that more "cuddly" forms of capitalism cannot. As a result, "the diversity of institutions we observe among relatively advanced countries, ranging from greater inequality and risk-taking in the United States to the more egalitarian societies supported by a strong safety net in Scandinavia, rather than reflecting differences in fundamentals between the citizens of these societies, may emerge as a mutually self-reinforcing world equilibrium. If so, in this equilibrium, 'we cannot all be like the Scandinavians,' because Scandinavian capitalism depends in part on the knowledge spillovers created by the more cutthroat American capitalism." A 2012 working paper by the same authors, making similar arguments, was challenged by Lane Kenworthy, who posited that, among other things, the Nordic countries are consistently ranked as some of the world's most innovative countries by the World Economic Forum's Global Competitiveness Index, with Sweden ranking as the most innovative nation, followed by Finland, for 2012–2013; the U.S. ranked sixth. There are however global initiative like the United Nations Sustainable Development Goal 10 which aims to garner international efforts in reducing economic inequality considerably by 2030.


See also

* Accumulation of capital * Aporophobia * Class conflict * Criticism of capitalism * Cycle of poverty * Donor Class * Economic anxiety * Economic migrant * Economic security * Equal opportunity * Great Divergence, disproportionate economic advancement of Europe * Human Development Index * Income distribution * ''Inequality for All'' * International inequality * List of countries by distribution of wealth * List of countries by income equality * List of countries by wealth per adult * Occupy movement * Paradise Papers * Poverty reduction * Public university * Rent-seeking * Social inequality * Tax haven * Theories of poverty * Wealth concentration * Wealth distribution


References


Further reading

;Books * * Tony Atkinson, Atkinson, Anthony B. (2015).
Inequality: What Can Be Done?
' Cambridge, Massachusetts: Harvard University Press. * * * * * * * * * * Ribeiro, Marcelo Byrro (2020)
''Income Distribution Dynamics of Economic Systems: An Econophysical Approach''Cambridge University Press
ISBN 9781107092532. * * * * * * * ;Articles *Rivera Vicencio, Eduardo, "Inequality,Precariousness and Social Costs of Capitalism. In the Era of Corporate Governmentality" International Journal of Critical Accounting (IJCA), Vol 11, Nº1, pp. 40–70

*Liaquat Ahamed, Ahamed, Liaquat, "Widening Gyre: The rise and fall and rise of economic inequality", ''The New Yorker'', September 2, 2019, pp. 26–29. "[T]here seems to [be] some sort of cap on inequality – a limit to the economic divisions a country can ultimately cope with." (p. 28.) * * * * * *Cousin, Bruno; Chauvin, Sébastien (2021)
"Is there a global super-bourgeoisie?"
''Sociology Compass'' 15 (6): 1–15. *Cousin, Bruno; Shamus Khan; Ashley Mears (2018)
"Theoretical and methodological pathways for research on elites"
''Socio-Economic Review'' 16 (2): 225-249. * * * * * * * * * * * * * * * * *


Historical

* Alfani, Guido, and Matteo Di Tullio. The Lion's Share: Inequality and the Rise of the Fiscal State in Preindustrial Europe, Cambridge University Press, Cambridge 2019.
The Lion's Share: Inequality and the Rise of the Fiscal State in Preindustrial Europe
* Crayen, Dorothee, and Joerg Baten. "New evidence and new methods to measure human capital inequality before and during the industrial revolution: France and the US in the seventeenth to nineteenth centuries." ''Economic History Review'' 63.2 (2010): 452–478.
online
* * Hoffman, Philip T., et al. "Real inequality in Europe since 1500." ''Journal of Economic History'' 62.2 (2002): 322–355.
online
* Morrisson, Christian, and Wayne Snyder. "The income inequality of France in historical perspective." ''European Review of Economic History'' 4.1 (2000): 59–83
online
* Lindert, Peter H., and Steven Nafziger. "Russian inequality on the eve of revolution." ''Journal of Economic History'' 74.3 (2014): 767-798
online
* * Piketty, Thomas, and Emmanuel Saez. "The evolution of top incomes: a historical and international perspective." ''American economic review'' 96.2 (2006): 200–205
online
* Piketty, Thomas, and Emmanuel Saez. "Income inequality in the United States, 1913–1998." ''Quarterly journal of economics'' 118.1 (2003): 1-41.
online
* Saito, Osamu. "Growth and inequality in the great and little divergence debate: a Japanese perspective." ''Economic History Review'' 68.2 (2015): 399–419. Covers 1600–1868 with comparison to Stuart England and Mughal India. * * Stewart, Frances. "Changing perspectives on inequality and development." ''Studies in Comparative International Development'' 51.1 (2016): 60–80. covers 1801 to 2016. * Sutch, Richard. "The One Percent across Two Centuries: A Replication of Thomas Piketty's Data on the Concentration of Wealth in the United States." ''Social Science History'' 41.4 (2017): 587–613. Strongly rejects all Piketty's estimates for US inequality before 1910 for both top 1% and top 10%
online
* Van Zanden, Jan Luiten. "Tracing the beginning of the Kuznets curve: Western Europe during the early modern period." ''Economic History Review'' 48.4 (1995): 643–664. covers 1400 to 1800. * Wei, Yehua Dennis. "Geography of inequality in Asia." ''Geographical Review'' 107.2 (2017): 263–275. covers 1981 to 2015.


External links

* {{DEFAULTSORT:Economic Inequality Economic inequality, Distribution of wealth Economic globalization Libertarian theory Occupy Wall Street Social inequality Population concepts