Economic inequality refers to the differences between people’s incomes or wealth. It’s a global problem with ramifications for public health, political stability, and economic growth. Ideally, economies should be balanced with everyone having an equal chance of success. While some inequality is inevitable in a market-based economy due to differences in talent and effort, excessive economic inequality can lead to polarization and ultimately lower growth.
Many different factors influence the amount of economic inequality in a country, with income being one of the most significant. Average incomes, however, can be misleading because they do not take into account the extremes of wealth and poverty. A more accurate measure of inequality is the Gini coefficient, which measures how a country’s economy is distributed. A value of zero means perfect equality and a value of one indicates extremely high inequality.
A second factor is the ownership of assets, which can change in value over time. For example, homeowners are often disproportionately wealthy because the value of their homes tends to increase faster than inflation. The availability of access to education and job training that could minimize the impact of income inequality is another key factor. Many of these programs, however, are limited in scope and are not widely available.
Other societal factors can also contribute to economic inequality, including racism and discrimination in the workplace and lack of educational opportunity. The COVID-19 pandemic exacerbated these trends, further widening the gap between the haves and have-nots.
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