Economic inequality is a global phenomenon that undermines a country’s economic growth, health outcomes, and democratic institutions. Researchers track inequality using a number of measures, but a common one is the Gini coefficient, named after Italian statistician Corrado Gini. A country with a Gini of zero means everyone earns the same amount, while a score of one indicates extreme wealth concentration.
There are many factors that contribute to economic inequality, including a decline in economic mobility that deprives people of their future prospects. The root causes of this trend are rooted in the fact that people who grow up poor do not have the financial or human capital to take advantage of new opportunities, such as jobs requiring higher levels of education. Their families do not have the resources to invest in education, and they do not have the social networks that can open doors and provide them with valuable information about how to succeed.
Changing economic paradigms are also reshaping distributional dynamics, contributing to increased income inequality within countries. This includes the emergence of technology that is reshaping work and shifting labor demand away from routine low- and middle-level skills, increasing capital income as firms gain market power through technological change and winner-takes-all markets, and a shift in incomes between wages and profits with the rise of digital technologies.
These trends can be exacerbated by economic disruptions, such as financial turmoil that reduces job opportunities, and environmental changes like climate change that deprive people of resources and hinders access to healthy foods and clean water. However, the most significant contributor to inequality is structural factors that limit a person’s ability to generate income, such as gender and race biases, a lack of education or training, a family’s ability to invest in their children, aging, ill-health, and war, among others.
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