Income Inequality
Aug 07, 2022 By Susan Kelly

Income inequality refers to how unevenly income is distributed across a population. Income inequality is greater the less even distribution. Wealth inequality, or uneven distribution of wealth, is often associated with income inequality. Different ways of dividing populations can show different levels or forms of income inequality, such as by race or gender. You can use measures such as the Gini coefficient to determine the degree of income inequality within a population.

Understanding Income Inequality

The analysis of income inequality and income disparity may benefit from using segmentation. Using segmentation of income disparity analysis, one can research a variety of different sorts of income distributions. The study of income distributions according to demographic subgrouping provides the foundation for understanding income inequality and economic disparity.

  • Gender
  • Ethnicity
  • Geographic location
  • Occupation
  • Historical income
  • Examples of income inequality

Numerous case studies and analysis reports provide insight into income inequality, income disparity, and income distributions in the U.S. as well as around the globe.

Urban Institute

One source of insight into income inequality is the Urban Institute. The Urban Institute analyzed 50 years of economic data and found that the wealthiest became poorer while the poorest got richer. From 1963 to 2016,

  • The 10% of most poor Americans have $1,000 debt and zero assets.
  • The median income segment of families has more than twice the wealth as their previous average.
  • The wealth of the top 10% of families was more than five times that of their previous wealth.
  • The wealth of the top 1% of families was seven times greater than their previous wealth.

The Urban Institute also studies the U.S. racial-ethnic wealth gap. According to the Urban Institute, White families had a median wealth of $45,000 more in 1963 than those of color. The median wealth of White families had increased to $153,000 more than Latinx families and $165,000 over Black families by 2019.

Federal Reserve

The Distributional Financial Accounts Report is put out by the Federal Reserve once every three months. This paper analyses the distribution of wealth among households in the United States. The Federal Reserve provided the following information about the distribution of wealth in the United States as of the first quarter of 2021.

Economic Policy Institute

According to the Economic Policy Institute, a 2018 report showed a trend toward increasing the incomes of top earners after the 2008 recession. The Economic Policy Institute found that incomes for the top 1% increased faster than those of the rest in 43 states and Washington D.C. between 2009 and 2015.

This trend can be caused by many factors, such as wage stagnation for wage-earning Americans and tax cuts for the wealthiest Americans. There may also have been a decline in manufacturing jobs and an exploding stock market, which has inflated the value of corporate executives and hedge fund managers.

Companies are investing heavily post-recession to retain and hire skilled workers in engineering and healthcare. Automation takeovers have reduced or been replaced by newer technology, lowering wages for those in lower-skilled jobs. EPI data also tracks wages segment by segment on an ongoing basis. It showed the following averages as of 2020 for Whites, Blacks, and Hispanics.

Institute for Women's Policy Research

Income inequality is an economic concept that affects certain population segments more than others. Significant wage gaps are often found for Blacks and Hispanics living in the U.S. A Institute for Women's Policy Research of 2020 income data found that women of all races and backgrounds were paid on average 82.3% more than men. This is the narrowest gap in history. Since 1980, when women earned 64% more than men, it has steadily increased.

Pew Research Center

The Pew Research Center data also shows income inequalities based on gender. According to the Pew Research Center, the gap in income between men and women has decreased for all workers 16+. Women are reported to have 84% of the average salary of men. Workers aged 25-34 had a smaller income gap. In 2020, females earned 93% of the men's salary.

Take Note

Corrado Gini, an Italian statistician, created the Gini Index in the early 1900s to quantify and compare income inequality across countries. An index can be from 0 to 100, with a higher value indicating greater income inequality and vice versa. According to the World Bank, South Africa has the highest income inequality, with a Gini Index of 63.0. According to the World Bank, the Gini Index level in the United States is 41.4. Slovenia has a Gini Index reading of 24.6, which is the lowest according to the World Bank.

Both local and international governing institutions are constantly looking at the dispersions of income inequality. The World Bank and the International Monetary Fund (IMF) have aimed to improve the income of the 10% lowest earners in all countries seeking global support. As part of a global initiative for financial inclusion, new financial technologies and productions can help improve the banking services for the lowest-income earners worldwide.