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What is Economic Inequality?

2017-06-02T07:02:03+00:00

The term 'Economic Inequality' is included in the Economics edition of the Financial Dictionary. Get yours now on amazon in ebook or paperback format. Read more here...

Economic Inequality concerns disparity financially between various groups of individuals. There are no societies in the world where all people fall into precisely the identical class economically. In other words, all individuals do not have the same amount of material or financial resources. Unfortunately, just the opposite is more common.

In many nations, some people have such vast income and wealth differences from others who live in dire poverty. On the other extreme, the wealthy live ultra luxuriously. This causes great and intense debate as the effects of economic inequality spill over into other parts of life that would normally not be determined by one’s economic standing.

In most economies and countries, there are poor people, rich people, and then many medium classed ones which live in the middle. This is most clearly demonstrated in respect to the richest class. They earn and possess substantially greater resources than all of the other classes, particularly versus the bottom one. It is this whole scenario that economists call economic inequality.

Two different focuses surface as analysts consider such economic inequalities. Wealth is the first of these. This refers to the quantifiable amount of money and possessions that people have. Such wealth massively affects the lifestyle of individuals as it is almost exclusively the determining factor of what people can buy and what choices they have in their daily lives and when making longer-term plans. The wealthy naturally have higher standards of living than the rest of the classes.

The other critical financial indicator for measuring the level of economic inequality has to do with income. There are a number of individuals who possess no or little wealth as they have next to no meaningful income. In most cases, the people who command the greatest amount of wealth and so enjoy the highest standards of living are similarly the ones who enjoy the most significant levels of income.

It is interesting to realize that this kind of inequality economically is more severe in some nations and regions than it is in other ones. Nations that do not have sufficient social services find that the disparities are greatest and painfully obvious. In some of these countries, some individuals are extravagantly wealthy while others on the other extreme live in appalling conditions or suffer from starvation or at least severe malnutrition. Other countries have adequate social service networks and find that the gap between the richest and the poorest proves to be less severe. This still will not stop significant differences from appearing between the different groups and their actual lifestyles.

The debate rages on regarding economic inequality because of a variety of reasons. One strong argument against wealth and income disparities is that these dramatically impact the ability of citizens to obtain core services and basic items that ought to be easily available to all people. This includes such things as food, clean drinking water, legal representation, and adequate health care. Another complaint regarding inequality concerns the unfair access to impacting the political environment that the rich enjoy.

In recent years, the United States has been ranked among the most unequal of all developed nation rivals. In fact the OECD ranks the U.S. as second highest in inequality levels once it takes market incomes and adjusts them for the redistribution impacts of income transfer programs and tax policies (like unemployment compensation and Social Security payouts). According to their measurements, only Chile has a greater level of economic inequality from all 31 developed nations.

Similarly, the U.S. economic inequality has become the highest since 1928 in recent years. As of 2012, the highest earning one percent in the U.S obtained 22.5 percent of all pretax income. The bottom earning 90 percent enjoyed only 49.6 percent of the national income share.

The term 'Economic Inequality' is included in the Economics edition of the Financial Dictionary. You can get your copy on amazon in Kindle or Paperback version. See more details here.