Urban Institute. The Federal Reserve. Economic Policy Institute. Institute for Women's Policy Research. Accessed Nov. Pew Research Center.
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We and our partners process data to: Actively scan device characteristics for identification. I Accept Show Purposes. Your Money. Personal Finance. Your Practice. Popular Courses. Economy Economics. Table of Contents Expand. What Is Income Inequality? Understanding Income Inequality. Special Considerations. Key Takeaways Income inequality studies help to show the disparity of incomes among different population segments. When analyzing income inequality, researchers commonly study distributions based on gender, ethnicity, geographic location, and occupation.
Case studies and analyses of income inequality, income disparity, and income distributions are provided regularly by a variety of top sources. The Gini Index is a popular way to compare income inequalities universally across the globe. An income gap refers to the difference in income earned between demographic segments. The discrepancy in income between the wealthy and the poor is worsening. Although world income measured in real terms has increased by percent since the Second World War, the wealthiest people have absorbed most of the gains.
Since the richest fifth of the world's people have seen their share of the world's income increase from 70 to 85 percent. Thus one fifth of the world's population possesses much more than four fifths of the world's wealth, while the share held by all others has correspondingly fallen; that of the world's poorest 20 percent has declined from 2. In , the wealth of the world's three richest people was greater than the combined GNP of the 48 least developed countries, which have million inhabitants.
In , the USA had the sharpest wealth disparity of any western nation. The wealth of the top one percent is greater than that of the bottom ninety percent of Americans.
On a worldwide plane, wealth disparities are staggering. According to the United Nations Development Program, the assets of the world's billionaires were greater than the combined incomes of countries with 45 percent of the world's people about 3 billion human beings. It is currently published as a searchable online platform with profiles of world problems, action strategies, and human values that are interlinked in novel and innovative ways.
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You are here Home. Experimental visualization of narrower problems. Other Names:. Broader Problems:. Narrower Problems:. Related Problems:. Web Page s :. Subject s :. For many in the opportunity-not-inequality camp, the relationship between the two concepts is an inconvenient truth.
Many politicians and analysts would rather not address the power imbalances that have channeled so much of our economic growth to the highest-income families. But a growing body of research shows strong links among inequality, poverty, and opportunity. For example, new research by Elise Gould of the Economic Policy Institute reveals that of the factors most commonly cited as driving poverty in America—education, family structure, race and more see chart below —the number-one factor by far is the growth in inequality, which added seven percentage points to the poverty rate since the late s.
So why is that? How is it that inequality reduces mobility and deepens poverty? The relationship between childhood family income and life outcomes is well-established. Research by Raj Chetty of Harvard and his colleagues links every percentile-point gain in childhood income rank with a 3.
In addition, a large and growing body of evidence, recently reviewed by Katharine Bradbury and Robert Triest of the Federal Reserve Bank of Boston, directly connects inequality of outcomes to inequality of opportunity. As just noted, rising inequality implies that the income and wealth generated by GDP and productivity growth increasingly flow to those at the very top of the scale. As a result, relatively fewer resources reach everyone else.
Research indicates at least three causal pathways via which inequality constrains opportunity for those at the lower end of the economic spectrum. First, inequality is driving increasing residential segregation by income. The shares of families in neighborhoods of concentrated poverty and neighborhoods of concentrated wealth both more than doubled between and , while the share of families in middle-income neighborhoods declined from 65 percent to 42 percent.
Those high-poverty neighborhoods—where more and more families are living—create lasting disadvantages for many who grow up there: If a family with young children less than age 13 relocates from a high- to a low-poverty neighborhood, the kids achieve better academic and economic outcomes later in life, as new work by Chetty et al.
Over the period of growing inequality, these disparities have increased. In , for example, families with education debt in the bottom half of the net worth distribution a broader definition of income, including assets minus liabilities had a mean debt-to-income ratio of around 0.
For families in the top 5 percent, that ratio was eight cents on the dollar. But by , the debt-to-income ratio had more than doubled to 0. Third, and most importantly, inequality directly undermines equality of opportunity, likely through a variety of mechanisms.
As the gap between the rich and poor widens, lower-income families have less ability relative to their rich counterparts to invest in enrichment goods for their children.
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