The world is highly unequal. So what are global wealth inequality and income inequality? Explore these key terms and more.
Have you ever wondered why some people have so much and others have so little? We can all see that the world is unequal, but how did it get this way and what problems does this inequality create?
It’s not just your imagination. While global inequality has improved slightly over the last several decades thanks to the growth of India and China (where a large number of the world’s people live), the world remains highly unequal.
The truth is that very poor people have seen their wealth increase modestly, while the very wealthy have made fantastic gains. This means inequality is on the rise within many individual countries.
At Oxfam, our mission is to fight inequality to end poverty and injustice. So we’re going to explain what wealth and income inequality are, what drives global wealth inequality, how it’s measured, which countries are the most unequal, and what Oxfam is doing to reduce wealth inequality.
What is wealth inequality?
Wealth inequality is the unequal distribution of wealth (defined as what someone owns) minus liabilities (debt) among individuals across a country.
Wealth inequality tends to increase when ultra-wealthy individuals and companies exert their influence over government policies. They advocate for tax breaks for the ultra-rich and corporations, as well as less regulation on businesses. Policies that result in low wages for workers, and low taxes for corporations and ultra-wealthy people, drive economic inequality.
The argument for these sorts of policies is that lower taxes will spur economic activity, which benefits everyone. This theory of “trickle-down economics” allows the wealthier members of society to get a bigger piece of the pie from the new wealth being generated. Less wealth ends up trickling down to workers, however, and leaves the government with fewer resources for education, subsidies for childcare, and other programs that can help working people get ahead.
“Trickle-down economics assumes that a rising tide of economic growth will lift all boats,” says Oxfam America’s Head of Research Nick Galasso. “The reality is that it does not lift all boats equally.”
What is income inequality?
Income inequality is one way of measuring economic inequality. This shows how income is unequally distributed within a country or across the world.
Economic policies that increase minimum wages, tax the wealthiest people, and use these public funds to invest in education can reduce income inequality. Economic policies that result in low wages for workers, and low taxes for corporations and ultra-wealthy people, increase inequality.
How is inequality measured?
The most common tool economists use to measure different types of inequality is the Gini Coefficient. This is usually used to measure income inequality but can be used to measure wealth inequality as well.
The Gini Coefficient represents inequality on a scale where 0 equals perfect equality (where everyone has the same wealth, for example). At the other end of the scale, 100 equals a situation of perfect inequality: One person has all the wealth, and no one else has any.
Zambia has one of the world’s highest Gini Coefficients at 70. The country with the most equal distribution of income in the world is Norway: 17.6. The Gini Coefficient for the United States is 46, much higher (more unequal) than many other developed, high-income countries.
How does poverty differ from economic inequality?
Poverty is usually defined as not having the means to support basic nutrition, access to safe drinking water, shelter, education, and other needs. Around nine percent of the world’s population (about 720 million people) currently live in poverty, according to the World Bank. Inequality, on the other hand, is about the distribution of wealth or income across a society or the world.
But they are related. Taking steps to reduce inequality will make it possible for more people to escape poverty: A 2020 paper by economists at the World Bank finds that lowering the Gini Coefficient by one percent is more effective than increasing a country’s gross domestic product by one percent. In other words, reducing inequality may be as effective in reducing poverty as increasing economic growth.
Inequality and poverty are not inevitable. Our policy choices determine the level of inequality and poverty we see in the world and specific countries. When we invest in education, health care, and other social programs that benefit workers, ethnic and racial minorities, women, and others struggling to work their own way out of poverty, we can reduce inequality and poverty. This is why it is important for working people to effectively raise their concerns to policy makers, and influence tax policy, labor laws, and budgets for social programs that can decrease inequality and poverty.
What are causes of global economic inequality?
Colonialism and the industrial revolution
The world’s wealthiest countries have historically benefited from rapid growth during the industrial revolution, and some by extracting wealth from colonies in Africa (such as through the slave trade), Asia, and the Americas. More recently, technological innovations, coupled with a highly skilled work force, give some countries an advantage in using new technology.
Recent uneven economic growth
In recent decades, rapid economic development in Asia (including China and India, two of the most populous countries in the world) has lifted millions out poverty and reduced global inequality. Inequality has increased in India and China during this period of economic growth. Other regions have not benefited from a more globalized economy and still suffer in poverty and the lingering effects of colonialism and conflict.
Inequality is increasing in many of the countries with more advanced economies. They tend to have rapid changes in technology that have left some workers out of fast-growing industries. Globalization has moved some businesses out of wealthier countries and into ones with lower wages, leaving workers unemployed. They tend to have policies that are deregulating industries and lowering taxes on corporations and the wealthiest people, stagnating wages for middle-income workers, and undermining labor laws and unions.
Which countries are most impacted by economic inequality?
Zambia: Gini Coefficient 70.1
The majority of the poorest people in Zambia live in rural areas and struggle to earn a decent living by growing crops, and lack access to decent health care, water and sanitation, and education. They fail to benefit from industries like copper mining, that contributes 17 percent of Zambia’s GDP but only employs two percent of the population. Oxfam has been working in Zambia since the early 1980s. Our program includes
- Improving the well-being of poor people
- Access to essential services (education, health, and water)
- Reducing the impact of disasters, and promoting the rights of women.
Brazil: Gini Coefficient 66
Brazil, one of the world’s largest economies, is also one of the most unequal. There are massive gaps in income, and access to education, between rural and urban areas. Although the economy of Brazil has grown over the years, most of the benefits were captured by the wealthiest people.
Oxfam works with partners to support efforts to reduce inequality and poverty:
- Helping communities that rely on natural resources to protect the environment
- Advocating for tax reforms that will help expand social spending on health, education, and other programs to help the poorest people in Brazil
South Africa: Gini Coefficient 63
Ten percent of the people in South Africa own 80 percent of the income, a left-over effect of colonialism and apartheid policies that favored a white minority.
Today, Oxfam works on
- Work and livelihoods programs, prioritizing women’s right and unequal pay for women.
- Accountable governance: The right of people to basic services like water and education.
- Natural resource justice: Working with communities affected by mining projects to ensure companies and the government respect their rights to be consulted, that people are involved in decisions related to development projects, and women are consulted and involved in community decisions.
United States: Gini Coefficient 46.6
The U.S. is more unequal than many other industrialized countries. The reasons for this include lack of access to health care and affordable childcare, and low minimum wages. Wealth in the U.S. is becoming more and more concentrated among fewer and fewer rich people. Oxfam America’s program in the U.S.
- Advocates for better policies that can reduce inequality and poverty, such as a child tax credit, and increases in minimum wages.
- Supports partner programs in Southern states in workforce development and a policy and advocacy agenda addressing the root causes of the economic inequality that is affecting Black women.
How is Oxfam helping to reduce inequality worldwide
Oxfam works with partners to provide lifesaving support in times of crisis: We deliver clean water, food, and cash to communities affected by wars, natural disasters and climate change, gender-based violence, exploitation, and illness.
Oxfam also supports longer-term efforts to dismantle unequal systems that perpetuate inequality and poverty. We fight for everyone to pay their fair share of taxes and for companies to provide a living wage. We work to solve the care crisis and push for climate action, for a healthy and sustainable food system, and for the rights of workers. Fundamental to these changes is helping people most affected by inequality and poverty to influence policy decisions, and change the power dynamics driving the choices that have made the world so unequal.
Editor’s note: Data for the Gini calculations are from the World Inequality Database (https://wid.world ). View full spreadsheets of the data. Ginis are calculated based on percentiles of the share(s) of disposable income (diinc) among equal split adults (992j) using The R Project for Statistical Computing, and the Gini function from the DescTools package: https://cran.r-project.org/web/packages/DescTools/index.html