Economic Inequality

ECONOMIC INEQUALITY most commonly refers to an analysis of the degree of disparity (inequality) within an economy. This study is accomplished by measuring, for instance, the amount of income, wealth, or expenditure distributed among a chosen population and geographic area.

In writings about economic inequality, income is most commonly measured using objective and normative methods. An objective measure of income applies statistical procedures such as the Gini coefficient of the Lorenz Curve. This curve has a “0 to 1” range, indicating the extent of income inequality that can increase or decrease in value. “0” represents a completely equal division of income, and “1” represents a completely unequal division of income. A normative measure pays attention to social issues affecting patterns of income: these might include gender, ethnicity, race, age, rate of infant mortality, social structure, literacy, diversity of employment opportunities, rates of consumption, life expectancy, control over resources, and access to basic needs or social services (education, medical care).

The measurement of economic inequality describes the well-being of a society. For instance, governments might identify financial differences between income groups experiencing wealth and those experiencing poverty. Outcomes might reveal the extent of imbalance over time; show where in the group poverty or wealth is occurring; and help determine descriptions and prescriptions of wealth and poverty in any given social context.

On the global level, economic disparities among nations might be studied to determine national living standards or quality of life. At the local level, investigations of economic inequality aid the assessment of mean incomes, levels of poverty occurrence, and income thresholds of deprivation, which allows policymakers and political theorists to create guidelines for minimum wage laws, taxes, tax breaks, social assistance and benefit programs, financial aid, unemployment insurance, and pension programs.

What critics often find misleading in such calculations, however, is the extent to which they can hide true economic realities, that is, actual consumption patterns, inadequately measured basket-goods, the impact of inflation, real wage values, fluctuating interest rates, and other factors sometimes overlooked or ignored in num-bers-based studies.

The knowledge brought forth by studies of economic inequality has created genuine movements appalled by the devastation inequality has had on the universal common good. Patterns exposing declining wages and job security affecting millions of workers hint at the unrelenting local and global problems accompanying the rise of capitalism, the globalization of the economy, and the rise of wealthy multinational megacorporate enterprises, technology, rapid transportation, and mass consumption. Highly accumulated [Page 289]amounts of income and wealth—among the powerful few who can truly influence economic outcomes—have aggravated and multiplied the poverty of the many, as indicated by recent United Nations Development Report updates. Such patterns have shaped the political sphere of moral debate in the new millennium, raising three important questions: Whose responsibility is it to balance the inequities between rich and poor? What strategies might be used to ensure that equality can be reached without a considerable decrease in income or wealth of those unwilling to forfeit it? Is the current economic system conducive to economic equality?

...