Economic inequality refers to the disparity in income (earnings) or wealth (net worth) across a country or society. It reflects the extent to which the benefits of economic change are broadly shared by society or whether social groups feel left behind and have few opportunities for upward mobility.
Inequality has risen worldwide, with a growing gap between rich and poor. About 13 percent of the world’s population lives below the poverty line, receiving less than $1.90 a day in 2012 and experiencing inadequate access to education, water, sanitation, nourishment, and medical care. Wealth is extremely unequally distributed; the richest 1 percent own more than half of the world’s wealth.
The causes of increased inequality vary by country, but research indicates that growth in technology and globalization are playing a role. Other factors include business replacing lower skilled workers with machines, the erosion of middle-income jobs, structural racism, and the fact that women earn fewer earnings than men.
Although many people believe that income inequality largely reflects individual talent and effort, sociological studies show that the correlation degree between class and economic inequality can fluctuate. Factors such as segmented labor markets, government policy, and legal and cultural influences (institutionalized racism and sexism, family responsibilities, gender roles) contribute to inequality independent of individual traits.
Despite the economic harm that COVID-19 caused and will continue to cause, governments can take steps to reduce inequality. In addition to macroeconomic policies that promote private-sector economic growth, they should directly address inequality through a mix of targeted interventions.
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