Economic inequality refers to the gap between rich and poor people in a society. It also describes how different social groups are affected by the distribution of wealth, such as people’s ability to earn and possess income or property, and their access to services like health care and education.
While some inequality is inevitable in a market-based economy, excessive inequality can damage societal cohesion and lead to political polarization and lower economic growth. It is important to understand the factors that contribute to economic inequality in order to develop policies and institutions that promote more inclusive outcomes from economic change.
Wealth inequality is a large factor in economic inequality, and is caused by a variety of factors. One major cause is the unequal opportunity to build wealth, which can be due to things such as racial or gender discrimination, educational achievement, or other life circumstances. Another cause is the concentration of wealth among a small group of individuals and corporations. These entities can use their financial resources to lobby for tax breaks and less regulation, resulting in lower wages for workers and less wealth for the general population.
Many other factors can contribute to economic inequality, including stagnant or decreasing wages and high unemployment. In the United States, for example, the number of people who are union members has been declining, and in 2022 the top 10% of earners earned 68% of total household income. In addition, the cost of living has been rising faster than wages have, and a full-time worker on minimum wage in most U.S. counties does not earn enough to afford a decent apartment.
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