Inequality

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Definition

Inequality is concerned with disparities in the distribution of a certain metric, which can be income, health or any other material or non-material asset. Inequality typically refers to within country inequality on individual or group level, such as between gender, urban and rural population, race etc. Inequality among countries are referred to as international inequality.

Inequality is closed linked to the ideas of equity, which has two contrasting concepts: equality of opportunity and equality of outcome.

The first one, equality of opportunity, is concerned with the equal potential of every individual access public services and rights. Liberal thinking considers equality of opportunity, in particular in education, as fundamental precondition for a truly meritocratic system. Equality of opportunity to access health care, education or job openings are today considered fundamental in the European welfare systems.

The second aspect of equity, equality of outcome, is concerned with the actual outcome of asset distribution within or among countries. Policies to reach equality of outcome often include direct and indirect redistribution.

The concepts can however not always been seen in contrast. For example, the equality of outcome, i.e. the effective assets of a family, affect the equality opportunity of their children in many aspects as many studies have shown. Low household income has been shown to correlate across cultures to many indicators of child well-being.[1]

Income inequality between the world’s richest and poorest is higher than ever before, with the richest 5 percent of people receiving one-third of total global income, as much as the poorest 80 percent.[2]

Measuring Inequality

The most common measure of income inequality is the Gini coefficient. The coefficient varies between 0, which reflects complete equality and 1, which indicates complete inequality. So, a country with a low Gini co-efficient like Denmark (.24) is said to be more equal than a country with a high co-efficient such as Namibia (.74).

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Another measure of inequality is Deciles. This indicator is fairly simple to understand[3] and is one of the many inequality indicators used by several organizations such as OECD[4] and the US government.[5] Basically, the main idea is that deciles show how income is distributed, how much of the total income in a country is earned by lower wage earning groups and how much of the total income is earned by higher wage earning income groups. If the people in the top and bottom groups earn the same proportion of the income, then there is income equality. If the top groups earns a much higher percent of the total income, while people in the bottom groups earn much lower percent of the total income, then there is inequality.

Social/Income Inequality

In December 2011 an OECD report, Divided We Stand: Why Inequality Keeps Rising, stated that the gap between rich and poor in OECD countries has reached its highest level for over 30 years. It specified that in the three decades prior to the economic downturn of the late 2000s, wage gaps widened and household income inequality increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth.[6]

This report analyses the major underlying forces behind these developments:

– Part I. How Globalisation, Technological Change and Policies Affect Wage and Earnings Inequalities

– Part II. How Inequalities in Labour Earnings Lead to Inequalities in Household Disposable Income

– Part III. How the Roles of Tax and Transfer Systems Have Changed

This media briefing for the report outlines the content and points to some of the key findings of the report. Extracts from the report are available in the documents below:

An Overview of Growing Income Inequalities in OECD Countries: Main Findings

Special Focus: Inequality in Emerging in Economies

 

 

Measuring Gender (In)equality

The OECD Gender, Institutions and Development Database (GID-DB) is a new tool for researchers and policy makers to determine and analyse obstacles to women’s economic development. It covers a total of 160 countries and comprises an array of 60 indicators on gender discrimination.

In 2009, the OECD also developed the Social Insitutions and Gender Index (SIGI) which focuses on the root causes behind gender inequalities. It uses 12 innovative indicators on social institutions, which are grouped into 5 categories: Family Code, Physical Integrity, Son Preference, Civil Liberties and Ownership Rights. Each of the SIGI indicators is coded between 0, meaning no or very low inequality, and 1, indicating very high inequality.

Studies

For a range of studies on inequality, including global inequality, inequality and politics, openness and inequality, see the World Bank Inequality website.

Inequality, Poverty and Well-being, Mark McGillivary (ed), Palgrave McMillan, 2006. This book examines inequality, poverty and well-being concepts and corresponding empirical measures.
Worlds Apart: Measuring International and Global Inequality, Branko Milanovic, Princeton University Press, 2005. This publication from a leading World Bank economist analyzes income distribution worldwide using household survey data from more than 100 countries and addresses how to measure global inequality among individuals.

Inequality Re-examined, Amartya Sen, Oxford University Press, 1995. This book examines the claims of equality in social arrangements, stressing that we should be concerned with people’s capabilities rather than either their resources or their welfare. Looks at “why equality” and “equality of what” and includes a chapter on “Freedom, Agency and Well-being”.

The UC Atlas of Global Inequality integrates data, maps, and graphs to create an interactive website for accessing and analyzing information addressing global change and inequality.

The Quantity and Quality of Life and the Evolution of Global Inequality, 2008, Gary S. Becker, Tomas J. Philipson, Rodrigo R. Soares, The University of Chicago, United States. Lack of income convergence for the world as a whole has led to concerns about the impact of globalization of markets on world inequality. GDP per capita is usually used to proxy for the quality of life of individuals living in different countries. However, well-being is also affected by quantity of life, as represented by longevity. This paper incorporates longevity into an overall assessment of the evolution of cross-country inequality.

UK Data Service Case Study: Gender Equality in the Labour Market in Central and Eastern Europe: Attitudes to Women’s Work, by Sylke V. Schnepf, (published in S. V. Schnepf (2007) Women in Central and Eastern Europe. Measuring Gender Inequality Differently. Saarbruecken: VDM, pp. 84-136. ISBN: 978-3-8364-2526-1).

UK Data Service Case Study: Does the daily commute affect women more than men? By Jennifer Roberts, University of Sheffield, in collaboration with Paul Dolan of the London School of Economics and Robert Hodgson of the University of York, Feb 2012.

UK Data Service Case Study: Why does the work women do pay less than the work men do? By Francisco Perales, University of Essex, Dec 2011.

 

 

References

  1. Progress for Children: Achieving the MDGs with Equity, 2010, UNICEF, MDG Progress Report Card 9, September. http://www.unicef.org/publications/files/Progress_for_Children-No.9_EN_081710.pdf
  2. http://www.carnegieendowment.org/publications/ Worlds Apart: Measuring International and Global Inequality, Branko Milanovic
  3. http://go.worldbank.org/3SLYUTVY00 Poverty Analysis: Measuring Inequality. The World Bank. 2010.
  4. http://www.oecd-ilibrary.org/ Society at a Glance 2009: OECD Social Indicators: Equity Indicators, Income inequality
  5. https://www.cia.gov/library/publications/the-world-factbook/docs/notesanddefs.html World Factbook, Definitions and Notes. CIA. 2010. Listed as “Household income or consumption by percentage share”.
  6. Press Release, Divided We Stand: Why Inequality Keeps Rising. OECD 05.12.2011

 

See Also

 

External Links

 

Further Reading