Income and wealth inequality

Gini coefficient 

It condenses the entire income distribution for a country into a single number between 0 and 1. When the numbers higher it means there is greater income inequality .

If it’s above 0.4 inequality is frequently assocaiGed with political instability and growing social tensions.

The latest value for the Gini Coefficient in the UK is a figure of 0.35.

The change in Gini indices has differed across countries. Some countries have change little over time, such as Belgium, Canada, Germany, Japan, and Sweden. Brazil has oscillated around a steady value. France, Italy, Mexico, and Norway have shown marked declines. China and the US have increased steadily. Australia grew to moderate levels before dropping. India sank before rising again. The UK and Poland stayed at very low levels before rising. Bulgaria had an increase of fits-and-starts. .svg alt text

Income and wealth inequality

Ways the level of inequality of income and wealth can be measured

  • Share of income going to different groups in society, e.g. the poorest 20% of households at the bottom of the income scale through to the richest 20%
  • The proportion of all households who live on an income below an official poverty line
  • For the UK and other EU countries, the current poverty line is an annual income of less than 60% of median income. The median individual is in the middle of the income distribution
  • Gini co-efficient
Income and wealth inequality

Key causes of income and wealth inequality

  • Education- people will not have the skills and training required to be able to have some jobs which are typically higher paid. Therefore, they will lack experience to get other jobs in the future
  • Age discrimination or unfair treatment based on a person’s age can impact on someone’s confidence, job prospects, financial situation and quality of life.
  • Ownership of financial assets- people of a higher income are increasingly investing in stocks and shares, which is leading to the rich becoming richer, however the ‘trickle down effect’ is not occurring as this is a self-benefitting investment