Income inequality fluctuates according to societal characteristics such as sexual identity, gender identity, age, and race or ethnicity, resulting in a bigger disparity between the top and working classes. Income inequality can also be affected by economic factors such as unemployment, retirement, and wages.
The main determinant of income inequality is the level of income earned at the top. If the rich earn more while the poor earn less, then you will have inequality. If the rich earn about the same as the poor, then you will have equality. If the poor earn more than the rich, then you will have inequality. It all depends on how much extra there is to go around. If there is little or no extra money, then everyone will just barely make it until they die or are taken away in an ambulance.
Inequality arises because some people are lucky enough to be born with talent or into good jobs, while others do not have this chance. The rich may get richer because they create products or services that other people want so they will pay them to use them. This means that investment income, property values, and the like are important factors in determining inequality. The poor may become poorer because they spend their entire paycheck on food instead of making more money or saving some of it.
In economics, income inequality refers to a considerable gap in the distribution of income across people, groups, populations, social classes, or nations. Inequality in income is a fundamental component of social stratification and social class. It can also be used as an indicator of economic health and development because greater equality suggests that improvements have been made in both the quality and quantity of income received.
Income inequality can be measured using several different indicators. The most common are the Gini coefficient and the more recent concentration index. The Gini coefficient ranges from 0 to 1, with 0 indicating complete equality and 1 complete inequality. It is calculated by taking the ratio of total income earned by the top quarerty to total income earned, and then multiplying it by 100. The higher the number, the greater the degree of inequality.
The Gini coefficient does not take into account how much each person earns, but rather how much each person receives. For this reason, it can be useful for comparing countries with different income distributions. Even though Japan has a lower Gini coefficient than many other countries, for example, its economy is significantly more unequal. Because the United States has a higher Gini coefficient than Japan, it can be inferred that they have more equal economies.
Another way to measure income inequality is through the use of the concentration index.
There are multiple reasons why the earnings of different groups may differ. The first factor is related to education. The second reason for income inequality is that some individuals have more money than others, and the distribution of wealth is more unequal than the distribution of income. A third factor is discrimination: if some groups are denied opportunities that allow them to earn more, then they will remain in a position where they can only earn what others choose to give them.
Income inequality has increased over time. The top 1% of income earners took home 10% of all income in 1975 but by 2015 this had increased to to 22%.
Here are the main factors behind increasing income inequality:
1. Changes in the way we measure income inequality. Income inequality measures the difference between the highest-paid person or group on one hand, and the lowest-paid person or group on the other. These differences can be based on race, gender, age, occupation, marital status, or any other factor. When these differences are measured using pre-tax income, the result is called "before-tax income inequality." When they are measured using tax data, the result is called "after-tax income inequality."
2. Changes in who earns income.