Economic inequality refers to the disparity between rich and poor people in a society. It can be measured in terms of wealth, such as the average income per person, or in terms of purchasing power parity, which compares a country’s GDP per capita with the standard of living in other countries. Economic inequality also encompasses differences in opportunities, such as the probability of moving from one socioeconomic class to another over time.
Some scholars argue that some economic inequality is inevitable in a free market economy, but others are concerned that rising inequality is harming the global economy. The increased purchasing power of a wealthy minority has resulted in stagnant or declining wages for many workers. Moreover, impoverished individuals are exposed to higher rates of disease and death and have less access to quality health care and nutritious food. The resulting poverty trap can also inhibit economic growth.
Researchers study both within- and across-country economic inequality to identify trends and patterns. They use measures such as the Gini coefficient to quantify differences in purchasing power and wealth. They also examine the causes of these changes and how they affect a country’s overall wellbeing.
Some economists suggest that the increase in economic inequality is due to global forces such as technological change, the emergence of large monopolies, the decline of labor unions and the eroding value of the minimum wage. However, other scholars point out that these factors are not enough to explain the rise in inequality and argue that societal dynamics are at play. For example, a woman’s ability to work outside of the home may be constrained by social norms and traditions; a child with an illness can’t earn as much as a healthy child; and discriminatory practices may limit career advancement.
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