Economic inequality describes differences in wealth, income, and opportunities across society. Its causes and effects vary by country, but global factors like technological progress and commodity price cycles play a large role. Domestic policies, such as the taxation and distribution of government spending and public benefits, also play a big part.
A common measure of inequality is the Gini coefficient, which gives a number between 0, indicating equal income, and 100, indicating total inequality (where one person has all the wealth). This index can be applied to the distribution of income or wealth, but it is also used to describe other forms of inequality, such as the gap in access to education.
Some inequality is inevitable in a market-based economy as a result of differences in talent, effort, and luck. But excessive inequality can erode social cohesion, lead to political polarization, and slow economic growth. (Berg and Ostry, 2011; Rodrik, 1999.)
There are a number of ways that governments can reduce inequality, including increasing minimum wages and taxing the wealthy to boost after-tax incomes. In addition, it is important to ensure that natural resources are not a source of injustice for communities, and that people are consulted and involved in decisions related to development projects. Oxfam works with companies and communities to ensure that they pay fair wages and taxes, respect workers’ rights, and ensure that women are able to participate in community decision-making around mining projects. We also promote policies that protect the environment and empower communities by ensuring that people are informed about the risks of climate change, and that they can access affordable health care and childcare.
About the Author
