Inequality
Inequality refers to the differences in income and wealth between all groups in society—between rich and poor. High levels of inequality can signal real differences in social and economic opportunity and lead to perceived unfairness, distrust of government and other key institutions, and political unrest.
The importance of inequality relative to average economic well-being is sometimes debated. Some argue that a degree of inequality is a natural outgrowth of differences in individual abilities, motivations, and decisions. Others argue that inequality of outcome is less important than inequality of opportunity—specifically, the opportunity to get out of difficult economic circumstances, or economic mobility. Still, inequality is a concern across the political spectrum.
-
Income InequalityNational
Trend% of countries the US outperformsIntl. Rank
Trend22%Specific Measure:
Income Gini coefficient (net of government taxes and transfer programs). This is an index that ranges from zero to 100 where higher numbers indicate more inequality.
-
PovertyNational
Trend% of countries the US outperformsIntl. Rank
Trend25%Specific Measure:
The Supplemental Poverty Measure (SPM), which measures income net of government taxes and transfer programs (see examples below).
Measures in green indicate an improving national trend or that we are outperforming at least 80% of countries.
Measures in red indicate a declining national trend or that we are outperforming less than 50% of countries.
Measures in yellow indicate stable trends or that we are outperforming 50-79% of countries.
Summary of Results
More than three-quarters of high-income countries have lower income inequality than the United States. Our income inequality is also worsening overall and relative to other countries. This can be mainly attributed to quite large increases in income among the most well-off. We can see this partly by comparing income inequality to our second measure: poverty. The poverty rate has been declining, mostly because of government interventions like Social Security and the Earned Income Tax Credit. The result is that fewer people have incomes so low that they cannot provide for their basic needs. But the increase in income among the rich has been larger, which explains rising income inequality.
Related Topics
Every other section in this report focuses on average outcomes across the country. This is the only one where we focus on how outcomes compare between groups within the country. However, our explanations for rising income inequality are related to the other topics. For example, most income comes from wages from work (see the Work & Labor Force section). Also, education is a key driver of income (see the Education section).
Income inequality might also be a partial cause of our poor standing on other measures of the state of the nation, especially how people perceive their lives and the country as a whole. See the Life Satisfaction and Mental Health sections, as well as the polarization measure under Citizenship and Democracy. On the other hand, if the ability to provide for basic needs is a key factor in these perceptions, then the decline in poverty shown in this section should be improving perceptions of Life Satisfaction and Mental Health measures. The reduction in poverty could, however, be associated with the declining murder rate (see the Violence section).
Other Measures Considered
The board also considered, but did not include, other measures, including homelessness, wealth inequality by race, and wage inequality by decile. The public only supported poverty and homelessness, but between the three measures of inequality (income, wealth, and wage), they aligned with the board, ranking income inequality the highest.