Divergences in people's wealth and income are referred to as economic inequality. And those distinctions can be significant. When Forbes released its most current rankings in 2021, the globe had a record 2,755 billionaires.
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| Economic Inequality: What Is It? Definition, Causes, and Important Statistics |
More than 711 million people worldwide would be living on less than $1.90 a day in 2021, according to a World Bank projection. Compared to 1990, when there were only 269 billionaires worldwide and more than 1.9 billion people lived in extreme poverty, that represents a significant improvement.
These figures will be seen by some as supporting the idea that rising tides raise all boats. Global wealth has expanded during the last 30 years, and general living standards have improved. Others may look at these figures and wonder how anyone can live in poverty when the world's billionaires are worth a combined $13.1 trillion. Of course, both things can be true at the same time.
Questions about economic inequality are raised by disparities like these and those that many people observe in their daily lives, where the homeless reside in tent towns just kilometers from opulent condominiums. What exactly is it?
What causes it and why does it happen? Is this the normal order of events, or has the system been rigged? Should efforts be taken to make things more equitable, such as by raising taxes on higher earners, as Sweden has done? Is the epidemic going to exacerbate this inequality?
No solutions exist with us. The roots of economic disparity are numerous, and our society has yet to reach an agreement on what, if anything, should be done about it, with political gridlock preserving things as they are for the time being. We may provide some background information and analysis on the current level of economic disparity in this nation.
Financial Inequality: What You Need to Know
How much the poorest people make in comparison to the richest people and how income is divided in society are the fundamental components of economic equality. What assets do people have to assist them to get through bad times and invest in future opportunities? For several factors, these variations are significant.
First, consider the psychological impact of economic disparity. We are all guilty of comparing ourselves to others. How pleased we are with our income or net worth is determined by factors other than how low or high those statistics are, or how comfortable we are with our money.
Rather, how well off we are relative to our friends, family, coworkers, siblings, classmates, and bosses determines how happy we are. As an example, consider Lorenzo, an accountant. Lorenzo may be content with his $70,000-a-year accounting salary until he discovers that his colleague and fellow accountant Sebastian makes $80,000. The disparity appears to be unjust. It makes him sad, if not enraged.
Sebastian is confronted by Lorenzo, who questions him about how he makes an additional $10,000 per year. They both have the same amount of experience, they joined the company around the same time, and they perform the same duties, he notes.
Sebastian responds by stating that the fact that their CEO makes $60 million is a greater concern. Furthermore, their buddy Marco, who works in customer service via a contractor hired by their business, earns just $20 an hour and does not receive the same perks as they do.
- There is no health insurance. No 401(k) (k). Only ten days of paid time off per year, and he must pick between vacation, personal time, and sick leave.
Does Economic Equality Make Sense?
Marco's position and compensation are explained by Lorenzo. Marco did not attend college, although Lorenzo and Sebastian studied hard in high school and were accepted into prestigious institutions.
On top of that, they both became certified public accountants, which required a lot of extra studies, taking more examinations, and spending a lot of money. It makes no sense for Marco to earn $75,000 each year. He didn't do any of those things. That is how the system operates.
The majority of Americans would agree. They would contend that despite the fact that both Lorenzo and Sebastian are single, however, Marco is also supporting a partner and two children, it is undoubtedly true that Marco requires a bigger income than Lorenzo and Sebastian do. Consequently, they disagree with the concept of "from each according to his capacity, to each according to his requirements."
That is the communist tenet, and since communism was established in the Soviet Union in 1917, it has resulted in millions of state-ordered executions, widespread hunger, war, and human suffering. (However, some contend that the issue is not the communist doctrine itself, but rather its historical application under harsh tyrants.)
Returning to our accountants. Lorenzo does not believe it is fair to give Marco $15,000 of his $70,000 income so that they may both receive an equal $55,000 each year. Sebastian, too, does not want to give up so much money. He doesn't have a spouse or children, but he does have a mortgage to pay, and he wants to return to school to get his MBA.
Not cheap at all. He does not wish to support the children of others. He wouldn't have bothered to become a CPA if he was just going to make $55,000 a year.
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| Economic Inequality: What Is It? Definition, Causes, and Important Statistics |
What Causes Economic Inequality?
We already know that comparing oneself to others is a major contributor to economic inequality. We feel guilty when we discover that others have more than we do, especially when we are comparable to those individuals. People require incentives to work hard, and they believe they are entitled to keep what they earn. They also believe in meritocracy, which holds that individuals rise in wealth and position by hard effort rather than advantages. But if they discovered more about Marco's life story, how would Lorenzo and Sebastian react?
The community where Marco grew up was semi-rural. His schools were significantly below average, and he had little option about where he received his education. His father stocked shelves at the neighborhood supermarket. His mother worked as a waitress in a restaurant. His parents did not complete high school. They were unable to assist him with his assignments.
Weekend shifts and nights were common for them. During such times, Marco's grandparents kept an eye on him, and he played with the neighboring kids. In high school, he obtained a job as a busboy at his mother's restaurant. His buddies were all nice kids, but none of them ever mentioned going to college. The majority of the adults in their life were not college graduates. Nobody anticipated Marco or his buddies to go to college or work in a white-collar job.
Both Lorenzo and Sebastian grew raised in cities. Sebastian's parents lived in a wealthy area with excellent public schools. Lorenzo's parents used a school choice program to get him into a better school.
Teachers noticed potential in both boys and urged them to attend advanced subjects. They didn't always receive straight A's, but they had excellent enough marks to get into prestigious universities. Furthermore, all of their buddies were attending college. Their professors anticipated their attendance and assisted them in preparing.
Inequality of opportunity has led to the current situation for these three men. They all did nothing wrong. Neither of their parents did anything wrong. But Sebastian benefited from intergenerational riches, which allowed him to grow up in a lovely neighborhood with good schools.
Lorenzo benefited from attending those schools and growing up with kids like Sebastian, whose parents expected their children to attend college and seek corporate positions with decent income and benefits. Marco lacked all of these benefits. This is only one illustration of how economic disparity may occur. If this occurs, the life effects are severe.
Inequality and Health
Evidence has emerged showing that many employers have not offered a sufficient protection to prevent essential workers from contracting and spreading COVID-19 since Homeland Security's memo on the subject was made public.
The issue is partially caused by a lack of pandemic preparedness on a global scale and, in accordance with national press reports, a severe lack of personal protective equipment, even for medical personnel. However, it is also clear that economic inequality has exacerbated a difficult position for many employees.
Because their families depend on their income, some people have persisted in working at high-risk occupations because they believe they have no other option. A 62-year-old California lady told the Los Angeles Times that she continued to work at her $13.58-an-hour job doing laundry at a nursing home despite her husband's wishes. She stated that she needed to help her family because they had all been infected with the illness.
Because of situations like this, some argue that individuals deemed critical employees are instead viewed as throwaways. Where it has been offered, hazard pay has been regarded insufficient; it may also rapidly prove transitory. Some firms, probably most notably airlines, have even prohibited their employees from using face masks and have kept them in the dark about on-the-job virus exposure.
Due to their employer's failure to offer the cash, perks, or sick leave they require to take time off and receive medical attention, some people have reported working while suffering from COVID-19 symptoms. Millions of individuals have been thrown into unemployment as a result of stay-at-home orders, and while they may be safer from the coronavirus, they don't have enough money to pay their expenses unless they have a substantial emergency fund, which most people don't.
Because inexpensive, high-quality health care in the United States is typically related to employment, even with the Affordable Care Act, the jobless may not have health insurance to receive treatment if they become ill (ACA).
Resuming the tale of our fictitious employees Marco, a customer service employee in a pandemic-affected office, is theoretically allowed to work from home. However, because business has slowed significantly, the company does not have enough work for all of its representatives. He is now attempting to obtain unemployment benefits from a system that is overburdened after being fired.
Lorenzo and Sebastian, meanwhile, have carried on working from home at their well-paying accounting jobs. They also have health insurance, something their company never provided for Marco because he works via a contractor and is not an employee of the firm. He does have an Affordable Care Act exchange plan, but he is unsure how he will continue to pay the costs.
Being without health insurance carries a great deal of risk for anyone, but Marco's asthma makes it even more dangerous. In fact, many of the people he grew up with do, either because many of their parents smoked, or because the outdoor air quality near their area was bad due to a chemical factory. These disadvantages did not apply to Lorenzo and Sebastian. They also have some luck on their side and no underlying medical issues.
Another aspect of economic inequality that has become more visible as a result of the pandemic is the higher prevalence of underlying health conditions such as asthma and high blood pressure in lower-income individuals and people of color as a result of their lifetime marginalization.
Because their underlying health issues predispose them to unfavorable outcomes from COVID-19, and they are also more likely to be exposed to it at work, these groups are at an even higher risk of dying in the pandemic.
Getting Economic Inequality Fixed
Do we need to attempt to address economic inequality? This is a contentious political topic in the United States. Progressive taxation, universal healthcare coverage, unemployment insurance, basic income, Medicaid, and COBRA health insurance are all covered.
According to some, the United States should expand its social safety net and include more aspects of the Nordic model. Others consider this plan to be overly socialist and would prefer a more commercial paradigm. They do not want to pay greater taxes to support additional social services, and they feel that filling gaps via the activity of private charity is a preferable answer.
Although most individuals are ready to pay taxes, there is variation in the amount that each person is willing to pay to lessen economic injustice. Lorenzo and Sebastian like to think that the taxes they pay on the money they continue to earn are supporting people like Marco right now through federal and state income security programs. Additionally, some of their tax money supports their grandparents through Medicare and Social Security.
Furthermore, Lorenzo and Sebastian are presently contributing 10% of their salaries to local NGOs that are assisting unemployed individuals in dealing with the epidemic. They feel compelled to give back to their community since part of their ability to work is due to luck, and they do not believe that those who are unemployed should suffer as a result of ill luck.
A complex topic is an economic inequality. Inequality may be inherent to some extent. Marco, like Lorenzo and Sebastian, did not select the circumstances in which he was born. Although other forces also assisted Marco in obtaining a job that pays reasonably well for a person without a college degree, it is possible that social forces determined the circumstances they were born into and then sustained their unfair circumstances.
Then again, why couldn't Marco have benefited from the same chances that his teammates did? Fairness and equality of opportunity are questions that lay underlying the issue of economic inequality and the extent to which it is natural, unavoidable, acceptable, or even desirable. It is up to each of us to define what economic equality or inequality looks like for us, and then vote and spend our money appropriately.
