Income Inequality Measured by Gini Coefficient
Income inequality may be measured by Gini coefficient, higher Gini coefficient meaning higher inequality. If Gini coefficient is 0, everyone has the same income. If Gini coefficient is 1, a single individual has all the income while all others have none.
Most societies use certain level of income inequality to motivate people to work. It is generally believed that too much equality will reduce productivity. If people receive the same pay no matter how much they work, some or many will become lazy, except under special circumstances or with special group of people. On the other hand, high inequality will typically lead to more health problems and higher crime, even reducing economic growth or leading to violence.
How to structure inequality, including how much inequality to target, is most important for any human group, from family to company to society. For a family with several children, for example, do parents give each child the same allowance, or give them the same pay if they work in a family business? In a company, what should be the ratio between highest pay person to the lowest pay person? In a profit sharing design, what percentage should be shared by investment, how much to the management, and how much to the workers? In a government income tax design, how much to tax corporations, wage and salaries, and investment income respectively?
This chart compares income inequality for several countries over time.
Gini coefficient for United States was 0.35 in 1980, before the start of Reaganomics, and growing to 0.41 in 2022.
Gini coefficient for China was 0.27 in 1984, rising to 0.44 in 2010 with expansion of capitalism, then dropping to 0.36 by 2021 as the Chinese government saw inequality too high and has been making efforts to reduce inequality since 2012.
Norway and Finland have low Gini coefficient about 0.27, as examples of low inequality.
Inequality Measured by Wealth Distribution
Inequality may be measured by wealth distribution.
This chart compares wealth owned by the top 10% and bottom 50% for selected countries with 2023 data.
In Mexico, the richest 10% own 78% of the national wealth, while the bottom 50% own 7.6%.
In the US, the richest 10% own 71%, while the bottom 50% own 13%.
In the Netherlands, Norway and Sweden the bottom 50% own 24%.
Less than half of the bottom 50% Americans are homeowners. If more of them can become homeowners, their wealth percentage would be higher.
