Income inequality

The term income inequality refers to a state of unequal levels of income among members of different groups, such as between individuals in a particular country or between different countries. Income is the money that a person adds to the money they already have—often primarily through wages paid by their employer, but also in other ways, such as investments. Income inequality statistics often compare the lowest and highest income brackets. This is often presented by giving a percentage of a population and stating what portion of the overall income is earned by that percentage. For example, according to US Census data from 2019, the wealthiest 20% of Americans accounted for about 52% of all income earned in the US (with the wealthiest 5% earning 23% of all income at the time). This means that in 2019, 80% of all Americans earned only about 48% of all income in the US. There are a few terms that sound similar to income inequality but that are used in distinct ways. The term wealth inequality is often broader and uses wealth to refer to the entirety of a person’s monetary assets (all the money they have), not just their income (which can be thought of as the money that a person adds to their existing wealth). The terms wage gap and pay gap typically refer to the differences in the average pay of individuals who do the same job. For example, in the US, many studies show a wage gap between men and women, with women earning less for the same roles (and women of color often earning even less). Wage gaps can be thought of as one factor that contributes to income inequality (which in turn contributes to wealth inequality), but income inequality is thought to be driven by many causes (which are discussed below). The term income inequality is often used to imply that different people’s levels of income are not just unequal but unfair due to being the result of systemic factors. For this reason, it’s a term usually used by people who believe that income inequality is a problem (and a widespread and increasing one). Example: Reports repeatedly show that income inequality has continued to increase, with the top earners earning more and more and the lowest earners continuing to earn the same. In other words, the rich are getting richer while the poor stay poor.

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