Income inequality – definition and examples

Income Inequality refers to the varying incomes of different socioeconomic groups in an economy. We sometimes refer to it as the income gap. It highlights the gap between those with the highest and lowest incomes in a country, region, or the whole world.

Income inequality exists when there is an unequal distribution of incomes across various groups of individuals and households in an economy.

Income inequality usually compares socioeconomic groups. However, it may also compare the incomes of men versus women, or white people versus African Americans.

We usually express income inequality in percentage terms. For example, we may say that the top ten percent of earners represent fifty percent of a country’s total income.

Income and income distribution

The term income is the money that people receive for the work they do. It also includes money we get from things we sell and services we provide.

Income distribution looks at how much different socioeconomic groups in a country, region, or the world earn. To define income inequality, we need to know what the income distribution is.

Oxfordreference.com has the following definition of the term:

“Differences in income between individuals or families, or between different groups, areas, or countries.”

Income inequality and wage inequality are similar. However, wage inequality does not include income from dividends, investments, selling something, or the profit a sole trader makes.

Wealth vs. income inequality

Our wealth is all our possessions, including cash we have at home, money in the bank, shares, bonds, property, vehicles, etc. In other words, our wealth is everything we own.

Our income, on the other hand, is the flow of money we receive such as our salary, bonuses, and share dividends.

The profit we make when we sell something for more than we bought it for is also our income. We usually calculate income per week, per month, or per year.

Therefore, wealth inequality looks at the distribution of all wealth in a country. It looks at how fairly or unfairly total wealth is distributed across a population.

We also express wealth inequality in percentage terms. For example, I might say that ten percent of the population own sixty percent of a country’s wealth.

A CEO and four manual workers - depicting income inequality.
Image created by Market Business News.

Income inequality and automation

Automation is finding its way into every niche and cranny of our economy. Robots, computers, and artificial intelligence threaten to exacerbate income inequality, a report has warned.

The Institute for Public Policy Research warns that increasing automation will affect low-wage workers the most. The Institute for Public Policy Research is a left-wing think-tank based in London, UK.

Robots are already starting to master many repetitive tasks and replacing human workers.

Low-wage jobs, the authors found, are five times more likely to become automated than high-income jobs. The retail trade, manufacturing, and transportation are at highest risk, they added.

The emergence of the gig economy and contract-based work challenges traditional employment models, potentially leading to a new landscape of income disparity.

As technology continues to advance, the demand for high-skill labor increases, potentially widening the income gap as middle-skill roles diminish and high-skill professionals command greater earnings.

Compound nouns

There are many compound nouns (terms consisting of two or more words) containing the word “inequality.” Here are some of them, their meanings, and how we can use them in a sentence:

  • Gender Inequality

The unequal treatment or perceptions of individuals based on their gender.
Example: “Gender inequality in the workplace often results in women receiving lower pay than men for the same roles.”

  • Wealth Inequality

The unequal distribution of assets within a population.
Example: “Wealth inequality is starkly evident when comparing the lifestyle of billionaires to that of the average citizen.”

  • Health Inequality

The difference in health status or in the distribution of health determinants between different population groups.
Example: “Health inequality is a significant concern in areas where access to medical care is not universal.”

  • Education Inequality

The unequal distribution of academic resources and opportunities among students from different socioeconomic backgrounds.
Example: “Education inequality is apparent in the varying quality of schooling available in affluent versus underprivileged neighborhoods.”

  • Opportunity Inequality

The disparity in access to opportunities such as jobs, internships, and networking events that can lead to career advancement.
Example: “Opportunity inequality is often a barrier for talented individuals from less privileged backgrounds.”

  • Housing Inequality

The unequal distribution of housing quality and affordability across different regions or demographics.
Example: “Housing inequality can be seen in the sharp contrast between urban housing projects and suburban homes.”

  • Digital Inequality

The gap between demographics and regions that have access to modern information and communication technology and those that don’t or have limited access.
Example: “Digital inequality has become more prominent with the necessity for remote work and online education.”

Two Videos

These two interesting video presentations, from our sister YouTube channel – Marketing Business Network, explain what ‘Income Inequality’ and ‘Inequality’ are using simple, straightforward, and easy-to-understand language and examples.

  • What is Income Inequality?

  • What is Inequality?