How Income Inequality Affects Our Global Society

Economic inequality (or “wealth and income differences”) comprises disparities in the distribution of economic assets and income. The term typically refers to inequality among individuals and groups within a society, but can also refer to inequality among countries.

“Social and economic inequality is detrimental to the health of any society. Especially when the society is diverse, multicultural, overpopulated and undergoing rapid but unequal economic growth.”  Milind Deogaonkar, MD

Since the 1960’s economic inequality has increased within and between countries globally. In the year 2000 40 percent of global assets were owned by the wealthiest 1 percent. In 2008 the G.D.P. of the most heavily indebted poor countries was less than the wealth of the worlds 7 richest people combined. In 2012 more than 3.5 billion people or close to half our population were living on less than $2.50 a day.

People in North America, Europe and high income Asia-Pacific countries collectively hold almost 90 percent of total world wealth. These numbers, as shocking as they are, do not explain that both wealth and income are also unequal within the U.S.A., China, and other countries around the world.

A 2011 report by the Organisation for Economic Co-operation and Development (OECD) found that:

1) Across OECD countries, the average income of the richest 10 percent of the population is nine times that of the poorest 10 percent. Additionally, with the exceptions of France, Japan and Spain, wages of the 10 percent best-paid workers have risen relative to those of the 10 percent lowest-paid workers.

2)The differential between the top and bottom 10 percent varies from country to country: “While this ratio is much lower in the Nordic countries and in many continental European countries, it rises to around 14 to 1 in Israel, Turkey and the United States, to a high of 27 to 1 in Chile and Mexico.”

Since the 1980s the top 0.1 percent’s share of income has more than tripled in the United States; a successful C.E.O.s income could be around 40 times that of the average employee in the 1980s. While in 2001 the same C.E.O.s may take home as much as 350 times that of the average employee. Lee Scott Jr. Wal-Mart’s C.E.O., earned more than 900 times the pay and benefits of the average Wal-Mart employee in 2005. Which was about the average amount a Wal-Mart employee could expect to generate in a lifetime. This pales in comparison to the fact that the average wages of people in poor exporting countries are only one-tenth that of the average employee in the U.S.A. and could be seen as almost 9000 times less than the wage of an American C.E.O. such as Lee Scott Jr.

 

It can be commonly misconceived that rising inequality is acceptable because overall gains are seen by all. This is not the case; despite an increase in total income, the poorest 10 percent of household income in China fell by 2.5 percent and standards of living inequalities are also greater today than in the past 50 to 100 years, the growth of these inequalities is expected to continue.

Globalisation and skill-biased technological advances are the main reasons for the increasing disparities, many skilled jobs may be at risk as robotics and artificial intelligence develop further. We may see substantial unemployment throughout society, falling wages and wealth and income becoming concentrated with capital owners capturing a larger fraction of the economy as machine learning allows computers to do knowledge-based jobs that typically required an advanced education. In turn leading to reduced consumer spending and economic growth with the population lacking the income to purchase products and services produced in the economy.
I.B.M.’s Watson computer is powered primarily through the technology of machine learning and by analysing thousands of Jeopardy! questions was able to achieve championship level proficiency at Jeopardy!. Routine and repetitive jobs are becoming increasingly susceptible to machine automation, regardless of skill and education required to perform the job. While playing Jeopardy! at championship level may not seem to be a routine or repetitive activity, a machine was able to prevail.

An individual’s’ variation in access to education is an important factor in the creation of inequality.

Worse outcomes for children is shown through research to be closely associated to growing up in poor neighbourhoods and suggests that economic segregation may in fact be harmful to children. Thus if economic inequality amongst adults leads to economic segregation which creates further inequality in childhood educational outcomes causing the transmission of economic segregation into future generations, we can see negative feedback being created that reinforces further inequality and segregation.

 

Even when controlling for other crime determinants crime rates and inequality are positively correlated, within and particularly between countries.

 

“with a degree of consistency which is unusual in social sciences, lower-class people, and people living in lower class areas, have higher official crime rates than other groups.”

 

John Braithwaite, Inequality, Crime, and Public Policy

 

 

 

The theory of “relative deprivation”, expresses that inequality creates social tensions as the less well-off feel dispossessed in comparison to wealthier people. The sense of unfairness and disadvantage leads the poor to seek compensation and satisfaction by any means, including criminal offences against both the poor and rich.
Increasing economic inequality has a robust and significant effect of raising crime rates. As rates of growth and distribution of income together determine the rate of poverty reduction, the aforementioned results express that the rate of poverty alleviation has a crime reducing effect.

“How cohesive a society is, how much people trust each other and are involved in community life, is an important social asset that makes a very substantial contribution to the quality of life.”
Richard Wilkinson

 

Levels of trust between people in countries with greater income differences are much lower, studies have shown. A country with high income inequality, such as Brazil, has the lowest levels of trust, while countries with much more equal income distribution, such as Sweden, have the highest levels of trust.

Extreme economic inequality is detrimental to the cohesion and safety society at large.

 

“What the relationship with inequality actually demonstrates is that societies that tolerate the injustices of great inequality will almost inescapably suffer their social consequences: they will be unfriendly and violent societies, recognised more for their hostility than for their hospitality.”
Richard Wilkinson

Both happiness and health appear to be impacted on by economic inequality, as income inequality has grown in the U.S.A. so has the gap in life expectancy. A 2007 study showed that people with incomes less than $50,000 a year had significantly shorter lifespans than those with incomes above $50,000.

Economic inequality in our world is so severe that it is unjust to let it continue and if nothing is done to stop it, levels of inequality will certainly rise into the future.

 

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Views society as changeable, and seeks to investigate, challenge and bring into question our current social system of organization, will endeavor to further examine and dissect our social environment, treating nothing as taboo or unchangeable.