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Evelyn Marsters on income inequality

Inequality. It’s a buzz word, right? But despite the best of intentions, it’s also commonly misused. Research into inequality can produce powerful arguments about the harmful side effects of living in a society where wealth is distributed unevenly, but when it is used inappropriately it diminishes some of the rigour behind the concept. It’s a tricky one to grasp, so this is my attempt to unpack the idea of inequality, in the hope that more people will become proponents of equality.

In almost every online example I could find, ‘inequality’ discussions are focussed on ‘income inequality’. The most simple explanation is that this refers to the difference between those who have the most and least income in a population. Income inequality provides an effective marker as to how far we are from achieving an equal world. Other less common uses of the term inequality refer to social inequality, which is about the equitable distribution of rights – but let’s save that topic for another discussion.

Beyond the simple turn of phrase, the idea behind inequality is rooted in economic theory, allowing for the numerical representation of the distribution of wealth within a population. Richard Wilkinson and Kate Pickett in their book The Spirit Level – Why Equality is Better for Everyone (2009) provide the most useful explanation of how to understand income inequality. The authors use a ratio measure that compares the difference between how much income the richest 20% of a country receive, compared to the poorest 20%.

The other most commonly used method of calculating income inequality is the Gini coefficient. In an equal world, the Gini would be ‘0’, where all people received the same income. In a place where one person received all the income and everyone else received nothing, the Gini would be ‘1’. The closer a country or society is to ‘0’ the more equal the income distribution.

Some countries have more equitable distributions of wealth than others. Denmark, Norway and Iceland are more equal in terms of income than others. Chile, Israel, Turkey and the USA are the most unequal. Organisations and researchers cut and slice the inequality equation in different ways. It doesn’t really matter which way you calculate inequality – the point is to use it as a possible explanation for a wide range of harmful social and health conditions which affect everyone in society. For example, income inequality has been demonstrated to exacerbate eroding levels of trust in a society; mental illness; life expectancy and infant mortality; obesity; children’s educational performance; teenage births; homicides; imprisonment rates and social mobility.

Let’s take eroding levels of trust in a society as an example. ‘Trust’ transcends class boundaries because we all need positive social relationships. The strength of our relationships with our families, neighbours, communities and the stranger on the street all rely upon a level of trust. With the dismantling of trust, people retreat. Gated communities are built, and people decreasingly venture outside of their trusted social circles. As trust diminishes, so too do our social worlds.

As Wilkinson and Pickett state: “Humans instinctively know how to cooperate and create social ties, but we also know how to engage in status competition — how to be snobs and how to talk ourselves up. We use these alternative social strategies almost every day of our lives, but crucially, inequality shifts the balance between them. It is hard to avoid the conclusion that we become less nice people in more unequal societies. But we are less nice and less happy: Greater inequality redoubles status anxiety, damaging our mental health and distorting our personalities — wherever we are on the social spectrum.” (NY Times, How Inequality Hollows Out The Soul)

At the most basic level, income inequality measures tell us where the wealth is situated in society. The more level the playing field, the more equal society is. But the idea of inequality is greater than this; it speaks to our relationships with others.

Evelyn Marsters has a PhD in Development Studies from the University of Auckland (NZ) and is currently based in Berlin. Her focus is global health and migration, and she is Deputy Editor at Impolitikal. Read more by Evelyn.