Income inequality is a widespread phenomenon in society. It indicates how partial income is distributed to different people in a community. Income inequality is usually shown by dividing populations by race, gender, or other factors and analyzing the level of income inequality in that population. In the United States, for example, income inequality has heightened over the past 50 years, and there are many reasons why this occurred, not only in the US but across the globe.
The first fundamental cause of income inequality is globalization. Globalization over the past century has brought stabilized connections between multiple countries, supplying each other with resources. While this act of globalizing has benefited the world’s economy massively, it came with many costs. Many working and manufacturing opportunities were transitioning to countries like China, Bangladesh, or others where labor costs are cheaper, meaning that proletarians and bourgeoisie can no longer access secure income flows, causing income inequality for the workers.
Another dystopian yet realistic cause of income inequality is technological advancement and artificial intelligence. Artificial intelligence has grown massively over the past few years, with ChatGPT from OpenAI leading the charge. Suppose this mind-boggling growth is sustained over the next decade. In that case, it is more than likely that most blue-collar jobs will be replaced with AI automation, sparking global income inequality. Even if AI doesn’t surpass human occupation in the future, the continuity in technological development ensures that uneducated workers will lose jobs and get lower wages.
Income Inequality at a Sociopolitical Standpoint
Income inequality has also strengthened ties to sociopolitical aspects of modern life. Politically, many countries worldwide have policies implemented that promote income inequality undercovered. Socially, the gender and racial equality movements are also bound to have considerable impacts on the income equality of different societies worldwide.
Socially, income inequality worldwide is mainly driven by historically present racial and sexual inequalities. The Urban Institute showed that in 1963, White families had approximately $45,000 more in wealth than families from other races. By 2019, the number had increased to $165,000. The growth in wealth inequality over the past century is driven by prolonged periods of income inequality.
Politically, income inequality has its share of ties to capitalism, which is prevalent across at least 40 countries worldwide. To be fair, capitalism does not directly mean democracy, but is usually classified as a form of political and economic theory. Capitalists and workers receive different income types, resulting in inherent income inequality. Economically speaking, economic growth within capitalist nations over long periods tends to lead to inflation, where things become more expensive. Economic growth brings more job opportunities and higher wages, increasing demand for consumer items. This leads to sellers wanting to raise prices, and when it happens across the face of an economy, it brings inflation. The problem with inflation, however, is that the wealthy in capitalist countries generally hold assets like stocks and other investments that perform well in inflationary environments, meaning their net worth isn’t affected by inflation. However, the proletarians’ and bourgeoisie’s wages don’t typically increase with inflation, so they are constantly pressured by higher costs, in which the prevalent tendency for the economy to grow is rooted within the free-market system promoted in capitalist nations. Overall, this creates a phenomenon known as “The rich getting richer, the poor getting poorer,” which closely correlates to capitalism and politics.
How Can We Solve Income Inequality?
The good thing is that there is active engagement in reducing income inequality across the globe. The International Monetary Fund and World Bank collectively aim to stabilize the incomes of 10% of the world's population. Additionally, political and economic leaders can also effectively address income inequality if they can agree to:
Drive job opportunities during free market income declinations
Address government policies that increase income inequality
Provide accessible resources like Medicare to the public to ease cost concerns
Other fiscal actions to reduce income inequality where possible
While income inequality is wrong, it is tough to avoid in most societies, where people have minor to drastic differences in education, talent, and effort. The IMF reports that “[income] inequality is inevitable in a market-based economic system as a result of differences… excessive inequality could erode social cohesion, lead to political polarization, and ultimately lower economic growth.” This means governments must focus on reducing other external factors that contribute to this inherent income inequality, like taxation, inflation, etc.
Fortunately, according to the IMF, “Global inequality has been declining fast since the 1990s.”
There’s still a long way to go until we achieve social and economic equality globally. However, with enough determination and might, income equality would finally be on the horizon for individuals worldwide.
Works Cited
Bank of Australia (2024). Causes of Inflation | Explainer | Education. [online] Reserve Bank of Australia. Available at: https://www.rba.gov.au/education/resources/explainers/causes-of-inflation.html#:~:text=More%20jobs%20and%20higher%20wages,to%20an%20increase%20in%20inflation [Accessed 15 Aug. 2024].
IMF. (2024). Introduction to Inequality. [online] Available at: https://www.imf.org/en/Topics/Inequality/introduction-to-inequality [Accessed 15 Aug. 2024].
Investopedia. (2024). Income Inequality Definition: Examples and How It’s Measured. [online] Available at: https://www.investopedia.com/terms/i/income-inequality.asp [Accessed 15 Aug. 2024].
Kelly, J. (2024). Why The Rich Get Richer And The Poor Get Poorer. Forbes. [online] 3 Jun. Available at: https://www.forbes.com/sites/jackkelly/2024/05/14/why-the-rich-get-richer-and-the-poor-get-poorer/ [Accessed 15 Aug. 2024].
Wikipedia Contributors (2024). Political ideologies in the United States. [online] Wikipedia. Available at: https://en.wikipedia.org/wiki/Political_ideologies_in_the_United_States [Accessed 15 Aug. 2024].
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