Extreme disparities in the distribution of income and the concentration of it in a small section of the entire population causes Income Inequality. This disparity builds up to create an economic gap between the Haves and Havenots.
It can permeate deep enough to become social evils affecting individuals and even countries. On a global context it becomes an extreme with the wealthiest 1% hoarding as much as the rest of the population. The build up of this scenario over several decades has made Income Inequality to be the greatest economic hurdle toady. What makes it even worse is the continuous flow of income to the already well off pockets alone, leading to the coinage of the term One Percent, referring to the tiny fraction of the wealthy.
Seven Factors of Income Inequality
Why and how this inequality came into being is still a baffling question among Economists but studies on demographic, economical and structural facades have shown that there are seven major factors at play.
The Gini Coefficient is a major tool in analyzing Income Inequality, it is also refereed to as the Gini Index. Corrado Gini, an Italian sociologist came up with this system in 1912. This is proof that Income Inequality was a threat even at that time or was atleast being considered by the Economists. It works by assigning Zero for equality among the people and One for inequality. These numbers are assigned to countries. Among the OECD (Organization for Economic Cooperation and Development) countries United States ranks fourth. With 41.6 holdings of the global personal wealth, it has a Gini Index of 0.42 which is the worst among the OECD nations.
Effects of Income Inequality
The far reaching effects of Income Inequality are:
Economic Crises-The impact of Inequality can be proven by the Great Recession in 2008. The stagnation of the middle-class and working people resulted in an increment of credit demand created an unstable credit umbrella especially in the US. Tangling up with bank deregulation, it nurtured the growth of the One Percent Economy. This ultimately created an avalanche effect in the economy and thus the Great Recession.
How to Overcome Income Inequality
This Socio-Economic disparity can be overcome by:
A holistic approach (Social, Educational, Political and Economic) should be practiced for years to come to counteract the imbalance and diverge the flow of income to just concentrated pockets.
Student Experience and Engagement Manager
Athena Global Education
Scottish Qualifications Authority, UK
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