Income disparity can be a confusing topic for many readers, eliciting images of complex statistical graphs, talking heads on television, the IRS, even 2020 presidential candidates like Bernie Sanders and Elizabeth Warren. But what is income disparity, and where does America rank versus other world economies?
Using 2018 data from the World Economic Forum (WEF), we compiled a list of countries with the largest income disparity, also known as "income inequality." From this data, released in 2019, we ranked the 25 countries with the most unequal income distributions.
The WEF used a metric called the net income Gini index, which measures the extent to which the net distribution of income (after taxes and other income transfers) among a country's population deviates from an equal distribution. In this way, a Gini index of "0" would be a perfectly equal income distribution, whereas an index of "100" would be perfectly unequal. In other words, the higher the number, the higher the income inequality in that country.
While the countries are ranked based on the net income Gini index, we have also included a few other statistics for each country on the list: the wealth Gini index, median income, and the poverty rate.
The wealth Gini index, like the net income Gini index, is a measure of inequality. Just like the net income Gini index, a higher number means a higher level of inequality. The difference is that wealth is the total value of a person's assets, whereas income is the amount a person receives for their services. The median income is a way to measure the average daily income per person in that country (all 25 countries on the list are under $20 per day). The poverty rate is the percent of that country's population with less than half of the median income.
It's important to note that the net income Gini index for the United States is 37.80 (ranked at #50 of 103 countries measured). The United States' wealth Gini index is 85.60 (#6 most unequal of 103 countries).
Keep reading to see which economies boast the highest income inequality.
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