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International Income Inequality: Whither the United States?


We hear ad nauseum from the mainstream media, and particularly the business-focused press, that the United States has the most productive economy on the face of the Earth. Yet there is almost never any discussion about how equally or unequally the income generated from that productivity is distributed across members of our society. Income inequality in the United States is an issue that certainly the Democrats or Republicans don’t want to talk about—and will not, unless forced to.

 

While not the only type of oppression institutionalized into the current social order, income inequality has a major impact on people’s lives: especially at the lower levels, lack of income affects all kinds of life chances and even existence, such as health, likelihood of being a victim of violence, and access to medical services. (And we know that the consequences are even worse when racial and/or gender oppression is added.)

 

Yet, unknown to most people, the US Government tracks income inequality in our society, and has done so since 1947. There is a relatively simple measure that has been developed, called the Gini index (or coefficient). A Gini score is a simple number computed annually to represent the degree of income inequality in a social order and, when viewed over time, will indicate whether the inequality is getting better (being reduced) or getting worse (increasing). Also, it can be used to compare the rate of inequality in one country with that of another.

 

In addition to considering the overall situation as illustrated by Gini scores, they also can help guide public policy decisions. For example, if income inequality is increasing, then any type of progressive policy implemented would seek to reverse that growing inequality. Or even if you are talking about cutting taxes (say in the current US political climate), then progressives would want to target tax cuts to benefit those on the bottom and not on the top of the social order so as to help reduce income inequality.

 

The Gini index is a numeric scale that runs from zero to one. A score of 1.000—it is usually represented by scores in thousandths—thus represents perfect inequality. A score of 0.000, therefore, represents perfect equality. So, the higher the score, the greater the inequality.

 

The Gini index can be used to measure economic inequality in a number of ways. It can measure inequality across individuals, families, and households (unrelated people sharing housing), and it can measure inequality across racial groups, by gender, by education level, etc. In short, it is a very useful tool that is well established and relatively simple to understand.

 

However, the Gini measure is not perfect. While it can be used to address economic inequality by whole or by selected group, getting Gini index scores by the different groups (for comparative purposes) is difficult, and it’s not even known if this measure has been computed internationally on any consistent basis. Data available does not take into account the size or productive capacity of a country, areas within countries, or any other factors: what is available is a composite score for entire countries, in this case regarding family income inequality. So, it should be taken conservatively: this data is merely suggestive, not definitive. Nonetheless, the suggestiveness of such data deserves consideration.

 

In this article, I focus on income inequality across families. I have chosen to focus on this because I have data to compare the level of family income inequality around the world. Thus, while not repeating myself, all comparisons herein are of income inequality among families.

 

In the US, the Gini scores for family income inequality have both decreased and increased in the period since 1947. Broadly, this can be broken into two periods: 1947-1968, and 1969 to present.

 

In the first period, the measure of inequality showed a small but persistent decline. From a score of .376 in 1947, it moved unevenly but dropped to .348 in 1968.

 

Since 1969, the trend has reversed, moving consistently in an upward direction—representing increasing income inequality. In 1969, it was .349. In 1982 (under Reagan), it hit .380 and has never gone below that amount since then. Since .379 (in 1950) was the high point of income inequality in the 1947-68 period, this means that every year since 1982, income inequality in the US has always been greater than the worse level of inequality that existed in the earlier period.

 

Income inequality has increased under both Republicans and Democrats. Under Reagan, it went from .369 in 1981 (the first year in office) to .395 in 1988, his last full year. Under Bush I, it went from .401 in 1989 to .404 in 1992. Under Clinton, it went from .429 in 1993 to .430 in 2000. And under Bush II, income inequality was at .435 in 2001 (the latest data we have available at this time), but it is all-but-certain the score has increased since then. (This data is available on line at www.census.gov/hhes/income/histinc/f04html)

 

 

(The higher the Gini score, the greater the inequality) While this trend is troubling in and of its own self, I thought it might be interesting to see how the rate of family income inequality compared to that in other countries. A look at the CIA Fact Book at www.odci.gov/cia/publications/factbook/fields/2172.html provided the information I was seeking. (Despite using CIA data and World Bank categories, below, this does not mean I accept their work—however, it is useful for comparative purposes.) The World Bank categorizes countries in different ways, such as by regions of the world; however, for our purposes, the measure most useful is Gross National Income per capita. (GNI used to be referred to as Gross National Product, but they changed the name.) In other words, the goods and services produced in a country in a year divided by its population. The World Bank places countries into one of four categories for this measure, and here I used its latest figures (from 2003). Countries where the GNI/capita is $765 or less a year are labeled as “low income.” Those between $766-3,035 are “lower middle income”; between $3,036-9,385 are “upper middle”; and those over $9,386 are “high income.” And the Bank categorizes most of the countries of the world—I’m not certain they include every country—into one of these four categories www.worldbank.org/data/countryclass/classgroups.htm. The CIA does not categorize the countries in the Fact Book according to the World Bank categories, but they do provide the Gini index for 110 different countries, which includes most of the countries so categorized by the World Bank. (The CIA reports the Gini index by whole numbers and tenths, which I’ve never seen used elsewhere, but it is easily convertible to the standard reading, which I have done.) What this enables me to do is to group the countries according to World Bank categories, and compare rates of family income inequality by income level of countries across the globe. (The CIA does not include all countries—for example, neither Haiti nor Taiwan are include in their data—but they do not explain why some countries are not included.) The CIA web site reports that this page was last updated on May 11, 2004. I entered all of the Gini index data provided by the CIA in two ways. First, I entered it in alphabetical order, as did the CIA, but I placed them within the World Bank categories. I then sorted the data by Gini score, from the lowest to the highest. Taking this second step allowed me to do simple mathematical computations: I utilized my spreadsheet program to compute the average of the data, and then the median. The average should be pretty straightforward. The median basically is the 50 percentile of the data, meaning that half of the scores are below the midpoint, and half are above. The median point is less susceptible to wide-scale variations, so generally it is the more useful of the two measures in that it is not skewed by extremely high or low data points. I computed the scores for the low-income countries ($765 and below), which includes countries such as Bangladesh, Ghana, Moldova, Sierra Leone and Zimbabwe. Their average score for family inequality was .431; the median was .406. I computed the scores for the lower-middle income countries ($766-3,085), which includes countries such as Algeria, Columbia, Honduras, Romania and Ukraine. Their average score for family inequality was .429; the median was .414. I computed the scores for the upper-middle income countries ($3,036-9,385), which includes countries such as Chile, Estonia, Malaysia, Panama and Venezuela. Their average score for family inequality was .385; the median was .370 And then I computed the scores for the high-income countries ($9,386 and above per capita), which includes countries such as Australia, Finland, Italy, Slovenia and the United States. Their average score for family inequality was .313; the median was .316. The Gini index for the United States, in 2001—before the Bush tax cuts—was .435. This compares to the median Gini scores of the low-come countries (.406), lower-middle countries (.414), upper-middle countries (.370), and high-income countries (.316). In other words, our level of family income inequality was worse than the average and the median of other high-income countries (in which category the US is located, based on the level of economic development with the worse family income inequality by far of the entire category). However, if that wasn’t bad enough, the level of family income inequality in the United States was above the average and median of family income inequality of the poorest nations on the planet.

 

Income Category

Average Gini Score Median Gini Score

Gini Score, US (2001)

Low-income countries

.431 .406

.435

Lower-middle income countries

.429 .414

.435

Upper-middle income countries

.385 .370

.435

High-income countries

.313 .316

.435

 

Then, I decided to combine all of the 110 countries that I had obtained Gini scores on, rank them in order (from lowest income inequality scores to highest) to see where the United States would be located. For all 110 countries, the country with the lowest amount of family income inequality was Belarus (.217 in 1998); the average score was .399; the median score was .379; and the greatest family income inequality was found in Sierra Leone (.629 in 1989). Again, the US came in at .435 in 2001. (Jamaica at .379 was the median score at number 56, and the US came in the 75th most unequal country in the world!) But does a regional approach change this analysis? (In other words, am I “massaging” my data to make my point?) Not really. I grouped the CIA data by World Bank regions: Sub-Saharan Africa; East Asia and the Pacific; Europe and Central Asia (basically the former “Eastern European” states); Latin America and the Caribbean; Middle East and North Africa; and South Asia. (The World Bank only includes “developing countries”—i.e., not “high-income” countries—in these regional compilations, but still the comparisons are interesting.) Again, as I did originally, I computed the average level of family income inequality for each region, as well as the median score.

 

Region

Average Gini Score Median Gini Score

Gini Score, US (2001)

Sub-Saharan Africa

.446 .410

.435

East Asia & Pacific

.424 .404

.435

South Asia

.367 .367

.435

Latin America & Caribbean

.518 .526

.435

Europe & Central Asia

.336 .343

.435

 

As one can quickly see, the level of family income inequality in the United States (.435) is better than the developing countries in Latin America and the Caribbean (median .526). However, the level of family income inequality in the United States (.435) is higher than in the developing countries of Sub-Saharan Africa (.410), East Asia and the Pacific (.404); North Africa and the Middle East (.358); South Asia (.367); and Europe and Central Asia! While it could be argued that income inequality in the poorest countries is not unexpected, since they lack the resources and/or mechanisms to distribute income more equally, this claim cannot be given any credence in a country with the resources and governmental mechanisms as found in this country. It is clear that this escalating family income inequality is due to conscious political decisions by political “leaders” of both the Democratic and Republican parties, and these have been continuing over time. Family income inequality would seem to be an issue that independent parties could use against the established political parties should the independents decide to use it as an issue.

 

_____ Kim Scipes is a long-time activist in labor and other progressive movements. He currently teaches sociology at Purdue University North Central in Westville, IN.

 

 

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