17

Olle Hammar et al write in Global Earnings Inequality, 1970–2015:

Our main finding is that global earnings inequality has declined, primarily during the 2000s, when the global Gini coefficient dropped nearly 10 points and the earnings share of the world’s poorest half doubled.

GlobalFinance writes:

Today, data shows that the gap between the richest and the poorest has never been wider.

What's true? Is the popular conception that inequality as measured by metrics such as the Gini-index rises false as Hammar claims or is it true?

  • 5
    Your question assumes that the gap between the richest an poorest ist the same as the gini coefficient. That is probably not the case. – redleo85 Jan 24 at 8:47
  • 2
    I posted an answer but then deleted it because I wasn't satisfied. But here are some hopefully helpful remarks from it: 1. (labor) earnings are not the same as income, which shifts the gini considerably (wealthy people are more likely to have income from capital). 2. A gini index is just one metric, and it is difficult to draw conclusions about the underlying distributions from it. 3. The world inequality report states "At the global level, inequality has risen sharply since 1980". – Jishin Noben Jan 27 at 9:11
  • Graphs for Gini coefficient by country are found at en.wikipedia.org/wiki/Gini_coefficient – GEdgar Feb 2 at 22:41
18

Relative inequality has fallen over the last four decades; absolute inequality has increased, according to the University of Oxford

Say in 1975 Alice earned $1 a year and Bob earned $100 a year. Bob earns 100x Alice's income in relative terms, and earns $99 a year more in absolute terms.

A decade goes by and Bob's income doubles. Alice's income quadruples over the same time span, so Alice earns $4 / year, and Bob $200 / year. Now in relative terms, Bob only earns 50x Alice's income - relative inequality has halved. But he also earns $196 more than her, nearly double the absolute inequality.

I cannot say with confidence that the sources you're quoting are falling afoul of this distinction, but it's one explanation for the difference.

  • 2
    "inequality" is always relative. I'd rephrase this to say "multiplicative" vs "additive" or something along those lines. – einpoklum Feb 6 at 12:56
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    I agree with @einpoklum. Seeing as buying power is something that is calculated multiplicatively, I would say that the relative measure is more important. – bxk21 Feb 7 at 21:54
  • The University of Oxford press release / study I linked specifically uses the phrase 'relative (global) inequality' and 'absolute inequality'. – James Picone Feb 8 at 12:02

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