Simply put, income inequality refers to the difference in income distribution. Income, in this particular case, is not simply the difference between the paycheck between the richest and poorest, but income (or lack thereof) derived from rental income, stock gains, interest on savings accounts, and profits from selling something for more than a person bought it for. [1]
The most common tool used to determine income inequality is called The Gini coefficient. This coefficient was developed in 1912 by an Italian statistician and sociologist Corrado Gini and is first described in a published paper entitled “Variability and Mutability.” [2]
The Gini coefficient measures the inequality among values of a data sample, for example, levels of income. A Gini coefficient of zero expresses perfect equality, where all values are the same. This would be a situation where everyone has the same income. A Gini coefficient of one (or 100%) expresses maximum inequality among values. In an income scenario, this would be a case where only one person has all the income.
Based on the most recent data, and that data point ranges from 1995-2007, the United States has a Gini rating of 45, according to the CIA World Factbook. Sweden, the most-equal country, gets a rating of 23. Lesotho, in southern Africa, has the highest Gini coefficient on the CIA’s list with a rating of 63.2. There are 141 countries in this list and the U.S. is listed 41st.
NOTES:
[1] http://inequality.org/income-inequality/ accessed August 10, 2014.
[2] http://en.wikipedia.org/wiki/Gini_coefficient, accessed August 10, 2014
[…] I dream of Gini or How is income inequality defined? […]