The myth of persistently rising inequality

Income inequality hasn’t increased in 20 years, while wealth inequality is more complex

Income inequality is likely bad, or at least it correlates with a lot of bad stuff. I would like to see it being lower than it currently is. But the popular claim that it’s just rising and rising, or even skyrocketing, in contemporary times – or that it’s doing so virtually everywhere around the world – is very misguided, if not outright wrong.

It’s not just well-meaning activists who are misusing statistics, it’s even organizations like the UN saying “income inequality within countries has become worse … inequality has gone up in the majority of countries over the past three decades [and only] fallen in a few.” What exactly does this mean when the very source they rely on when making this claim, and which they link to, suggests the opposite:

No general trend to higher inequality. It’s a mistake to think that inequality is rising everywhere. Over the last 25 years, inequality has gone up in many countries and has fallen in many others. It's important to know this. It shows that rising inequality is not ubiquitous nor inevitable in the face of globalization …

Now, it’s well-known, although not celebrated enough, that both global and between-country inequality have declined quite notably. What people almost completely miss is that within-country inequality has also stopped increasing globally since the mid-2000s. Depending on how we measure it, there’s even some evidence of it falling.

As you can see, this is true whether we look at income inequality expressed through the Gini coefficient or as measured by the income share of the top 1% or 0.1%.¹

We should weight the world average if we’re interested in whether the typical person (instead of the typical country) is burdened by rising inequality. But as is clear, relying either on raw averages, where each country – large or small – contributes equally to the total, or using population-weighted averages in the end doesn’t really change the picture much over the past two decades. Income inequality is not increasing and hasn’t been for quite a while now. That’s good news.

Okay, but what if we zoom in and take a regional-average perspective? That is, what does income inequality within countries look like if we aggregate it at the level of specific world regions? No increase since 1980 in the typical country in the Americas, Asia (China is an exception), or Africa. A big increase in Oceania, but just until 2010. And a slower rise in Europe, but mostly stagnation over the past two decades.

Let’s zoom in further on Europe to get a better look. Again, no increase over the past two decades, with the Gini even decreasing.

Even in the US, where inequality did increase quite notably during the 1980s and 1990s, there’s been no further rise in the top 1% and 0.1% shares since around 2010.

Okay, so income inequality hasn’t really been rising for some time now, whichever way we slice the data. (Thankfully, I’m not the only sociologist noticing this.) But surely wealth inequality just keeps going up everywhere?

Here, it’s more complicated, but again the trends are far from unequivocal. Without weighting the data by population, the top 1% wealth share is down a bit compared to the 1990s, when the data began. So, the typical country has not experienced rising wealth inequality in decades. And there’s definitely no evidence of an explosive, year-on-year rise, along this dimension.

The world average (measured within each individual country) can also be decomposed into regional averages. These are more heterogeneous. Countries in the Americas (though not the US) have seen a clear decrease in wealth inequality. The same goes for Africa. In Asia, nothing much has changed through the decades (though again China is an important exception). In Oceania, the top 1% is capturing more and more total wealth. In Europe, something similar was happening between the 1990s and mid-2010s; however, for the past decade, wealth inequality has been stagnant in Europe as well.

Finally, if we weight by population, we see that wealth inequality has been increasing throughout. That is to say, if we’re mostly interested in what people in the US, China, and India – three countries that represent almost half the world population – are experiencing, the answer is: “Rising inequality.” So, on the one hand, wealth concentration is not increasing in the typical country, but on the other hand, the typical person does see it rise on account of what’s been happening to the three most populated societies on the planet, where almost half of humanity lives.

What would Thomas Piketty, one of the biggest inequality researchers of our time, have to say about all this? Would he faint? Not at all. In one of his more recent books, he puts it like this (emphases mine):

This book offers a comparative history of inequalities among social classes in human societies. Or rather, it offers a history of equality, because, as we shall see, there has been a long-term movement over the course of history toward more social, economic, and political equality. …

The world of the early 2020s, no matter how unjust it may seem, is more egalitarian than that of 1950 or that of 1900, which were themselves in many respects more egalitarian than those of 1850 or 1780. …

[O]ver the long term, no matter which criterion we employ, we arrive at the same conclusion. Between 1780 and 2020, we see developments tending toward greater equality of status, property, income, genders, and races within most regions and societies on the planet, and to a certain extent when we compare these societies on the global scale.

If we adopt a global multidimensional perspective on inequalities, we can see that, in several respects, this advance toward equality has also continued during the period from 1980 to 2020, which is more complex and mixed than is often thought.

As is the case with most other social phenomena, inequality is complicated. If you’re really interested in understanding it, don’t turn it into a mindless political slogan.

1. The shares data I’m using come from the Piketty-associated World Inequality Database and from Our World in Data. The Gini data come from the Standardized World Income Inequality Database.