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Income Inequality: A Global Look

by Elaine Schwartz    •    Aug 18, 2013

Please for a moment, think of yourself as a citizen of the world who is looking at income inequality. According to World Bank scholars, you should first identify your approach.

  • 1. You could just create 3 baskets for countries, the poor, the middle income, the most affluent. Then, based on average per person income in each country, you can decide which country belongs where. Because height reflects mean income (below), the shortest figure represents nations where people earn the least; the middle, more; the tallest, the most.

Income Inequality Global

or…

  • 2. You can make new baskets that include population weights since it was misleading to ignore that China, for example, has so many people and Luxembourg, so few. Again, height will represent the three categories of your income baskets. Now though, 5 tenths of the world’s population lives in countries with the lowest average income, 2 tenths the next level, and 3 tenths the highest.

Income Inequality global perspective 2

or…

  • 3. Ignore national borders. Instead survey people everywhere and determine where they fit in a scale representing world income distribution. Then you will see that some people from middle income countries are among the world’s poorest. Correspondingly, certain individuals living in the world’s least affluent nations are 4 rungs down from the top of the world’s income ladder.

Income Inequality global perspective

 

Next, continuing to use a world citizen lens, we would soon see that US income distribution is not so unequal. When the US is compared to the BRICs, the least affluent 5% of the US population has an annual income that exceeds 60% of everyone everywhere else.

The point at which Y=60 displays the global income rank of the poorest 5% of the US population. From: Milanovic et al. The World Bank 2012.

Making it more affluent than 60% of the world, the poorest 5% of the US population crosses the vertical y-axis at 60. From: Milanovic et al. The World Bank 2012.

 

While the World Bank report on which my information is based says so much more, one conclusion resounded: “…if I know nothing about any given individual in the world, I can, with a reasonably good confidence, predict her income just from knowledge of her citizenship.”

Or, we could just could say that citizens of the US enjoy a “location premium.”

Sources and resources: While an excellent World Bank paper was the source of all above facts, diagrams and my graph, you can read a summary in the Washington Post, much more in Branko Milanovic’s The Haves and the Have-Nots, and additional ideas from the book in econlife.

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