Think about it:
The Economist discusses two interesting facts in an article published a few weeks ago.
- Income inequality has risen in most countries in the world over the past 10 years.
- Total global income inequality has fallen over the same period of time.
How is that possible? If almost every country has rising income inequality shouldn’t total income inequality be growing globally? (If you want to take a second and try to think about how this is possible, do it now).
How it happens:
This is true because the poorest countries are gaining wealth significantly faster than rich countries. This means that the rich people in Asia are starting to reach equitable levels of wealth with the rich in the western world. In individual countries the gap between the rich and poor is growing, but the total wealth of various countries is beginning to even. As millions of BRIC inhabitants get richer while many others remain stagnant economically this trend will continue.
Below is a graph showing the change in world distribution of income. (Images courtesy of Gary Patterson). As you can see, over time the distribution becomes more normal, showing the rising strength of the middle class. More of the wealth (i.e the area below the curve) is contained among the people in the middle.
Now, below is a graph showing income inequality in various countries over time. (Courtesy of [Kenneth Kambara’s blog post(https://thesocietypages.org/thickculture/2009/12/04/where-have-all-the-jobs-gone-long-time-passing/)]) This is an incomplete figure because much of the data stops being recorded in 2005. Between 2005-2010 income inequality actually rose significantly in many of these countries. Regardless, as you can see from 2000-2005 income inequality rose in the US, Brazil, China, the UK, India, and other countries.
So, should the title of this blog post be: “Global Inequality is Falling” or “Income Inequality Across the World is Rising.” Both are true right?
The lesson: be careful with statistics and data.