Question

2) (10) Describe the inequality in income and wealth between countries, and explain whether each of those two measures has grown or shrank over the past 50 years. Why is income inequality less than wealth inequality?

Answer 1

Answer :

Describe the inequality in income and wealth between countries, and explain whether each has grown or shrank over the past 50 years.

Income is relatively straightforward matter of wages and compensation.

Wealth is more mercurial : It can be physical asset like a car, house or land but it can also be a stock or bond on financial asset.

If we saw the data, both income and wealth inequality increase at Global scale. For example : In US by now the share of all income going to the top 1% of Americans stands at 20%, which is big.

As far as wealth is concern the top 1% Americans households enjoy 35% of the ownership by themselves. From 1963 to 2013, families in the bottom 10% of wealth ownership went from having no wealth at all on average to being $2000 in debt, which is disturbing.

Why is wealth inequality greater than income inequality?

Income inequality less than wealth inequality because the more income you have, the more wealth generating assets. You can buy lending to even more income. So the best way to enrich yourself is to already be wealthy. Wealth is also tranferable endlessly from one generation to the next in the family.