By Karen Appold
Global income inequality—the sum of inequality within and between nations—is massive today, writes Glenn Firebaugh, PhD, Roy C. Buck Professor of American Institutions, Sociology, and Demography, College of the Liberal Arts, Penn State University, in a review of the literature. But some good news is that global income inequality is currently receding.
“Because income inequality produces significant disparities in life experiences, it is a critical topic for social scientists to investigate,” Dr. Firebaugh says. The article, “Global Income Inequality,” was published in Emerging Trends in the Social and Behavioral Sciences: An Interdisciplinary, Searchable, and Linkable Resource, a collection of essays from the social and behavioral sciences published recently by Wiley Press. In it, he describes the reasons for global income equality, explains why it is difficult to measure inequality, and explores the possibility of realistically reducing world poverty.
The essay provides insight into the evolution of global income inequality over the past two-and-a-half centuries and the legacy of uneven growth in the world's regions since the Industrial Revolution. Dr. Firebaugh points out that citizens in rich countries such as Switzerland and Germany are on average about 25 times richer than citizens in the world’s poorest countries. Although the cross-country differences are much greater now than before the Industrial Revolution, they are currently being compressed by the faster-than-world-average income growth in large poor countries such as China and India.
Indeed, many nations in Asia—as well as some in Africa—are currently experiencing faster economic growth than in the West, thus reversing the trend toward ever-increasing inequality between nations (which is where most global inequality now lies).
If the rate of economic growth in China and India were the same as in the rest of the world, global income inequality would not be declining. The slow rate of economic growth in many regions in sub-Saharan Africa, on the other hand, is retarding the decline, the essay states.
Challenges with Data Collection
Dr. Firebaugh admits that as a graduate student in the 1970s, he was interested in writing his dissertation on global inequality after casually observing great differences in income both within and among nations. But he abandoned the study because data were unreliable or unavailable for many nations. Years later, he returned to the topic when better data became available.
Despite advancements in collecting data, Dr. Firebaugh says it’s still difficult to accurately measure income inequality within countries because income is often considered a private matter. “People do not always know what their income is or they may lie about it,” he says. “Income is harder to measure than something more concrete like age or education, for example.”
In addition, comparing incomes across nations is even more difficult because individuals have different needs in different countries, and they produce different things. “To measure income inequality we must answer thorny questions such as what is the worth of a ton of bananas (which can be grown only in certain climates) relative to a ton of steel?” he says. “And some items, such as a warm coat, are more essential—and thus have more value—in Alaska than in Hawaii, which makes it difficult to compare incomes.”
Reducing Poverty
Dr. Firebaugh deduces that today poverty is largely a problem of distribution, not world production. “In general there is enough food to feed everyone, but it is not evenly distributed,” he says. “So the easy answer is to say that we could eliminate poverty by eliminating inequality.
But that is not a realistic answer, since eliminating inequality entirely is a pipedream.” But on a more positive note, poverty has already been reduced dramatically in many Asian countries such as China. “Probably the best way to reduce poverty is to remove the impediments to economic growth, such as war or upheavals that increase misery in the short run (as well as making economic planning more difficult),” he surmises.
Ultimately, if abject poverty continues to decline, then the question is not whether one has enough, but whether one has as much as one’s peers. “In other words, the question of absolute poverty gives way to the question of relative poverty: I have enough to subsist, but not enough to keep up with the Joneses,” he states. “In that case, great disparities in income do not necessarily cause physical distress, but they can cause psychic distress and unhappiness.” A high level of inequality in a land of plenty can also in effect disenfranchise individuals from involvement in community life. In a country where virtually everyone has a smartphone, for example, people sans phones find it more difficult to fully participate in community life.
Looking ahead, Dr. Firebaugh says his research is focusing on types of inequality other than income inequality. For example, he is investigating the differences in the quality of neighborhoods where different racial and ethnic groups reside in the United States.
Reference
Firebaugh G. Global income inequality. Emerging Trends in the Social and Behavioral Sciences: An Interdisciplinary, Searchable, and Linkable Resource. Wiley, 2015.