Earnings research puts U.S. in middle of the pack

Max Fisher / The Washington Post /

Published Sep 29, 2013 at 05:00AM

The way we measure income inequality is changing.

After years of relying on a complicated metric called the Gini coefficient, some economists argue that we should adopt the Palma ratio, which measures the gap between the rich and the poor in a society.

In the accompanying map, the latest data illustrates income inequality around the world, as measured by the Palma. The results are pretty revealing. Bluer countries have greater income equality, according to the metric, meaning that there’s less of a gap between the rich and the poor. Redder countries have more income inequality, meaning that there’s a wider gap. The United States, which is the most unequal of any developed country measured, is roughly in the middle.

The countries that come out looking best include, no surprise, the usual suspects of Northern Europe.

Interestingly, Eastern Europe scores quite highly as well, as do some post-Soviet countries in Central Asia. Perhaps that’s a legacy of Soviet-era social programs meant to flatten class divides. But it’s also a reminder that, while income equality is great, it’s not synonymous with a healthy economy. Some countries are economically equal because everyone is well-off, as in Denmark, and some because most everyone is equally poor.

The countries with the highest income inequality are, by far, those in Latin America and the southern tip of Africa. These countries have been seeing economic growth over the past few decades, but much of the wealth ends up funneling into the top social stratospheres. This problem tends to be self-reinforcing: The rich are able to secure better education and political access, making it easier for them to stay rich and tougher for everyone else to get a share of the pie.

The United States doesn’t come out of this comparison looking great. It’s ranked 44th out of 86 countries, well below every other developed society measured. It’s one spot below Nigeria, which has some of the worst political corruption in the world and in 2012 saw nationwide protests over perceived income inequality. The United States’ Palma ratio ranks it just beneath Nigeria but above Russia and Turkey — all countries that have experienced intense political unrest in recent years.

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