The income gap between the nation's richest and the poorest citizens is typically referred to as income inequality—and in many countries, it has never been wider. Just as the overall incomes of the world's richest and poorest countries can offer broad hints about the level of development in those countries, the level of income inequality in a given country can help indicate the quality of life for its average citizen. Income inequality impacts a nation both economically and politically, with effects that include political polarization, negative attitudes towards the wealthy, slower GDP growth, reduced income mobility, higher poverty rates, and greater household debt. On the other hand, extremely income inequality that is extremely low can sometimes indicate a lack of economic growth.
The Gini Coefficient
The Gini coefficient, or Gini index, is a statistical measure of income inequality developed by Italian statistician Corrado Gini in 1912. The Gini coefficient ranges from 0 (0%) to 1 (100%), with 0 representing perfect equality and 1 representing perfect inequality. For example, in a country where everyone has the same income, the Gini coefficient would be 0. However, if a single resident earned all of the income while everyone else earned nothing, the coefficient would be 1.
Top 10 Countries with the Lowest Income Inequality (Gini %):
Country | Gini Coefficient - World Bank |
|---|---|
| Norway | 22.7 |
| Slovakia | 23.2 |
| Slovenia | 24.0 |
| Belarus | 24.4 |
| Ukraine | 25.6 |
| Moldova | 25.7 |
| Netherlands | 26.0 |
| Belgium | 26.0 |
| Iceland | 26.1 |
| Czech Republic | 26.2 |
10 Countries with the Highest Income Inequality (Gini %):
Mathematically, the Gini coefficient is defined based on the Lorenz curve. The Lorenz curve plots the percentiles of the population on the graph's horizontal axis according to income or wealth, whichever is being measured. The cumulative income or wealth of the population is plotted on the vertical axis. Countries with high or low Gini scores often have economies that are either top-heavy, with too much money controlled by a wealthy elite; or stunted, with too little economic growth and development.
Limitations of the Gini coefficient
While the Gini coefficient is a useful tool for analyzing the distribution of wealth or income within a country, it is not a measurement of that country's overall wealth or economic well-being. For example, the Gini coefficient in highly developed, high-income countries is often higher—indicating less income equality—than the Gini coefficient in least-developed or low-income countries. Finally, the Gini coefficient can be compromised by imprecise or inadequate information. If reliable and up-to-date GDP and income data are lacking, the Gini coefficient may be inaccurate and overstate income inequality.
Income inequality in the United States
According to the U.S. Census Bureau, the United States’ Gini coefficient was 48.9% in 2020. This ranks as the country's highest Gini in at least the past 50 years—although the 2021 data, when available, will likely eclipse it. Note that this value is higher than the World Bank estimate shown further down this page, which is computed using a slightly different algorithm.
The U.S. also has the highest Gini coefficient among the G7 nations. The top 1% of earners in the United States earn about 40 times more than the bottom 90% of earners, and roughly 33 million U.S. workers earn less than $10 per hour, placing a family of four below the poverty line.
