Economics 101

Income Inequality: Why Christians Should Take a Closer Look

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Income inequality continues to be a hot topic and it’s important for Christians to be able to think about it from a biblical and economic perspective. What does the Bible say about it? Are there ways to fix it without making the problem worse?

There are a number of important biblical and economic points for Christians to take into consideration. Wearing my economist hat today, I’d like to explain one of the key economic points: understanding how income inequality is measured.

Understanding the “Gini Coefficient”

Income inequality is a measurement of the distribution of wealth across households. It is a relative comparison of the gap in household incomes across a given region, country, or the world. Income inequality is measured using the “Gini coefficient,” which calculates the extent to which the income distribution in a country deviates from perfect equity.

A Gini coefficient of zero indicates perfect equality (everyone earns the same income) and a coefficient of one indicates perfect inequality (one person holds all the income and everyone else has zero). So, if we measure income inequality in your neighborhood, you would get a much different coefficient than if you measured it across your entire state or country.

Formally measuring income inequality is often used as a benchmark for the welfare of a society or country—the relative poverty or prosperity of a society—and used as a justification of policy attempts at income redistribution.

The graphic below distinguishes countries based on income inequality using Gini coefficient data. According to these measures, Finland has more income “equality” than the United States. But just based on that, is it obvious that you should pack your bags and move to Finland tomorrow?  Not really. But, why? Because it doesn’t tell us much about opportunity, quality of life, and the ability to prosper.

In my chapter in Counting the Cost: Christian Perspectives on Capitalism, I compare the United States with other countries to show that the Gini index isn’t the perfect tool for determining human flourishing. Even though countries like Iran, Nigeria, Kenya, Morocco, Guinea, Yemen, Ethiopia, Bangladesh, Pakistan, and Ukraine all have lower levels of inequality than the United States, these countries often experience violence, terrorism, and economic and political crises.

This just goes to show that income inequality measurements, like the Gini index, are simply a way of measuring how income is held, and are not necessarily representative of overall prosperity or flourishing. We should instead consider other criteria, such as measures of economic freedom, happiness indices, life expectancy, or GDP per capita.

Societal Aspects that Contribute to Income Inequality

It’s also important to see that there are fundamental factors of our economic and human condition that lead to an unequal distribution of income. Understanding these aspects is important for knowing what public policy is able or unable to accomplish, and more importantly, what the Bible has to say about it.

Overall, there are six primary aspects of income inequality:

  • Family Structure—the latter half of the 20th century saw massive changes in the labor force. The family norm went from two-parent, one-earner families to either low-income single-parent families or higher-income two-parent, two-earner families. When the family structure changes, so do income holdings across these newly defined households.
  • Technology—Rapid advancements in technology through the latter half of the twentieth century and continuing today and into the foreseeable future, have shifted labor demand from low-skilled labor toward high-skilled labor.
  • Growing Markets—Globalized markets break down the boundaries of smaller, local markets and provide new platforms and new audiences for trade. This can and has changed how income is held across the globe.
  • Immigration—Immigration into a country changes the supply of labor, usually low-skilled labor in that country.
  • Property Rights—We are all born with different gifts and created individually; we will all have different earthly income levels, which means income inequality will always exist on some level. Our most fundamental property right is over ourselves and that means how we choose to use those gifts.
  • Income Mobility—Income mobility reflects how an individual’s income changes over time. Because we are all born with different skills, talents, and gifts, we have different ways and abilities to serve others through the market. Over time, as we fine-tune our gifts and become better at serving others, we move into higher income brackets.

Since we can’t grasp the full picture of flourishing without understanding mobility, I’ll tackle that point in my next post. For now, the economic point to consider is that there are a number of factors that contribute to income inequality. Just because a country appears to have less income inequality by some measures doesn’t mean it’s a model of human flourishing.

Since human flourishing is our goal, we need to truly understand how people are doing, care for those who need help, and look toward a future where the most people are becoming better-off.


Editor’s Note: Read Anne Bradley’s chapter on income inequality, “The 1 Percent: Is Income Inequality Evidence of Exploitation?” in Counting the Cost: Christian Perspectives on Capitalism

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