In this article, we will be taking a look at the 25 countries with the highest income inequality in the world. To skip our detailed analysis, you can go directly to see the 5 Countries with the Highest Income Inequality.
Global income inequality has always been a major part of our history, initially established through monarchies who were able to hoard all wealth and pass it down from generation to generation while the general population earned meagre income from work. However, as time passed on by, and more and more regions and countries began to be democratized, this combined with industrialization resulted in greater income equality than before. According to the Organization of Economically Developed Countries, over 200 years ago, the difference in income between the richest and poorest regions was just five times.
When we discuss the countries with the highest income inequality in the world, it is important to remember the focus on the word income, as inequality in other aspects of quality of life has improved considerably, including in life expectancy, which you can learn more about by visiting the countries with the highest life expectancy or in terms of gender equality, though of course, gaps still remain on these metrics as well. However, it was in the 1970s, when growth slowed down in the UK and the U.S., the two premier industrial nations at the time, sparking panic. Before this, significantly higher taxes were levied on those who earned very high incomes with said taxes being used to improve the quality of life for the general population as well. However, both the U.S. and the UK, after the scare in the 1970s, decided to abandon this policy and started encouraging entrepreneurism with no downside in terms of taxes, allowing for the easy amassing of wealth, though of course some of the richest families in the world started their fortunes much earlier. Even now, when different countries such as India and China are growing in economic stature, they are following a similar trajectory which is why, while India may not be in our list of countries with the highest income inequality in the world, it is on the way to becoming one, ranking highly in both, percentage of income taken by the top 10% and percentage of income taken by the top 1%.
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Of course, one of the biggest drivers behind greater income inequality in recent times has been the Covid-19 pandemic. According to the International Monetary Fund, both extreme poverty and extreme wealth continued to rise during the pandemic, thus greatening the divide between the rich and the poor. Globally, billionaires saw their wealth increase by an astonishing $3.9 trillion in 2020 alone, while Oxfam stated that billionaires added $5 trillion to their fortunes from 2020 to 2021, with this happening while tens of millions of people across the world lost their jobs amid companies tightening their costs. According to the World Inequality Report 2022, the top 10% of the population in terms of wealth earns over half the global income, with the bottom 50% earning just 8.5% of the total global income, showcasing just how income inequality has risen. Another way to check the rise of income inequality in the world is through the Gini coefficient, which calculates inequality in wealth / income in a country. If the coefficient is 0, that means that the country has perfect equality while 1 indicates complete inequality. The global Gini coefficient in the 1820s was 0.43, and has since risen by over 50% to reach 0.68 in 2005. However, that was a decrease of 0.03 from 2002 when the coefficient was 0.71, with China and India playing a major part in this as the rise of emerging markets has helped decrease global inequality to some extent, though this was mostly wiped out in the Covid-19 pandemic, as according to KPMG, inequality is near its highest point in over 150 years and just 8 of the richest people in the world own the same amount of wealth as the bottom 50%, or over 4 billion people!
The countries with the highest income inequality in the world aren’t just dealing with a major social issue, but a business one too. KPMG states “For businesses, systemic inequality is a great source of risk. It limits productivity and has the potential to constrain consumer spending and growth, destabilize supply chains, trigger political instability, and jeopardize their social license to operate. At the same time, addressing inequity is a business opportunity. But, with many businesses now dwarfing governments in economic scale, the private sector has a vital role to play in tackling inequality. In the quest for a peaceful and prosperous future, the United Nations Sustainable Development Goals (SDGs) call for cooperation between governments, civil society and the private sector.” One of the ways companies can help reduce inequality is by proper implementation of environmental, social and governance, and the biggest ESG companies in the world are leading the way here. Nowadays, financial performance and metrics aren’t enough to determine the future potential of a company, ESG plays a major role too.
When talking about the countries with the highest income inequality in the world, we also need to discuss the countries or regions where such inequality is still relatively low, namely in Europe. In fact, the country with the highest income inequality in Europe is Russia, and based on our rankings, is still only the 56th among the countries with the highest inequality in the world, despite the presence of oligarchs and power wielded by politicians. This is because most European countries, especially those under the European union, have implemented significant taxes to ensure that wealth and income is distributed more equitably.
Methodology
To determine the countries where inequality is the highest, we obtained data from the World Inequality Database, and determined the percentage of income attributable to the top 1% of the country, percentage of income attributable to the top 10% of the country, and percentage of income attributable to the bottom 50% of the country. We then ranked each country in ascending order in the first 2 metrics, and descending order in the last metric. We then calculated the average ranking from these three criteria to come up with an accurate list of countries where inequality is still dominant.
25. Belize
Total income attributable to the top 1%: 19.6%
In a bid to decrease income inequality, Belize raised its minimum wage for all worker categories in 2022.
24. Bahamas
Total income attributable to the top 1%: 19.6%
While not in our list of the top 15 offshore tax havens in the world, Bahamas is still a top tax haven, though income inequality is a major issue there, with gambling further increasing this divide.
23. Bolivia
Total income attributable to the top 1%: 19.6%
For Bolivia to reduce its income inequality, the IMF “emphasized the need to ensure that social transfers were well-designed and targeted, alongside a focus on the quality of education and healthcare.”
22. Guatemala
Total income attributable to the top 1%: 19.6%
Both poverty and income inequality are major issues plaguing Guatemala and cementing its position among the countries with the highest income inequality in the world.
21. Qatar
Total income attributable to the top 1%: 22.4%
The top 10% of Qatar’s population earns more than half the total national income even as the Qatari government affirmed the high levels of inequality in the country.
20. Congo
Total income attributable to the top 1%: 20.5%
Congo is among the poorest countries in the world, with over 60% of the country’s people living on less than $2.15 per day.
19. Bahrain
Total income attributable to the top 1%: 24.3%
Despite being a relatively rich country, Bahrain has a huge immigrant population entrusted with labor jobs, while the ruling family and Bahraini citizens enjoy most of the riches.
18. Thailand
Total income attributable to the top 1%: 22.9%
Thailand has the highest income inequality in East Asia, with one of the major contributors being the difference in urban and rural income, with the latter only 68% of the former.
17. Maldives
Total income attributable to the top 1%: 35.6%
One of the most visited countries in Asia, Maldives income inequality is geographical; while the population is evenly distributed between Male and the atolls, 93% of the nation’s poor population resides in the latter area.
16. Swaziland / Eswatini
Total income attributable to the top 1%: 19.3%
Despite improvements in poverty levels, Eswatini has relatively high income inequality levels and gender discrimination is one of the reasons behind this, since unemployment in women is much higher than in men in the nation.
15. Dominican Republic
Total income attributable to the top 1%: 28.6%
One of the countries with the highest income inequality in Latin America, the poorest 50% of the country’s population has just over a tenth of the total income, though that’s still much better than the global average of 8.5%.
14. Yemen
Total income attributable to the top 1%: 24.2%
Yemen being among the countries with the highest income inequality in the world comes as no surprise, with the war in the nation resulting in an unprecedented humanitarian crisis.
13. Zimbabwe
Total income attributable to the top 1%: 21.1%
Even though human development metrics have seen a great improvement in Zimbabwe, income inequality is continuing to widen as poverty continues to increase as well.
12. South Africa
Total income attributable to the top 1%: 19.3%
South Africa has a major pay inequality problem, with the bosses in the country playing a huge part. And while the apartheid may have ended decades ago, racism is still rampant in the country, which further contributes to income inequality.
11. Brazil
Total income attributable to the top 1%: 22.2%
Surprisingly, Brazil is also among the countries with the highest income inequality. While Brazilian favelas are known all over the world, Brazil’s income inequality has still fallen to the lowest point in the last 11 years, which is a great signal for the country.
10. Cambodia
Total income attributable to the top 1%: 26.8%
Global poverty has declined over the past several decades and the same is true for Cambodia, but income inequality has still persevered.
9. Angola
Total income attributable to the top 1%: 26.0%
Angola’s Gini coefficient is continuing to rise despite already being relatively high, according to the World Bank.
8. Botswana
Total income attributable to the top 1%: 22.7%
African countries dominated the list of the countries with the highest income inequality in the world, and Botswana is no exception, with job creation lags and high unemployment being the leading reasons behind this gap.
7. Namibia
Total income attributable to the top 1%: 21.6%
While Namibia made huge strides in reducing poverty by more than half in a period of just over two decades, it’s still battling high income inequality, even after the government has undertaken redistributive measures while implementing social protection programs.
6. Chile
Total income attributable to the top 1%: 22.9%
While Chile has made some progress in reducing poverty, it is still among several South American nations included in the countries with the highest income inequality in the world.
Click to continue reading and see 5 Countries with the Highest Income Inequality.
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Disclosure: None. 25 countries with the highest income inequality in the world is originally published on Insider Monkey.