|
|
Country A |
Country B |
Country C |
|
|
Low Inequality |
High Inequality |
High Inequality |
|
Lowest |
13% |
3% |
3% |
|
2nd |
17% |
8% |
4% |
|
3rd |
20% |
12% |
5% |
|
4th |
24% |
20% |
31% |
|
Highest |
26% |
57% |
57% |
|
|
|
|
|
|
Ratio: High/Low |
2.0 |
19.0 |
19.0 |
CASE 1
|
|
|
Before |
After |
|
5% |
4% |
|
10% |
5% |
|
15% |
16% |
|
25% |
27% |
|
45% |
48% |
|
|
|
|
9.0 |
12.0 |
CASE 3
|
|
|
Before |
After |
|
5% |
4% |
|
10% |
8% |
|
15% |
12% |
|
25% |
20% |
|
45% |
56% |
|
|
|
|
9.0 |
14.0 |
CASE 2
|
|
|
Before |
After |
|
5% |
5% |
|
10% |
10% |
|
15% |
15% |
|
25% |
20% |
|
45% |
50% |
|
|
|
|
9.0 |
10.0 |
CASE 4
|
|
|
Before |
After |
|
5% |
7% |
|
10% |
12% |
|
15% |
16% |
|
25% |
27% |
|
45% |
38% |
|
|
|
|
9.0 |
5.4 |
Country A Income inequality in this country is VERY low. If there were perfect equality, each quintile would earn 20% of the total wages in the country. In country A the lowest quintile earns 13% of the total wages, and the highest earns 26% of the total wages. The ratio between the highest and lowest is 2.0, which is also very low. This is much lower than in any industrialized countries.
Country B Here we have very high levels of inequality. The ratio of income between the highest and lowest quintile is 19.0. This is very much higher than in most industrialized countries. The poorest quintile only earns 3% of the total income. The bottom three quintiles are all well under 20% of the total income. The fourth quintile earns exactly 20%, but the richest fifth of the population earns 57% of the total income.
Country C Again we have very high levels of inequality. The ratio between highest and lowest is 19.0 – exactly the same as for country B. There are major differences in inequality between the two countries. Country C has greater inequality than country B. While the percentages are the same in the lowest and highest quintiles, they are different for the 3 remaining quintiles. In country C individuals in the second and third quintiles earn a much smaller percentage of the total income than those in country B. Individuals in the 4th quintile earn 31% of the total income, which is much higher than for country B. In country C, income is more concentrated in the two highest quintiles compared to country B. Individuals in the bottom three quintiles earn a small proportion of the total income.
For each of these cases, the initial level of inequality is the same.
Case 1 Inequality has increased over time. The ratio of income in the highest to lowest quintile has increased from 9.0 to 12.0. Individuals in the lowest two quintiles now earn a slightly smaller proportion of the national income, and individuals in the highest 3 quintiles now earn a slightly higher proportion. The increase is greatest in the higher quintiles. The second lowest quintile had the greatest drop in income, 10% down to 5%. This is a shift in income from the poorer quintiles to the middle and better off quintiles. One possible explanation is a downturn in the economy, with more individuals being laid off. Lay-offs may be more likely among working class individuals than managers or professionals.
Case 2 Income inequality has increased over time. The ratio has changed from 9.0 to 10.0. There has been no change in the lowest 3 quintiles. They still earn the same overall proportion of income as before. There has been a shift of income from the 4th to the 5th or highest quintile. This could be a shift from the upper middle classes to the upper class, or very rich. A possible explanation for this is flattening of corporations, and middle managers lose their jobs. Another is tax breaks for the wealthy.
Case 4 Income inequality has decreased. The ratio has dropped from 9.0 to 5.4. The proportion of income earned by the richest quintile has dropped by 7%. This has been redistributed fairly evenly to all the other quintiles.