U.S. has Higher Income Inequality than Britain, Bangladesh, Ethiopia

(Eric Chemi and Joshua Green)

This month, Bloomberg Rankings dove into U.S. census data to measure the level of economic equality in each of 435 congressional districts—a useful endeavor, given all the recent political attention on inequality. The Rankings team did this by calculating the Gini coefficient, a formula that measures the distribution of income across a population. The closer a Gini number is to 1, the greater the level of inequality; the closer to zero, the closer to perfect equality. You can see the Bloomberg rankings here. The big take-away: A strikingly high level of inequality exists throughout the United States.

Economic equality isn’t automatically a wonderful thing—nations such as Bangladesh and Kazakhstan have very little economic inequality, yet are hardly regarded as societies other countries would wish to emulate. Still, most people would agree that having a high level of inequality is undesirable and potentially damaging. So it’s worth examining how the U.S. stacks up against the Western democracies that are generally regarded as having a high quality of life.

As we noted last week, the U.S. congressional districts with the most inequality share certain traits: They contain a small, enormously wealthy elite surrounded by impoverished neighbors. Each lies within major urban areas such as New York, Philadelphia, Chicago, Boston, Atlanta, and Washington. The congressional district where inequality is highest turns out to be New York’s 10th, with a Gini coefficient of .587; the most equal district is Virginia’s 11th, at .385.

Some helpful context for understanding these numbers comes courtesy of the Central Intelligence Agency, which tracks the Gini coefficient of 139 countries. It’s possible—and kind of interesting—to take U.S. congressional districts and compare them to foreign countries.

What jumps out is how lousy the United States looks. Our best district in terms of equality (VA-11) is only as good as Portugal, which sits at a pedestrian 71st on the CIA’s list, right in the middle of the pack. That means that the level of equality in every congressional district in America falls below the midpoint of the CIA’s 139-country ranking.

Even the best U.S. district has higher inequality than any number of countries you probably don’t associate with economic egalitarianism: Greece, Niger, Ethiopia, Egypt, Pakistan, Kosovo, Mongolia, Ukraine, Bangladesh. This doesn’t mean that the U.S. would be better off it were more like Ukraine. But the comparison between the U.S. and similar Western democracies is just as unsettling. The U.S. doesn’t come anywhere close to Scandinavia’s .2 – .3 Gini range. The most equal U.S. congressional district can’t compare with the national averages of New Zealand, France, Canada, Netherlands, Australia, Switzerland, Belgium, Germany, and Austria.

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Source:  Business week, May 20, 2014, titled “The U.S. has Higher Income Inequality Than Britain. And Bangladesh. And Ethiopia”.