November 10, 2015

Putting Income Inequality in Perspective

By Chelsea German and Marian Tupy
Debates about income inequality, “the top 1 percent,” and poverty typically examine those issues within the context of a single country. But, consider a global perspective. This web tool lets you find out which income percentile you belong to relative to all the other people in the world. If you make more than $32,400 per year, you are in the top 1 percent of the richest people in the world!

And, bear in mind that the world is more prosperous than it has ever been in the past. Compared to you, the vast majority of people who have lived on this planet were desperately poor. Poverty, as Cato’s David Boaz put it in this online lecture, used to be ubiquitous. “Why are some people poor? That’s always the wrong question. The question is why are some people rich? Poverty is the natural condition of mankind, but it’s easy to forget that.”


Fortunately, prosperity is rising and global inequality decreasing. Even as the world population has exploded, the number of people living in poverty has fallen. As a result of spreading prosperity, infant mortality, illiteracy, and malnutrition are in decline, and people are living longer. Extreme poverty’s end is in sight.

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Prosperity does not, of course, materialize without a cause. The role of industrialization and trade in bringing about economic growth and prosperity cannot be emphasized enough.

So the next time someone brings up poverty or income inequality within the United States, keep in mind the importance of a proper perspective. From a global standpoint, you may very well be a part of “the top 1 percent.”


Note: 
To calculate your income percentile, the web tool we used in this article uses 2008 statistics from the World Bank, and compares your income to the entire world population (6.69 billion people). To calculate your wealth percentile, the web tool uses 2012 estimates from Credit Suisse, and ranks you against the adult population of the world (4.59 billion people). Because the latter only ranks you against the adult population and uses more recent data, the wealth percentile is more accurate than the income percentile. For currency conversion the web tool uses dollars adjusted for Purchasing Power Parity (to take into account the differences in the cost of living between different countries).