Student Article / Comerce

Wealth Inequality: How To Reduce The Wealth Gap Between The Rich And The Poor?

Wealth Inequality: How To Reduce The Wealth Gap Between The Rich And The Poor?

Assistant Editor

22 Apr, 2019

It looked like Mount Vesuvius had completely destroyed the city, however as the last of the volcanic ash settled over the city of Pompeii in A.D.79, a detailed portrait of the life in the grand Roman city got preserved that told the story of bristling military outposts to the ingenious aqueducts that supplied water to the entire city. However, the massive eruption nearly 2000, years ago also captured clues of the lives of the people and within those clues also remains one of the most pressing of all social problems of this modern world; economic disparity. A team of researchers who were analyzing the dwelling in Pompeii and about 62 other archaeological sites dating back 11,200 years were able to rank the distribution of wealth of the people living there which clearly indicated an economic disparity that existed thousands of years ago and this gulf between the 1% of ultra rich and the rest continues to grow.  

It is not just Pompeii, but all the history that we have studied so far speaks of people being subjugated on the basis of economic inequality. Not to forget that this oppression and inequality is what led to all the revolutions, whether it was the English revolution or the French.

Wealth inequality existed always, irrespective of the type or design of the society. Let us try to understand what is wealth inequality? Wealth inequality is a type of economic inequality that actually refers to the unequal distribution of assets or money among a group of people. Wealth is a commodity that can be stocked. People stock their wealth in various ways mainly:

1. By means of saving in some commercial bank deposits.

2. By owing shares issued by stock-market listed companies and having     equity stakes in privately owned businesses. 

3. Being owner of several properly/real estate

4. By accumulating wealth that remain held in either corporate or    government bonds. 

5. Wealth tied up in private (occupational) like pension schemes or life insurance schemes.


Income inequality has risen in almost all parts of the world making it a worldwide issue that almost all countries are reeling under. There has been a rise of the "top 1%" who have gained the lion’s share of wealth and attention which has sent a large number of low earners who are slipping further and further behind in terms of their earnings. This has only created a huge gap between the rich and the poor which now looms as a "big problem" as found through a poll conducted of 44 countries by the Pew research Centre.

It has been found that the gap between the rich and the poor is at its highest for last 30 years, with the top 10% earning 9.6 times more than the poorest 10%.


The Organization for Economic Cooperation was founded on the 30th of September, 1961 with its headquarters in Paris. It is an intergovernmental organization that provides a forum for discussion to its democratic member countries and its governments about their industrialization and various other aspects of market economy. The most important agenda of this forum is to support sustainable economic growth. To make strategies that will boost employment amongst the citizens of the member countries, work to boost the economic environment which in turn will contribute not just the overall growth of these countries but also have a positive impact on the world trade. The OECD is also works towards consolidating a reliable source for comparable statistics of economic and social data about countries across the world. It analyzes various parameters related to patterns in the world trade, its environment, about agriculture, new technologies and uses, and economic areas like taxation and overall economic development.

According to OECD report inequality is bad and getting worse and the reports shows that in the 1980's, the richest 10% of the population in the OECD countries earned 7 times more than the poorest 10%. Now they earn nearly ten times more and when property and other forms of wealth are included the situation is even worse. In the year 2012, the richest 10% controlled half of all total household wealth and the wealthiest 1% held 18%, compared to only 3% for the poorest 40%. It is the poorest members of the society that suffer the immediate consequences of this inequality, however in the long term the whole economy gets damaged.

What are the causes for wealth inequality?  Though this inequality existed always however, the present extremes can be avoided to a great extent when we understand the factors leading to this inequality. 

If we take India as a case study one of the major reasons is tax evasion. High tax rates are one of the major reasons for the gap between the rich and the poor in India.

Tax avoidance follows a high tax rate which leads towards a parallel economy. In India the unofficial economy is as strong as the official economy. This also is the reason how more and more income and wealth lands into the hands of a select few. 

Unemployment and underemployment is yet another reason for this wealth inequality. This inequality leads to low labor productivity which pushes the unemployed and their families below the poverty lines.

Lack of education as well as variations in levels of education is yet another major reason that is creating this great inequality among people. An educated individual always has the potential to reach higher positions and in turn earn more compared to a person who is uneducated. The inability to pursue education or the lack of interest in individuals also is at a disadvantaged position when it comes to earning good salaries.

Inflation is another aspect wherein the prices of commodities are on the raise but not the income of individuals. Inflation also leads to the concentration of wealth and profits in the hand of selected few, while people with low earning become losers.  

The regressive taxation system that is prevalent in India is also one of the major causes that causes undue burden and exaggerate the already existing financial burden on common people. Added to these are other factors like inheritance, corruption and smuggling. The rising cost of professional education, the constantly deteriorating condition of landless workers and marginal farmers have and are contributing to the increase in wealth inequality.

In order to fight this inequality there are few very important steps that need to be looked into. Well known economists and governments throughout the world have given several solutions for unequal distribution of wealth; some of them are as follows:

Encouraging women to work as this will not just reduce income inequality but also increase the gross domestic product.

A major population of our country earns their living from agriculture. Investing in agriculture will raise the earnings and living conditions of poor farmers as well a vast population of people who are directly or indirectly associated with farming and agriculture.

Introduction of Minimum Wages and Universal Basic Income and reformed workers law in necessary to bring about a change in wealth inequality. Apart from this land reforms also will be a great step to abolish the zamindari system that promotes wealth inequality. 

There are many other measures undertaken by the government to tackle this inequality and they are;

Poverty alleviation, 

Redesigning of the pricing policies,

 Encouraging small scale industries and

 Expansion of the public sector.

Wealth inequality is deterrent to the actual economic growth of the country. However, with adequate government policies, which bring transparency and confidence, can definitely reduce wealth inequality if not completely eliminated. 


By: Madhuchanda Saxena

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