WHAT ARE THE ECONOMIC IMPLICATIONS OF INCOME INEQUALITY ON SOCIAL MOBILITY AND ECONOMIC STABILITY?"

Abstract

“Income inequality has recently come to be viewed as one of the greatest challenges facing the world today. In recent years, the topic has dominated the agenda of the World Economic Forum (WEF), where the world’s top political and business leaders attend.” (Polacko et al, 2021)

Income inequality has become a pressing concern in recent years, and for good reason. It's not just about some people having more money than others - it's about how this gap between the rich and poor affects our society and economy as a whole. This paper explores how income inequality impacts two crucial aspects of our economic life: social mobility (the ability to move up the economic ladder) and economic stability (how steady and reliable our economy is).

When we talk about income inequality, we're looking at how unevenly money is spread out among people in a society. Imagine a pie being cut into slices of very different sizes - that's kind of what income inequality looks like. Some people get big slices, while others get crumbs.

This uneven split of money isn't just a problem for those with smaller "slices." It can cause ripple effects throughout the entire economy, making it harder for people to improve their financial situation and potentially making our whole economic system more shaky.

“Income inequality compares the position of one household to another household at the same point in time. In contrast, income mobility compares the position of one household to itself at different points in time. Paying attention to mobility, as well as inequality, gives us a richer picture of the income possibilities for households over time” (Daniel R. Carroll et al, 2024)