Besides the undeniable personal impacts, income and wealth inequalities can affect factors such as:
- Economic growth.
- Standards of living.
- Social stability.
Impact on economic growth
Researches have found that high income and wealth inequality typically lead to slower economic growth. Reasons for this can include:
- Lower income households are not able to invest in human and physical capital, which reduces the long-term growth of the country as the production possibilities shrink due to less-skilled, less-productive people.
- Additionally, high income inequality often leads to a high concentration of political power on a few hands. This political influence may result in policymakers taking decisions that do not prioritise economic growth, but rather personal interests.
Impact on living standards
High income and wealth inequalities, usually correlate with low living standards. This is because:
- Low income households may struggle to get access to healthcare, quality education, housing, leading to lower well-being levels. This can be reflected by looking at the negative correlation between income and:
- Child mortality.
- Low skilled workers.
- Homelessness.
- Additionally, income and wealth inequalities often prevent people from realising their full potential, preventing them from developing their talents, skills, abilities, and passions.
Impact on social stability
- High income and wealth inequalities, create different groups of people based on their income, stemming from their different interests in matters such as tax laws.
- In cases of extremely low incomes, the social unrest and precarious situation of many may cause crime rates to go up. This, in turn, would cause living standards to decrease further.
