What are the biggest causes of income inequality?

There are several big causes of income inequality. These include

• Technological progress. Technology can commonly worsen income inequality by creating products that only the wealthy can afford and benefit from. In the case of automation, many of the poorest people may have their jobs replaced by AI, leaving them in an even worse state than before.

• Globalization. When work is offshored to countries with a lower standard of living, this benefits only the wealthiest people and harms both the original workers who were paid more and the new workers who are not paid fairly for their work.

• Commodity price cycles. Commodities tend to undergo natural cycles over time, and when these commodities are in more pronounced booms and slumps, this can affect income inequality.

• Domestic economic policies. The way governments choose to run the economy can have a profound effect on income inequality. For example, the US removed the Glass-Steagall Act in 1999, which allowed banks to make more unstable investments and ultimately contributed to the 2008 crash and subsequent recession.

• Economic instability. World events like the COVID-19 Pandemic can cause massive economic instability, which leads to income inequality. For instance, the richest people in the US grew richer at a much higher rate during the Pandemic.

• Debt and inflation. During the COVID-19 Pandemic, the US printed unprecedented amounts of money. This and many other factors have contributed to increased rates of debt and inflation, which in turn increases income inequality.

• Education disparity. When wealthy citizens receive a good education, and this is financially out of reach for poorer citizens, it perpetuates the cycle of income inequality. The wealthy are trained for high-paying jobs that require education, while the poor are stuck with low-paying jobs.