Wealth Inequality Essay

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In all human societies beyond a certain minimum size, material possessions (such as land, animals, houses, tools, and consumption goods) are distributed unequally among individuals and groups. Insofar as these possessions have a monetary or exchange value, this unequal distribution can be described as inequality of wealth. Besides, and related to, income inequality, wealth inequality is an aspect of economic inequality which in turn is a dimension of social inequality in the wide sense. Wealth can be defined as the monetary value of the sum total of assets or goods belonging to a certain unit. This unit may vary from a national society (national wealth) to an individual person (individual wealth). Personal wealth is the wealth owned by an individual person or a consumption unit consisting of more than one person (a household or family). Wealth inequality is usually understood as the unequal distribution of personal wealth in a society.

Wealth gives the owner certain advantages; in other words, it has functions for the owner. These functions vary with the relative amount of wealth, its composition (the specific goods that make up the wealth), and its institutional context (including laws of property). In general terms, three economic or material functions can be distinguished: wealth is a source of: (1) income (profits, interest, rent, dividend as well as capital gains), (2) material comfort and consumption (the ownership of a house and various durable consumption goods), and (3) material security. This latter function is particularly important when collective arrangements that guarantee some minimum income (pension rights, life insurances, social insurance, welfare payments) are lacking. Personal wealth can also have wider functions for its owners: it is a basis of (4) relative freedom and autonomy, (5) status, and (6) power. It contributes to individual freedom to the extent that it widens the scope of alternatives in consumption and leisure, and gives the possibility to postpone work, or not to work at all. Finally, personal wealth is (7) an important vehicle for keeping privileges within the family as it is transferred to   the   next   generation   through inheritance.

On all these accounts, wealth inequality is at the basis of, and connected to, various dimensions of social inequality. Several empirical studies have attempted to assess the degree of wealth inequality in a given society and trends over time on the basis of tax data.

Several conclusions can be drawn from these studies.

  1. The degree of inequality in the distribution of personal wealth is much higher than that of income. The shares of the top 1 percent or 5 percent in total personal wealth are normally more than twice the shares of the top 1 percent or 5 percent in total disposable income.
  2. During the first three-quarters of the twentieth century, wealth inequality in western countries tended to diminish, though this tendency was much less clear and outspoken for the USA than for the UK and Sweden. The same trend has been observed for several other western countries as well, such as France, Belgium, (West) Germany, Canada, and the Netherlands.
  3. Since the last 15 to 25 years of the twentieth century, this trend stopped or even reversed: wealth inequality increased in many western societies.


  • Lindert, P. H. (2000) Three centuries of inequality in Britain and America. In: Atkinson, A. B. & Bourguignon, F. (eds.), Handbook of Income Distribution, vol. 1. Elsevier, Amsterdam.

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