• Inequality
• Gender poverty reduction strategies

Inequality

Does GDP per capita (or the average wealth per person in a country) reflect the amount of wealth that the vast majority of the individuals have? This briefing argues that this is not the case, as averages conceal the distribution of wealth in a society. It proposes an absolute measure of income and inequality, called the Vast Majority Income (VMI). The VMI reflects the total wealth held by the vast majority (the first 80 per cent) of the population – rather than all of the population (as GDP per capita reflects).

Authors examine how countries rank differently in terms of development, if the VMI were used rather than GDP per capita. Findings indicate that:

• average income measures do not reflect the incomes of the vast majority. A ranking of nations by the VMI, as opposed to GDP-per-capita, give rise to substantial differences in ranking. For instance, Norway is lower than that of the US in terms of average income, yet its VMI is higher – indicating that the US is more unequal. An even greater contrast is identified between Mexico and Venezuela, and Chile provides a striking example of the negative effects of inequality
• incomes of the rich (top 20 per cent) are more equal across nations than the incomes of the vast majority (remaining 80 per cent)
  

Two broad policy conclusions include:

• it is important to conduct international comparisons in terms of VMI or some similar measure that combines both the level of income and degree of inequality
• both rising growth and inequality reduction contribute equally to improving the standard of living of the vast majority
  

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