Jargon Watch: Income Inequality

Income inequality – As cited by Paul Donovan of UBS global economics team in the podcast episode Unequal Economics.There has been a well-observed difference in disposable income between the rich and poor, however UBS also found that the inflation rate for those less well off in society has been higher than other members of society.

Like thermoclines in cold water stratifying out into different layers so different inflation rates have affected income groups.

For the past ten years, the worst off in society have undergone a recession whilst the well off have done well. Donovan claimed that this had a number of knock-on effects:

  • Companies whose product offering is aimed at the lower-end of the market will be adversely affected by higher inflation rates
  • The pension returns required by different levels of society are very different due to the different cost of living profiles
  • Income inequality is likely to bring more progressive taxes, political resistance to globalisation and a subsequent disruption of the economic cycle