This article explains how inequality is measured. It is not investment advice and takes no position on what, if anything, should be done about it.

Two different gaps: income vs. wealth

Before any measure makes sense, it helps to separate two things that are easily confused. Income is a flow — the wages, dividends, rent and government benefits a household receives over a period, usually a year. Wealth, or net worth, is a stock — the total value of everything a household owns (home, savings, retirement accounts, stocks) minus its debts.

The distinction matters because the two gaps are very different in size. Income is unequal; wealth is far more so. Wealth concentrates over time because assets compound and pass between generations, while income is earned and largely spent each year. That is why a discussion of "inequality" can sound very different depending on which one is being measured.

The Gini coefficient: one number for the whole distribution

The most widely cited single-number summary is the Gini coefficient, named after the Italian statistician Corrado Gini. It runs from 0, meaning every household has an identical share (perfect equality), to 1, meaning one household holds everything (total concentration). No real economy reaches either extreme.

The coefficient is built from the Lorenz curve, a graph plotting the cumulative share of income or wealth held by the poorest X% of households. Under perfect equality the curve is a straight 45-degree line; in reality it sags below. The Gini is, in effect, a measure of how far the actual curve bows away from that line — the bigger the bow, the higher the Gini and the greater the inequality.

According to Pew Research Center, the U.S. income Gini was about 0.434 in 2017, the highest among the G-7 advanced economies. Estimates of the U.S. wealth Gini run much higher — generally above 0.8 — reflecting how much more concentrated assets are than annual income.

Top shares: who holds what

Because the Gini compresses an entire distribution into one figure, economists usually pair it with top-share statistics — the slice of total wealth or income held by the top 1%, the top 10%, or the bottom 50%. These are often more intuitive.

The Congressional Budget Office, in an analysis of U.S. family wealth from 1989 to 2022, found that the top 10% of families held about 60% of all family wealth in 2022, and the top 1% held roughly 27%, up from 23% in 1989. The bottom half of families held only about 6% — little changed across more than three decades.

On the income side, the World Inequality Database estimates the richest 1% of Americans take in around a fifth of national income, placing the U.S. among the most unequal of the wealthy democracies on that measure.

The wealth-to-income gap

Another useful lens is the ratio of wealth to income — how many years of earnings it would take to match what the wealthiest already hold. It helps explain why "anyone can get ahead" narratives can mislead: even a high earner starting from zero faces a long climb to match a family whose assets were built and compounded over generations.

What the measures miss

No single metric is complete, and each has well-known limits:

  • Location blindness. A Gini driven by an enormous gap between the very richest and everyone else can look identical to one driven by a gulf between the middle and the bottom. The same score can describe very different societies.
  • Insensitivity at the top. Because billionaire fortunes sit so far outside the rest of the distribution, even large swings in the wealth of the ultra-rich move the Gini only modestly. Top-share statistics capture those swings better.
  • Data gaps. Household surveys such as the Federal Reserve's Survey of Consumer Finances rely on voluntary disclosure, and the very wealthy are under-represented; assets in trusts or offshore structures are hard to capture. Studies that use tax records, like those from the World Inequality Lab, tend to show even higher concentration.
  • Wealth vs. living standards. Net worth is an imperfect proxy for how people actually live: a farmer rich in land but short on cash looks "wealthy" on paper. Consumption-based measures sometimes paint a more equal picture, though critics say they understate the security and power that come with owning assets.
  • Before or after taxes. Pre-tax inequality looks worse than post-tax inequality. The CBO has found that federal taxes and transfers meaningfully reduce measured income inequality — though the United States still ranks high among peer economies after that adjustment.

Why the choice of measure matters

Policymakers and commentators often talk past one another because they are quoting different statistics. A post-tax income Gini, a top-1% wealth share from the SCF, and a consumption-based measure can all be accurate at the same time — and tell very different stories. The practical takeaway for anyone reading a headline number on inequality: check the fine print on what is being counted, over what period, and before or after taxes. The measure shapes the message.