Income inequality refers to the disparity in income levels among different households, highlighting a significant economic issue both in the United States and globally. This phenomenon is characterized by a situation where the wealthiest individuals accumulate more wealth, while those at the lower end of the income spectrum experience stagnation or decline in their financial status. For instance, data from the U.S. Census Bureau indicates that approximately 25% of households earn less than $25,000 annually, while around 20% earn over $100,000. This stark contrast illustrates the unequal distribution of income within the country.

Globally, income inequality can be assessed by comparing the income of the highest earners to that of the lowest earners within a nation. For example, Bolivia has been identified as having one of the highest levels of income inequality, with a ratio of 21.9% between the top 20% and the bottom 20% of earners. In contrast, countries like Japan and Sweden exhibit comparatively lower levels of income inequality, indicating a more equitable distribution of wealth.

Understanding income inequality is crucial as it relates to broader economic concepts such as economic growth, social mobility, and overall societal well-being. The implications of income inequality extend beyond mere statistics, influencing policy decisions and economic strategies aimed at fostering a more balanced economic environment.