income versus wealth inequality

Two questions sound the same but are not: 'How unequal are people's earnings?' and 'How unequal is what people own?' Income is a flow — money that arrives over time, like a salary, interest, or a pension, usually measured per year. Wealth is a stock — the pile you have accumulated at a moment in time: savings, a house, shares, a business, minus any debts. Income is the stream into the bathtub; wealth is the water already in it.

Keeping the two apart matters because they can tell very different stories. A young doctor may have a high income but near-zero or even negative wealth (think student loans), while a retired farmer may have a low income but own valuable land outright. Crucially, wealth is almost always far more unequally distributed than income in modern economies. A common pattern is that the top 10 percent might earn, say, a third of all income but own well over half — sometimes two-thirds or more — of all wealth. Wealth concentrates because it compounds: those who already own assets earn returns on them, can save more, and pass them on, so gaps widen across generations.

The distinction shapes almost every debate about fairness and policy. Some taxes hit income (income tax, payroll tax); others target wealth (property, inheritance, or capital-gains taxes), and they have very different effects. Mistaking one for the other leads to muddled conclusions — for instance, statistics about 'the rich' mean different people depending on whether you rank by income or by wealth. An honest caveat: wealth is far harder to measure than income (assets are hidden, valued unevenly, and held offshore), so wealth-inequality figures are rougher and more contested.