Inequality is commonly referred to in terms of individuals and groups. This essay will go over both of these classifications and the advantages and disadvantages of each definition. By considering the benefits and drawbacks of each description, it is possible to determine which one better represents the world’s injustices. Definitions of vertical inequality are critical for conveying the impact of the trickle-down effect. This refers to the way money is distributed in society. Vertical definitions of inequality aid in communicating the effects of a monopolized market on individual discrepancies. Therefore, vertical definitions reward effort, incentivize society to work hard and reduce economic inequalities. Nevertheless, vertical definitions alone will not reflect all inequalities at play. On the other hand, the ideology of the “American Dream” reveals a fault in working hard and opens the discussion for horizontal definitions of inequality. Horizontal definitions also allow us to interpret social concerns and social friction differently, such as an increase in crime.
This emphasises the significance of examining each definition of inequality in related domains to show how difficult it is to choose the best.
Inequality is the unequal and unfair distribution of resources and opportunities (Yee Koh, 2020). This notion comprises two categories: individual inequality and horizontal inequality. Individual inequality is unfair, but it is not always unjust (Jayaraj et al., 2006). Individual inequality comprises two types of economic inequalities: inequality in outcomes and inequality in opportunities. Both are directly tied to income. Inequality of outcomes is established when individuals do not obtain the same quantity of material means. This is reflected in the distribution of money, the disparity in earnings, or various health care demands for individuals with diverse needs. The concept of unequal access to resources in a person’s social environment is another aspect of inequality of opportunity (McKay, 2002). As a result, they may be unable to further their education, earn a living, or perhaps have a shorter life expectancy (Roser, 2019). Horizontal inequality, also known as group or social inequality, is the inequality produced between groups of individuals. For example, gender, race, ethnicity, religion, and sexuality are all instances of horizontal inequalities (McKay, 2002). Horizontal Inequalities are crucial due to their ramifications for justice and societal stability (Stewart et al., 2009).
The trickle-down effect is an important aspect with respect to the vertical definition of inequality. The trickle-down idea entails tax cuts for corporations and businesses along with fewer restrictions (Kenton, 2021). This increases the money available for private sectors, which supports the increase in company investments, the development of factories, upgraded technology, upgraded/more equipment, and eventually the ensuing increase in job prospects. This improves productivity and encourages economic growth (Kenton, 2021). In turn, the new employees’ increased disposable income will be spent on retail purchases, investments, and other economic activities. In turn, this will drive up demand for products and services across the economy while creating even more new jobs. In principle, this is a positive feedback loop in which the trickle-down effect diminishes income inequalities. Despite this, the theory of the trickle-down effect fails to hold up in practice. The International Monetary Fund (Dabla-Norris et al., 2015) proved that the income benefits do not flow down. Instead, the firm owners hoard the wealth in order to accumulate more.
Additionally, the American Economic Journal argued that the people who were earning more exploited this tax cut and used it as a strategy to enhance their pay. This meant that the money was not trickling down to the lower-income earners (Piketty et al., 2014). The gains that should be trickling down keep accumulating at the top (Kenton, 2021), worsening the economic gap between persons of different incomes. Therefore, income inequalities rise and result in an increase in individual inequalities. This demonstrates the value of measuring inequality via the trickle-down effect.
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