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7 Countries With Worse Income Inequality Than the United States

By Brian Stoffel - Jul 17, 2017 at 6:00AM

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It's not a problem unique to us, and it doesn't always mean gloom and doom, either.

Rich man and poor people at opposite ends of scale

Image source: Getty Images.

Since the Great Recession, the lopsided distribution of wealth in the United States has been a major concern for everyday Americans, whose wages are stagnating as the rich claim an ever-larger piece of the pie. In fact, the richest of the rich -- the so-called "one-percenters" who gained such notoriety during the "Occupy Wall Street" protests -- now receive about 20% of all pre-tax income in the U.S. There's a common narrative that Donald Trump won the presidential election largely because he promised to level the playing field for the working class.

A reader of today's headlines could be forgiven for thinking that America has the worst income inequality in the world. But the reality is far different.

According to the CIA's World Factbook, the United States comes in 43rd place as measured by something called the Gini coefficient. Fellow Fool Anna Wroblewska wrote a great piece on the metric back in 2014. Here's a key takeaway:

It measures the distribution of income in a population on a scale of 0 to [100] -- 0 being perfectly equal distribution and [100] being perfectly unequal distribution.

For example, if you had a population of 10 people and each person got $5 in income, your Gini coefficient would be 0. On the other hand, if you had a population of 10 people and one person got $50, the Gini coefficient would be 1.

Officially, the Gini coefficient of the United States is 45.0. To give you a better understanding of how so many countries could have worse inequality than the United States -- and what it means for us -- check out the seven exemplars below.

1. Saudi Arabia -- Gini of 45.9

Kingdom Tower in Riyadh

Kingdom Tower in Riyadh. Image source: Getty Images.

This Middle Eastern kingdom is home to some of the largest oil reserves in the world. That supply of black gold has made the Saudi royal family the richest in the world, valued at $1.4 trillion by some estimates.

At the same time, though, poverty in Saudi Arabia is growing, especially among the country's youth. While official estimates aren't made available by the government, outside agencies estimate that roughly 20% of native-born Saudis live in poverty.

As demand for oil declines and developed countries transition to renewable energy, Saudi Arabia's Gini coefficient may come down -- though it will owe to a loss of wealth among the richest Saudis, rather than rising wages for impoverished workers.

2. Mexico -- 48.2

Colorful houses in Mexico

Guanajuato, Mexico. Image source: Getty Images.

Our neighbors to the south have their own inequality problems to worry about. While most Americans hear about the drug wars that take place along the border, that alone doesn't explain the extreme wealth gap in Mexico. A 2015 report by Oxfam showed that 1% of Mexico's 127 million people controlled half of the wealth.

Ironically, however, Mexico has almost always ranked high in happiness as well. In fact, the World Happiness Report put Mexico at No. 25 worldwide -- ahead of developed economies like France, Spain, Italy, and Japan. Some of the reasons credited for Mexicans' unusually high happiness include its tight-knit communities, good weather, and a focus on religious faith.

3. Costa Rica -- 48.5

Sun settting over a beach.

A Pacific coast beach. Image source: Getty Images.

Results from Costa Rica are similar to Mexico's: They underscore how the Gini coefficient isn't necessarily a good predictor of happiness in any given country. While the country is considered an economic success story by many, the focus on exports and tourism has excluded many of the country's poorest from this boon.

At the same time, Costa Rica consistently ranks as one of the healthiest and happiest countries in the world. The World Happiness Report ranked Costa Rica two spots ahead of the United States, at 12th globally. And the New Economics Foundation's Happy Planet Index -- which factors environmental consumption into its formula -- has ranked the country as No. 1 in the world every time its biennial ranking has come out.

4. Brazil -- 49.7

Wealthy and poor neighborhoods of Rio de Janiero shown from above.

The stark contrast of Rio de Janiero's rich and poor. Image source: Getty Images.

If you watched the 2016 Summer Olympics or read about some of the controversy leading up to the games, this shouldn't surprise you too much. While Brazil has some of the most beautiful beaches and exciting cities in the world, it is also home to expansive slums.

While the gap between the rich and the poor has actually gone down, the World Economic Forum identified political corruption and -- not surprisingly -- onerous amounts of red tape stopping Brazilians from taking their economic futures into their own hands.

5. Hong Kong -- 53.7

Hong Kong's skyline

Hong Kong's skyline. Image source: Getty Images

One look at this city-state's impressive skyline should convince you that there's no shortage of riches in Hong Kong. As is often the case, however, such opportunity draws people of all stripes to its shores, and that means a growing population of poor people.

According to a 2016 Oxfam report, 18.7% of households in Hong Kong live below the poverty level. The problem is even worse among the elderly, where one in three now live in poverty. The report calls on the government to take a two-pronged approach of both reviewing the minimum-wage laws in the face of rapid inflation and improving public assistance for the elderly.

6. South Africa -- 62.5

The entrance to Robben Island's jail

The prison on Robben Island where Nelson Mandela was imprisoned. Image source: Getty Images.

While apartheid officially came to an end back in 1991, the ghosts of the policy still resonate in South Africa. Wealthier white South Africans still own an enormous swath of the country's land and money, while its native population is struggling to adjust to a 21st-century global economy.

A 2016 research paper put the situation very succinctly: "10 percent of the population owns more than 90 percent of all the wealth, while 80 percent have no wealth to speak of; a propertied middle class does not exist." That helps explain why South Africa has the second-highest Gini coefficient in the world.

7. Lesotho -- 63.2

A rural Lesotho hut.

A rural Lesotho hut. Image source: Getty Images

This tiny mountain country is completely surrounded by South Africa, so it shouldn't be too surprising that it has the highest level of inequality in the world (the number might be outdated, though, as the CIA's latest reading came from 1995). At the same time, however, apartheid alone doesn't explain this dubious distinction.

The World Bank estimates that Lesotho has a population of 2.1 million people. It is estimated that just 28% of that population lives in urban areas, meaning that the vast majority are rural poor, which helps explain the high levels of inequality.

As you can see, the problems of inequality are hardly unique to America. And even then, rampant inequality does not always mean an unhappy populace.

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