3.4.6—Impacts of inequality

Inequality can affect health, education, social cohesion, productivity, political power and stability; effects depend on degree and context.

Low-income households face constrained choices, while extreme concentration can reduce opportunity and demand.

Identify the channel and affected group before evaluating impact.

High housing inequality can lengthen commutes and reduce access to education.

Inequality is not automatically harmful in every degree or dimension.

Inequality can weaken growth when poor households cannot finance education, health or enterprise and when social instability deters investment; alternatively, some reward differences may support effort, saving and innovation. It lowers living standards for groups excluded from income and wealth gains even if the national mean rises, and extreme concentration can reduce trust, mobility and political cohesion. Evaluate degree, opportunity, institutions and whether the distribution changes absolute living standards—not inequality in isolation.