The Realities of Income Inequality

Data obtained from Brazil: Five Centuries of Change, p. 189.

This graph is a little bit difficult to unpack, but once understood provides a stark viewpoint upon Brazil’s income inequality. Firstly, all ratios are scaled to the lowest 20 percent of the population in 1960, which is used as our reference point, or 1. Income equality, meaning that 1 percent of the population takes home 1 percent of its income, is denoted on this graph by a ratio of 5.7. Therefore, a ratio below 5.7 means that the sector of the population is taking home less than its equal share of the income, and a score above 5.7 means that the corresponding sector of the population is taking home more than its equal share of the income based complete distributional equality.

Looking at the trends in this graph, the main one is that the gap between the richest and poorest Brazilians has drastically increased since 1960. While the lowest 20 percent has taken home less and less of the total national income, the top 20 percent has steadily increased its share. Separating this top 20 percent into the top 10 percent and the top 5 percent only magnifies the difference. In 1990 the average household in the top 5 percent of Brazilian wage earners took home more than 60 times the amount of the average household in the bottom 20 percent. This is a substantial increase from 1960, when the difference was still large but only 31-to-1.

Hungry Population

Data from Brazil: Five Centuries of Change, p. 189.

Toward the end of the twentieth century there was an even greater gap forming between the rich and the poor. The economic boom of the 1970s increased the level of income inequality, but as always, it varied greatly from region to region. This graph depicts the changing number of those deemed ‘hungry’ (people whose income was inadequate to allow for them to buy sufficient food). In 1990 in Brazil, there were over 31 million people determined hungry, and a majority of them were from the Northeast.

• From what you know about the different regions of Brazil, explain why the income inequality might be so related to regional characteristics.