Measuring inequality: A single number is never enough

Everyone talks about inequality. But to debate it, you first need to know how it is measured.

There are several tools. Each lights up part of the picture, and leaves another part in the shade.

The best known is called the Gini coefficient. It goes from zero to one.

Zero: everyone has exactly the same. One: a single person has everything, the others nothing.

In France, for income after taxes and benefits, it is around zero point three. Neither zero nor one: in between.

Handy for comparing countries. But a single number does not say where the gaps are: at the bottom, in the middle, or right at the top.

Second tool: deciles. You line up the whole population, from the poorest to the richest, and cut it into ten equal slices.

Then you compare the slices. How much do the top ten per cent earn, compared with the bottom ten per cent?

You can zoom in further. The top one per cent, and even the top zero point one. That is often where it all plays out.

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Third tool: the median. To understand it, put ten people in a room.

Nine earn two thousand euros a month. The tenth, twenty thousand.

The room's average income: three thousand eight hundred euros. Yet nine people out of ten earn far less.

The median is the person in the middle. Here, two thousand euros. It says what an ordinary person really lives on.

The average is pulled up by the top. When a billionaire walks into the room, the average explodes. The median does not move.

Remember this reflex: when you are given an average income, ask for the median.

Fourth point, the most important: income and wealth are two different inequalities.

Income is what comes in each month. Wealth is what you own: home, savings, investments.

Wealth gaps are far bigger. In France, the wealthiest ten per cent hold nearly half of it.

Why? Wealth builds up over a lifetime, is passed on, and earns more. Income starts again from zero each month.

Two neighbours can earn the same salary, and live in two worlds. One inherits a flat, the other pays rent.

The twist: a country can have fairly equal incomes, and very concentrated wealth. The two numbers do not tell the same story.

Gini, deciles, median, wealth. No tool tells the truth on its own.

Be wary of anyone who only quotes one. They often chose the one that suits them.

To judge an inequality, ask three questions: income or wealth? Average or median? And where is the gap?