No one cares that Corrado Gini was a fascist Mussolini supporter with ideas on the superiority of the Italian population. This statistician and sociologist invented an income distribution index that has lasted for more than 100 years. The Gini coefficient is used by the World Bank, the Central Intelligence Agency, the United Nations and others to keep tabs on patterns of income, wealth and consumption throughout the world.
It was 1912 when Corrado originally offered a new way to measure the distribution of income or wealth across a population. Although the Palma index compares the top 10 percent against the bottom 40 percent, the Gini, with its 0.0 to 1.0 scale, measures the distribution of income or wealth across states, regions and entire nations.
If all the wealth (or income) was equally distributed among all residents, the Gini score would be 0.0 implying a perfectly equal spread of wealth (or income). A score of 1 would represent a completely unequal distribution where one person owned all the wealth or income. Some scales start with 0 and go to 100. The United States’ Gini coefficient is over 80 for wealth and around 43 for income — both at the highest levels among developed nations.
Individual states with the lowest (1-100) Gini income distribution inequality scores are Utah (42), Alaska (42), Wyoming (42) and New Hampshire (43). Those with the highest scores include Massachusetts (48), Connecticut (49), New York (50) and Washington D.C. (53). Colorado comes in around 46.
The United States’ share of global personal wealth is over 41 percent — more than China, Japan, the United Kingdom, Germany, France and Mexico combined — and yet we worry. We might have suspicions that absolute wealth may be less important than the relative spread of those dollars, renminbi, yuan, yen, pounds, euros or pesos throughout a population.
History hints that high Gini ratios lead to unrest and revolution. Innovation and creativity alone don’t seem to be enough to impact Gini scores. Our communities need something more. Startups and ongoing operations can play a role in making income and wealth distribution match what we need for a bright future.
A startup’s purpose can directly include success milestones that benefit each person from top to bottom. This is easier at the outset since you’re not yet staring at piles of money on the ping-pong table. If a fair Gini distribution is baked into the startup cake, it’ll be easier to build a sustainable income or wealth range.
An ongoing smaller business has proven either its viability or its persistence — hopefully both. After all that work, owners naturally want to reward themselves and those who doggedly held on to the mission and purpose. It’s not human nature to reflexively want to squeeze eventual rewards into a low Gini distribution — most will want to score big and cash in. That is how you get on the cover of a magazine. Perhaps more context and history about this index can help us make better decisions.
An established larger business can have a direct impact on poverty, education and the health of a community. When this type of enterprise gets past the “just want to give back” cliche, we’ll see real progress in the broader society. Although not popular, a small amount from the top goes a long way at the bottom.
We must think more broadly and consider employees, investors, vendors, customers, neighbors, students, first responders, etc. A “share-the-wealth” mentality doesn’t have to bring the top down but can find ways to lift the bottom up — both will affect the Gini score.
Back in the 1940s, a dictator-style Italian government didn’t work out so well for Il Duce. So for today, if it’s true that 1 percent of Americans control more wealth than the bottom 90 percent, we may want to look more closely at history and allow Mr. Gini to finally rest in peace.
Rick Griggs is a former Intel Corp. training manager and inventor of the rolestorming creativity tool. He speaks on balance, teams and the confidence of Napoleon. Reach him at 970-690-7327.