Inequality has a wide range of negative social effects, with a larger proportion of the population placed in relative property while the rich gain more wealth and influence. Unequal societies are "less functional, less cohesive and less economically sound," with wide income gaps dividing communities and preventing effective cooperation and progress. Due to unequal provision of education and the inequality of opportunity, a large part of the population are unable to develop their skills and talents, and are prevented from making their optimal contribution to the economy.
Equality and Growth.
High income inequality can be a barrier to growth and development. Greater equality, which may be achieved through income redistribution, would increase the incomes of the poor and ensure equal access to education and healthcare. .
As a result, there would be an improvement in productivity and an increase in equality of opportunity, with human resources being used more efficiently. This can have a beneficial effect on growth, for various reasons: The poor can increase their levels of savings. If they are able to save a larger proportion of their income, investment will rise, contributing to growth. Greater equality will ensure that there is pro-poor growth. In a situation of high income inequality, the rich will commonly dominate politics and the economy. As a result, in an unequal society, policies will be in the favour of the rich, without benefitting society at large. For example, in the U.S. (where income inequality has been increasing significantly since the late 20th century), the gains of the recovery from the 2009 recession went primarily to the rich, with the top 1% gaining 93% of the additional income created in 2010. .
A more equal society prevents capital flight, which occurs when the rich move large amounts of funds out of the economy.
Greater equality increases levels of consumption.