Inequality is a critical social issue in most societies. It is associated with various social and health problems today. Income inequality is the common form of inequality, which describes how income is unevenly distributed in a given society. Income inequality has risen since the seventies. In the past few decades, income inequality has increased in almost all nations, but its speed is dependent on economic policy and institutions. Income inequality is caused by different factors, including technological progress, racial segregation, government policies, and, most importantly, trade globalization. Trade has facilitated growth in most countries by enhancing efficiency and competitiveness. However, increased trade between countries, as well as increased financial flows, partly facilitated by advancements in technology, are often driving income inequality. Offshoring and the ability of companies to use labor-saving technologies in advanced countries have been associated with increasing skill premiums and a decline in manufacturing. Increasing skill premium is linked to the widening income inequality in advanced countries.
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