By Carol Alvarez, tax strategist, author and mom

"Inequality is not just about a gap in income; it's about a gap in opportunity, and most importantly, a gap in hope."

Joseph Stiglitz (Nobel Laureate in Economics)

When we talk about economic inequality, the focus is solely on the numbers—the income gap, the wealth gap, or the disparities in access to resources. But what gets overlooked is the emotional toll that these disparities impose on individuals. Economics is not just a dry set of metrics or abstract policies; it's about real people who feel the weight of financial stress, frustration, and powerlessness.

My tax advisory clients, despite being middle class and well educated, often express a sense of anxiety about their financial future, the weight of student loans and their tax burden —leading to feelings of being “trapped or stagnant”

Psychological Impact: Economic inequality doesn’t just create financial hardship; it also has a profound effect on people's mental well-being. When individuals feel they are not able to meet basic needs or achieve upward mobility, it erodes their dignity, hope, and sense of security. People don’t only feel financially strained because they lack resources—they can feel demoralized, less valuable, and disconnected from the societal norms of success. This sense of alienation is crucial because it often triggers frustration and resentment, which can manifest in social unrest or demands for systemic change. When people are wounded by economic inequality, they are more likely to seek ways to challenge or change the economic system that they feel is oppressing them.

Perception of Fairness: The way people perceive the economic system is just as important as the material reality of inequality. Even if people are living in the middle class may feel that the system is unfair—whether due to unequal opportunities, corruption, or perceived favoritism toward the wealthy. Perception shapes how individuals interpret their own place within the broader economic system. For example, if someone perceives that the wealthy have access to better opportunities due to systemic advantages, while others are left behind despite hard work, this perceived injustice can fuel feelings of frustration and alienation. This perception doesn’t just stem from personal hardship—it’s about how individuals interpret social mobility, trust in institutions, and community well-being.

Together, these two factors—the psychological and the perceptual—are often the driving forces behind broader social movements and calls for systemic change. Revolutions or major societal shifts rarely stem from just material deprivation. They often arise when people feel disrespected, powerless, or alienated from a system they perceive as unjust. Understanding these psychological and perceptual factors helps us better understand why economic inequality can be more than just an economic issue—it becomes a deep source of social tension and potential upheaval.

Earnings vs retention: Lastly, most discussions around economic inequality focus on income disparities—how much people earn compared to others. But we need to acknowledge not just income but retention. It’s not just about how much people earn, but about how much of that money they can actually keep after the financial system takes its cut.

Thus, to truly understand economic inequality, we must consider both the numbers and the human experience of those numbers.

When the working classes realize that their economic mobility is constrained by the gap between what they make and what they keep, a sense of injustice intensifies.

I developed the "keep gap", a novel multi-dimensional metric that incorporates fiscal, emotional, and perceptual dimensions to capture the fully lived experience of economic inequality

This metric measures 3 key aspects of economic inequality:

Fiscal Dimension: measures how much of a person's income is effectively consumed by taxes, essential living costs, and other financial obligations, leaving little room for savings or wealth accumulation. It highlights the financial constraints that many individuals face, showing how much of their income is "lost" to necessary expenses and what they are able to keep. This shift in perspective recognizes that the economic system is not just about earning more, but about the opportunity to keep more of what’s earned for potential wealth building.

Emotional Dimension: This captures the emotional toll of financial struggle, such as stress, frustration, and feelings of being economically "stuck." This dimension acknowledges the mental burden that comes with living paycheck to paycheck or facing systemic economic barriers.