There are many researches made on the relationship between the income inequalityand the growth by economics. Inequality can be considered from many perspectives:economic, social and political perspective. In resolving this problem distinguish economicsused empirical and theoretical overview as well. Lack of regulations and insufficient fundsare just some of the reasons that do affect almost all. Many economic authors clams that it isdifficult to analyze the impact of income inequality on grow when other factors that doinfluence that are not taken under consideration. The purpose of this research is to examinethe impact of income inequality on the economic grow and if it can be reduced. Thetheoretical structure of this research analyzes such concepts as economic growth, incomeinequality and the relationship between these two.Key words: inequality, economic growth, income, finance, innovation, instability, financialcrisis, economic recovery, labor force, unemployment, gender wage gap, budget42 LIST OF FIGURESFigure 1. Figure 1. GINI Index……………………………………9Figure 2 Figure 2. UK GDP increase in 2010-2015…………….1053 1 STATEMENT OF THE PROBLEMOn global level, especially after the World War II, income inequality is most frequentglobal debate topic. Negative long term influence on the economic growth is caused byincreasing income inequality. Therefore, causes and cure channels in resolving this arecritical for the financial stability and development.3.1 PURPOSE OF THE RESEARCHTo find out and explore how unequal income impact the economic growth and to examine thefactors that can lead to the increase the economic growth, considering social values as well.Literature gap:? Researches made and available literature do not provide the clear answer about howsignificant channels affect income inequality (there are many issues that are hard to bemeasured) and this is still far from resolved issue in the U.S., Europe and evencountries in transition.? Researchers do not find solution to remove the inequity and seek total incomeequality instead it is increasing by time.? Poverty is mostly increasing and the situation is getting worse instead of getting betterand many authors mention government corruption as a main reason3.2 RESEARCH QUESTIONS? What is economic inequality and what are the causes of it?? Can society do something in order to significantly decrease income inequality?? To what extend are insufficient revenue and income affected by equal opportunities,free educational system and skilled labor force itself?? Does different individual income cause unequal representation in society to whichindividual belongs to?? Can the balance be obtained by higher taxation system and what are the key factors inobtaining it?63.3 RESEARCH APPROACHThe study can be categorized as having a deductive approach; secondary sources of books,peer-reviewed articles, journals and websites were used.3.4 STRUCTURE OF THE RESEARCHThis research is literature research and it answers research questions based on theory andempirical researches made.4 LITERATURE FINDINGS: CRITICAL OVERVIEW74.1 INTRODUCTIONInequality as a term is used a long ago and has it has roots in history. Individuals oftenrelates it to the diverse opportunities that they have. Furthermore, opportunities can beimportant concept and it does affect many areas, but causes of income inequality goes muchdeeper. Taking under consideration that on the global image there are more individuals whoare poor then rich it shows that inequality do affect most of the people. When it comes toU.S. since 1970 income inequality was growing up and many researches mention the genderwage gap as an important issue. It’s important to mention that difference between periodsrecalling the history, differences in countries and individual incomes help in examining thedeterminants of the inequality itself.The US gained stable level household income in 1950s-1960s, while from 1965- 1979UK reduced earnings depression. However, the US trend until the 1970s is explained byKuznets’ theory calming that US was one of the highest industrialized countries in the world.Nowadays, Kuznets’ theory is less relevant because there is focus more on service industrymore than on agriculture and manufacture.Economist Adam Smith in his book Wealth of Nations states that: ;A man educated atthe expense of much labor and time to any of those employments which require extraordinarydexterity and skill…;. This statement shows the importance in investing in education andhuman capacity because higher educated individual with efficient skills are more likely tohave higher income then ordinary ones. However, we have to consider that opportunity tostudy not every individual have and even if do, having same opportunity to not guarantee thateach of them will have same skills and would graduate indeed.Wage inequalities plays significant role in determining individual’s overall incomeand standard of living in general. On the other hand, wages are the easiest to measure, used inmany studies and there are many data-set on it.Poverty is mostly increasing and the situation is getting worse instead of getting betterand many authors mention government corruption as a main reason.Available data shows that there is high correlation between the government corruption andsocial exclusion which affects the income inequality. The interesting fact researches mentionis that social exclusion in more relevant predict of corruption than the GDP per capita.8However, when it comes to the gender wage gap, studies show that there are stilldifferences in their wages, stating that women and man do not work and do not operate in theequal labor market and there might be even difference in occupation.4.2 INCOME INEQUALITY METRICSThere are many theories who do explain the causes of the income inequality it is important toknow how to be measured as well. Concept of fairness or even the term poverty is differentfrom inequality.Well known economist such us T. Malthus, D. Richard and A. Smith manly focus onconsidering factors such as the capital labor and capital in resolving this issue. Moderneconomist when being compared with the above classical ones focus more on the individualhousehold’s income. In this research Gini index is mentioned as one of the measurement forinequality and this are some other:? 20:20 Ratio? Palma ratio? Hoover index? Coefficient of variation? Wage share? Theil index95 WAGE INEQUALITYThere is something common for all society and it is that none of themhave equally share and same distribution of wages. Wages distribution wasbest measured by Gini index.Goods are not equally shared, however the differences explained by Giniindex represents the range from 0 – 100. For better undurestanding theFigure 1, high level of unequally present 100 while perfect equalitypresents 0.Figure 1. GINI IndexAccording to the author Anthony B. Atkinston in his book ;Inequality; explainsthat inequality or Gini coefficient shows that India and China are close to 50 per cent,and above 40 per cent ,which is high, is in Brazil and Mexico, including other LatinoAmerican countries. Considering this, next comes US and then UK. When it comesto the comparison based on Gini coefficient Continental Europe have higher incomeinequality then Nordic countries. From 1962 there was an increasing the wealthfrom 11 % to 16 % in 1995, in the US. Higher wealth makes people more secure and10takes a part in political power as well. Furthermore, the US wealth is not equaldistributed among its citizens.5.1 MEASURING WAGEWhen it comes to measuring income inequality, its critical to mention thatwages have two dimensions and those are: dispersion and the extend to which iswage positively distributed. Gini coefficient do measure the dispersion andcompares shape.1 INCREASE IN REAL GDPIncrease in the real Gross Domestic Product shows the economic growth and GDP is used tomeasure National Income (Wages, Interests, Rent, Profit). Researchers showed thatincreasing economic growth is not guarantee that there will be increase in wages. It can occurthat GDP rise while average wage does not change or even decrease. This can be explaineddue to that profit takes large share of GDP.The other fact is that increasing real GDP cannot be seen when there is rise in population aswell. This means that if there is increase in population for 4% and same percentage in realGDP, there will be no change in GDP per capital nor in the real wages. However, a companycan gain higher profit but not necessarily share it for employee’s profit.The Figure 2 shows the increase in real GDP in the period 2010-2015 in UK which broughteconomic growth while average wages decreased.Figure 2. UK GDP increase in 2010-2015116 TOTAL INCOME EQUALITY AND ITSCONSEQUENCESCompering some undeveloped countries, some individuals even live under thepoverty line, and the higher inequality is related directly to higher % of individualsliving poor. Researchers clams based on survey made that some individuals are fortotal equality, meaning that everyone will earn the same amount while others areagain this saying that too equal distribution of earnings is not best solution.According to Lawrence and Skocpol who made survey on this topic, they stated thatAmericans easily accept the difference in wealth considering it as the result ofindividual choice and effort when compared with Europeans. On the other hand,Fligstein and Shin stated that individuals who are considered as poor will not just earless then others but are more likely to be working under unsafe working conditionsas well. A rapid increase in investment is not expected in accordance with thepersistently weak credit demand and the deleveraging of many banks. Even with theconsumer to keep the household back given the uncertain economic situation andthe tense situation on the labor market is still there. After two years of very lowgrowth Southeastern Europe has slipped into another recession. The recession hashit particularly hard the Western Balkans. High unemployment, especially betweenthe youth, is concerned.Economic differences started making the social status gap more and morewhich caused many debates on how poor individuals are less useful for the societyand community. Income inequality is not just different within the country and onesociety but mainly it exist across the globe, starting from the U.S., Europe andtransition countries as well.127 FINANTIAL INSTABILITY AND DICLINEPiketty doctrine states that taxes have to be on higher level in order to get bydeal with inequality. Not all researchers agree with this doctrine, explaining that thetaxes do transfer funds from private to public section and usually private sector is notwell known in sharing it. The country that do have high taxation and can be goodexample of almost equal income distribution but same time do not have positivelyeconomic growth is Finland. Although, that this county is consider as rich one, theprivate sector is not that strong. High taxation in this country do not bring much forthe economic grow, but on the other hand in brings free education and healthcarewhich is advantage for its citizens. This means that the opportunity to study andreach higher level of education is available for every citizen of that country as well ashealthcare without any cost in return.8 CONCLUSIONTaking under consideration last decades and the effects of globalization, it is important toemphasize that inequality is increasing in developed country but at the same time decrease inpoverty across the globe was noticed. Globalization did help people find new jobs and freemovement contributed and help them in finding new opportunities. On the other hand,working class do not benefit from it much. It is important to point out and conclude that asGDP is often considered as basic statistics in economy but it is not enough in analyzing theeffects on the economic grow. UK paradox mentioned in this paper was good example of it.13Researchers agree about that is better for the county to have economy which is likelyto growth even though there might be high level of income inequality rather than havingequal distribution of the income and the economy to be stagnating.