Among those who have read Marx, it is well known that Marx was rather indifferent to the issue of inequality under capitalism. Among those who have not read him, but know the left-wing views from social-democracy and assume that Marx’s view must have been similar (but just more radical) this is not well known, nor are the grounds for such an attitude well understood.
(Marx’s views on the topic are dispersed: they are in Grundrisse, The 18th Brumaire…, Capital, Critique of the Gotha program. A very nice and succinct recent discussion can be found in Allen W. Wood’s piece “Marx on equality”.)
There are several grounds on which Marx treats inequality as we currently understand it –that is, inequality of income or wealth between individuals—as relatively inconsequential.
The first ground has to do what is the main, as opposed to derivative, contradiction in capitalism: that between owners of capital and those who have nothing else but their labor-power. As for Ricardo, for Marx too, class determines one’s position in income distribution. Class is therefore prior to income distribution. It is the abolition of classes that matters. Engels (who certainly on this had the same opinion as Marx) wrote: “The elimination of all social and political inequality” [as stated in the social-democratic program that he is criticizing] rather than ‘the abolition of class distinctions’, is…a most dubious expression, as between one country, one province and even place and another, living conditions will always evince a certain inequality which may be reduced to a minimum but never wholly eliminated”. (Letter to August Babel) Thus, “to clamor for…equitable remuneration on the basis of the wages system is the same as to clamor for freedom on the basis of slavery” (Marx,Value, Price and Profit).
Once classes are abolished, the “background institutions” are just and this is the moment to begin any real discussion about what is a fair distribution. This is the topic about which Marx wrote relatively late in his life, in Critique of the Gotha program in 1875. He introduced there the famous distinction between the distribution of income under socialism (“to everybody according to their work”) and under communism (“to everybody according to their needs”).
Under socialism, as Marx writes, equality in treatment presupposes an original inequality because people of unequal physical or mental abilities will be rewarded unequally: ”This equal right is an unequal right for unequal labor.” (Critique..).
Under communism, however, in a Utopia of abundance, the real equality may imply an observed inequality in consumption, as some people whose “needs” are greater decide to consume more than other people whose “needs” are less. If in a hypothetical communist society we observe a Gini coefficient of 0.4 like in today’s United States, it tells us nothing about inequalities in the two societies—and certainly not that the two societies display the same level of inequality. In one (communism), it is voluntary inequality, in the other involuntary.