Middle class hit hard

Rich will get still richer unless policies change

Global income inequality has worsened over the past four decades, a report finds, with the wealthiest 1 per cent of the world’s population capturing twice as much income growth as the bottom half.

The world’s middle class, made up mostly of people in North America and Europe, has by some measures fared the worst. Globalization has boosted incomes for hundreds of millions of people in developing countries, particularly China and India. And it has lowered pay for manufacturing workers and other middle-income employees in the developed world.

The World Inequality Report 2018 is based on an interactive collection of data compiled by an international team of researchers that includes renowned economists Thomas Piketty and Emmanuel Saez. Their previous research drew attention to widening inequality in the United States by highlighting the disproportionate income gains enjoyed by the richest 1 per cent since 1980.

The new report argues that countries can reduce inequality through more progressive taxation and by subsidizing education. It points out that the United States and Western Europe had similar levels of inequality in 1980, with the top 1 per cent holding about 10 per cent of income. But by 2016, the top 1 per cent in Europe held a 12 per cent income share, compared with 20 per cent in the U.S.

That divergence occurred partly because the U.S. tax code became less progressive, while European policies provided more support for education, which benefited lower- and middle-income families, the report said.