Rich will get still richer unless policies change: report
Global income inequality has worsened over the past four decades, a report finds, with the wealthiest one 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 one 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 one per cent holding about 10 per cent of income. But by 2016, the top one 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 lowerand middle-income families, the report said.
The World Inequality Report shows that income gaps soared after 1980, though they levelled off af- ter 2008 after the financial crisis. The richest one per cent of the world’s population saw its share of global income slip from about 22 per cent in 2008 to just above 20 per cent in 2016. At the same time, the share of global income going to the bottom 50 per cent rose slightly in the same period, to just under 10 per cent, thanks to gains in populous and fast-growing China and India.
The share of income earned by the bottom 50 per cent of Americans sank from more than 20 per cent in 1980 to 13 per cent in 2016, it said.
The authors of the report said the data it analyzes were collected from a wide range of government sources over 15 years.
“Economic inequality is widespread and to some extent inevitable,” they said in the report’s summary. “It is our belief, however, that if rising inequality is not properly monitored and addressed it can lead to various sorts of political, economic and social catastrophes.”
While incomes for the top 10 per cent of wealthiest people have soared over the past four decades, the gains have been most dramatic in India, Russia and the United States. In the Middle East, Brazil and sub-Saharan Africa, inequality remained stable at very high levels, forming an “inequality frontier,” the report said.
The report said that the transfer of public wealth to the private sector has left governments without the resources needed to invest enough in education, health and other measures to help counter inequality.