20.12.2017 |

Income inequality has increased over the past 40 years

The report exposes shocking inequality (Photo: CC0)

The rise in wealth inequality over the past decades has been extreme. The top 1% richest individuals in the world have captured as much of global income growth since 1980 as the poorest half of the population. The World Inequality Report, published by French economist Thomas Piketty, warns that in a future in which “business as usual” continues, global inequality will further increase. The report, which draws on the work of over one hundred researchers covering more than 70 countries, said that the poorest half of the global population has seen its income grow significantly thanks to high growth in Asia, particularly in China and India. However, because of high and rising inequality within countries, the top 1% of the world’s population captured 27% of total growth between 1980 and 2016 while the bottom 50% only captured 12%.

Income inequality varies greatly across world regions. It is lowest in Europe and highest in the Middle East. “Since 1980, income inequality has increased rapidly in North America and Asia, grown moderately in Europe, and stabilized at an extremely high level in the Middle East, sub-Saharan Africa, and Brazil,” the authors write. In 2016, the share of total national income accounted for by a nation’s top 10% earners was 37% in Europe, 41% in China and 46% in Russia. The top 10% income share was even higher in the US and Canada at 47% and at around 55% in sub-Saharan Africa, Brazil, and India. In the Middle East, the world’s most unequal region, the top 10% capture 61% of income.

According to the authors, the fact that inequality levels are so different among countries, even when countries share similar levels of development, highlights the important roles that national policies and institutions play in shaping inequality. This is also confirmed by international development organisation Oxfam which said that government action is key to ending inequality. Responding to the publication of the report, Oxfam’s Max Lawson said: “Extreme inequality harms us: our societies, our economies and our politics. Yet [the] report shows inequality is not inevitable - it is the product of government action and inaction.” The World Inequality Report projects income and wealth inequality up to the year 2050 under different scenarios. If no action is taken, unequal rates of growth among wealth groups would lead to a compression of the global middle-class wealth share and a further rise in inequality. “Alternatively, if in the coming decades all countries follow the moderate inequality trajectory of Europe over the past decades, global income inequality can be reduced – in which case there can also be substantial progress in eradicating global poverty,” the report found. The researchers stress that tackling global income and wealth inequality requires important shifts in national and global tax policies. “Educational policies, corporate governance, and wage-setting policies need to be reassessed in many countries,” they wrote. Reducing inequality within and among countries is also the aim of Sustainable Development Goal 10. (ab)

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