Global Inequality by the numbers: why it matters

May 30, 2020

When it comes to addressing global inequality, humanity has created many tools to assess progress.[1]  Unfortunately, we are not as good at meeting our own targets for reducing poverty and suffering, such as the UN Sustainable Development Goals.        

Between 1990 and 2015, the number of people living in extreme poverty declined from 36 per cent to 10 per cent. The pace is now decelerating and COVID-19 impacts could reverse some of that progress, according to the latest report from UN Secretary-General António Guterres.  The numbers for the past few decades also reveal a growing divide between the very rich and the very poor, despite growth in GDP.

Since 1980, income inequality rose sharply in many countries.  From 1980 to 2016, the top 1% of income earners captured 27% of total income growth over this period. The World Inequality Report 2018 concluded that between 1980 and 2016, the poorest 50% of humanity captured 12 cents of every dollar of global income growth. By contrast, the top 1% captured a grossly disproportionate 27 cents.  

Source: World Inequality Database. 2017

Lars Osberg notes economic inequality can, and, is deepening over generations. (What’s So Bad about Increasing Inequality in Canada? December 2019). 

In advanced economies, there is evidence of stagnation in income growth for low- and middle-income earners. A 2016 report examined earnings growth over a 20-year period.  From 1995 to 2004, wages grew for 98 percent of households in most advanced economies.  But in the following decade (2005 to 2014) wage stagnation was evident in almost all of the same countries: “Income growth has been sluggish or even zero for individuals with incomes between the global bottom 50% and top 1% groups. This includes all North American and European lower- and middle-income groups.” (How Globalization Saved the World and Damned the West). However, Europe overall has performed much better on these metrics than Canada and the U.S.

Several dynamics are shaping our performance to address inequality:

  • Failures to make the needed adjustments in social, fiscal and economic policies to address the negative impacts of globalisation and ensure a more equitable distribution of income;
  • Persistent low rates of economic growth in so-called advanced economies and an increase in income and wealth inequality since the 2008 economic crisis (and before the current pandemic crisis);
  • Worrying trends in social mobility – children born into the bottom of the income distribution ladder have less chance today to move up and improve their occupational status and earnings than their parents and previous generations;
  • The negative impacts of climate change fall heavily on those already most vulnerable such as Indigenous peoples; 
  • The vital role of education in creating job opportunities in knowledge-based economies;
  • The role of gender equality in ensuring greater family income and more equitable distribution of wealth;
  • Manufacturing sector job losses in the western countries due to changes in global trade patterns, and further job loss expected from the coming impact of automation and artificial intelligence.

Now the pandemic’s health, social and economic impacts fill out the list of forces governments must manage.

UN Secretary-General António Guterres says the coronavirus pandemic is “the worst human and economic crisis of our lifetimes” and that it is “exposing and exploiting inequalities of all kind including gender inequality“. In his 2020 progress report on sustainable development, he also states: “Even before the COVID-19 pandemic, the pace of global poverty reduction was decelerating and it had been projected that the global target of ending poverty by 2030 would be missed. The COVID-19 pandemic is pushing tens of millions of people back into extreme poverty, putting years of progress at risk.”

The situation is dire.  A long lasting global recession seems likely to flow from the pandemic’s impact on the world economy. According to the Organisation for Economic Cooperation and Development (OECD), richer countries are set to take on at least $17 trillion of extra public debt in battling the economic consequences of the pandemic. The UN estimates that the economic impacts of the coronavirus pandemic could cost the global economy up to $8.5 trillion over next two years and push 34 million people into extreme poverty.

All of this adds to the sense of urgency for achieving the UN’s Agenda 2030 and its 17 Sustainable Development Goals (SDGs).  The SDGs are a global action plan to eliminate poverty and reduce inequality among and within countries by 2030.  The SDGs require intense action by governments and the private sector in the remaining decade.  

According to UNICEF and the WHO, 1 in 3 people globally do not have access to safe drinking water, 4.2 billion people do not have safe sanitation services and 2 billion lack basic sanitation. Given the mediocre performance before the pandemic, a new plan for action by world governments will be needed – one that extends beyond 2030 and considers the global impacts of the coronavirus pandemic.

In North America, the exponential growth of wealth captured by the top 1% of income earners has generated debate about tax policy, guaranteed income programs and other distributional measures to mitigate entrenched income and wealth inequality.  The barriers to social justice are even more evident in the face of the health, social and economic impacts of the coronavirus pandemic.

And why should we care? 

In addition to our obligation to reduce suffering where we see it or know it: “Slow progress in living standards and widening inequality have contributed to political polarization and erosion of social cohesion in many advanced and emerging economies.” (World Economic Forum. The Inclusive Development Index 2018).

Without distributional policies, income inequality will continue to expand dramatically in a recessionary global economy.  Battling income inequality should be a part of domestic and international policy making for economic recovery from the coronavirus pandemic.

Regardless of their political stripe, governments around the world are feeling the pressure to develop fiscal, monetary, tax and social policy to address the growing challenge of these troubling trends in inequality. Meeting this challenge is a performance measure for human rights and good governance for every government.

Globalization and the climate crisis are human made phenomena that have actually made us more dependent on each other than at anytime in our history as a species. We need collaborative action to respect the human rights of all.

[1] Organisation for Economic Co-operation and Development OECD (2018), A Broken Social Elevator? How to Promote Social Mobility, OECD Publishing, Paris,https://doi.org/10.1787/9789264301085-en.

[1] These include: the World Inequality Database the UN Human Development Index, the World Economic Forum’s Inclusive Development Index, the Gini Index, the World Wealth and income database and the UNDP’s global Multidimensional Poverty Index.

Wendy Moss

Related Stories:

ABC News. 28 June 2020. ‘Extreme inequality was the preexisting condition’: How COVID-19 widened America’s wealth gap. By Catherine Thorbecke and Arielle Mitropoulos. https://abcnews.go.com/Business/extreme-inequality-preexisting-condition-covid-19-widened-americas/story?id=71401975