Report: Economic inequality partly inevitable

The fact that inequality expands at varying rates shows that policies on taxes and other issues can make a difference.

15 December 2017 | 11:12

Source: Associated Press

  • Source: Associated Press
  • Last update: 15 December 2017 | 11:12

This photo shows a construction worker waiting to cross an intersection near buildings under construction in the central business district of Beijing. Aug. 16, 2017. (AP Photo)

TOKYO: Global inequality has stabilized at high levels in recent years, a report said Friday, despite gains among the poor in China and much milder disparities in incomes and wealth in Western Europe.

The World Inequality Report 2018 is based on a massive, interactive collection of data compiled by an international team of researchers that includes renowned economists Thomas Piketty and Emmanuel Saez.

It shows inequality has soared since 1980 although the global top "1 percent" saw their share of global income slip slightly after the 2008 financial crisis, to just above 20 percent. At the same time, the share of global income going to the bottom 50 percent rose slightly, to just under 10 percent, thanks to gains in populous, fast-growing China and India.

The United States and Western Europe had similar levels of inequality in 1980, with the top 1 percent holding about 10 percent of income. But by 2016, the top 1 percent in Europe held a 12 percent income share, compared with 20 percent in the U.S.

The bottom 50 percent of Americans saw their income share sink from more than 20 percent in 1980 to 13 percent in 2016, it said.

The report includes two charts illustrating the trends: In the U.S., the income share of the top 1 percent surpassed that of the bottom 50 percent in the mid-1990s and has risen since, the two lines crossing in a big "X." In Europe, the two lines have remained parallel, with the top 1 percent's income share remaining well below that of the bottom 50 percent.

The authors of the report said the data it analyzes were collected from a wide range of government sources over 15 years. One of the aims of the study is to push governments to be more transparent about financial data to ensure that debates over inequality and the policies that affect incomes and wealth are well informed.

"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 percent 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 fact that inequality expands at varying rates shows that policies on taxes and other issues can make a difference, it said.

The yawning gap in wealth and incomes in the U.S. largely reflects inequalities in education, taxes that have become less progressive and a shrinking share of private wealth going to labor.

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.

"While national wealth has substantially increased, public wealth is now negative or close to zero in rich countries," it said.

Following Europe's example in adopting policies to benefit middle and low income earners could help counter the trend toward extreme inequality, it said.

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