How unequal are we?
Economic inequality is often blamed for the growing waves of discontent around the world. But is the voice of the street right ? Are the rich growing richer and the poor getting poorer? Is the one per cent of top earners owning ever more of the world’s wealth? We ask Marta Roig, lead author of UN DESA’s upcoming World Social Report.
How do we know if the world is becoming more or less equal?
“Today, people are more educated, healthier, better connected and even richer, on average, than ever before. But average measures, including GDP or GDP per capita, are no longer sufficient to assess people’s well-being.
More and more people around the world agree that income inequality is a big problem and that it should be reduced. Income disparities create unequal opportunities, prevent some people from reaching their full potential and, as we are witnessing, breed frustration and discontent.
Despite persistent data limitations, the metrics that are available do confirm that income and wealth inequalities are very high and, in many cases, continue to grow. As the data improve, they increasingly back people’s perceptions that our world is growing more unequal.
For instance, in almost all countries that have them, distributional accounts data suggest that income is increasingly concentrated among top earners. Unfortunately, many developing countries still do not have the necessary data to assess whether this is a universal trend.”
Different studies on inequality sometimes come to dramatically different conclusions. What can we say with certainty about inequality?
“Inequality has many dimensions. Conclusions depend, in part, on the focus of different studies. The forthcoming World Social Report shows, for instance, that inequalities may be declining in basic indicators such as child health or primary education, but they are still growing in more advanced achievements, such as secondary education. Inequalities between urban and rural areas may be falling while disparities among ethnic groups continue to grow.
Despite these differences, all sources of data lead to some common conclusions: First, income inequality levels are at a historical all-time high. And secondly, income inequality levels and trends vary significantly across countries and regions. Latin America and Africa are still the regions with the highest levels of inequality but have seen income inequality decline since the late 1990s. In developed countries and in the two most populous countries in the world, China and India, inequality has grown.”
Why does the choice of indicators matter when we evaluate inequality trends?
“When it comes to income inequality, different indicators lead to different conclusions. The average Gini coefficient of income inequality within countries has slightly declined since the mid-1990s. At the same time, the share of income going to top income earners has grown in countries with data.
This is in part due to differences in data sources. The Gini coefficient is a summary measure of inequality and therefore allows us to make general conclusions on inequality trends. The Gini is based on survey data. Surveys contain a lot of information but are not well suited to capture the very high or very low incomes. Recent efforts that combine data from different sources, such as surveys, tax records and national accounts give us a better picture of income concentration at its extremes.
But the integration of data from different sources and the additional indicators they give us—like the share of income earned by the bottom 10 per cent or top 1 per cent of the population—are not available for many developing countries. And in countries with data, researchers still disagree on how to best combine these different sources. In addition, one single indicator (like the share of income of the top one per cent) alone, does not provide full information on the income distribution, while the Gini coefficient does.
All in all, each measure has pros and cons. When possible, it is important to rely on more than one indicator of inequality. Different indicators are not fully comparable and cannot be easily interchanged with another.”
We are entering a decade of action to achieve the Global Goals. What type of action do we need to prioritize to reduce inequalities by the targets set for 2030?
“Clearly, no single set of policies is applicable to all countries and contexts. The forthcoming World Social Report highlights three building blocks of a coherent and integrated policy strategy to reduce inequalities: First, promoting equal access to opportunity for instance, by ensuring that education helps to reduce inequalities rather than reinforces them. Secondly, promoting redistribution, including strengthening social protection systems, ensuring the availability of universal programmes. Thirdly, tackle prejudice and discrimination.
The UN has advocated for measures under each of these building blocks for decades. Inaction is not due to lack of sound technical advice or even, in most cases, adequate capacity. But politics matter. Many inequality-reducing measures challenge the status quo, and thus are likely to encounter resistance. Understanding the political constraints to reducing inequality and devising ways to overcome them is key to breaking the current stalemate.”