Income inequality is high and rising within many countries...
as the benefits of economic growth are increasingly captured by wealthy minorities. According to an official measure - the Gini Index - income inequality is extremely high (above 40) in seven of the world’s most populated countries, including the USA, Brazil, Mexico, the Philippines, the Democratic Republic of Congo, Iran, and Turkiye. The bottom 40% of households in all of these countries earn less than 20% of national income, while the top 10% earn more than 30%, according to the World Bank. But the highest levels of income inequality are actually found in low-income countries, especially in sub-Saharan Africa and Latin America, where all 12 of the world’s most unequal countries are found, including South Africa, Namibia, Central African Republic, Mozambique, Zambia, Eswatini, Belize, Colombia, Suriname, Botswana, Angola, and Brazil. In all of these countries the richest 10% of households owns 40% or more of national income.
Income inequality is also rising in many high-income countries. In the last decade, 15 of the 34 OECD countries have become more unequal, including Denmark, Estonia, France, Greece, Hungary, Israel, Italy, Japan, Luxembourg, New Zealand, Norway, Slovenia, Spain, Sweden, and the USA. However, it is important to note that over the same period global inequality between countries has actually fallen, with the rise of countries like China and India.
Inequality is a problem when it acts as a barrier to development, slowing economic growth, closing off opportunities for social mobility, increasing the risks of political and social instability, and undermining democratic values and institutions. Several leading economists, including Joseph Stiglitz and Anthony Atkinson, have concluded that inequality is a threat to growth when large populations are left behind with little or no access to pathways out of poverty. UNICEF has shown that in the lowest income countries the cost of inequality can be measured in life or death, with the richest 20% of households enjoying much greater access to healthcare and experiencing much lower rates of early death, especially among children. Large disenfranchised populations can also threaten peace and security, and the World Economic Forum’s Global Risk Reports have constantly ranked “severe income disparity” among the greatest risks facing the planet. In his landmark study of inequality, Capital in the 21st Century, Thomas Piketty concludes that high and consistent levels of inequality are a threat to democracies because they, “radically undermine the meritocratic values on which democratic societies are based.”
To shift the democratic conversation and government policymaking towards reversing the rise in income inequality, countries should embrace the World Bank’s “shared prosperity” agenda and set a new target to increase the share of national income owned by the bottom 40% to at least 25% by 2030. Strategies to achieve this goal should include educational investments, jobs growth, technology adoption, and taxation and social policy reforms that disproportionately benefit children and youth from the bottom 40% of households. The overriding objective should be to strengthen the capacities of current and future generations in the bottom 40% to contribute to, and to capture, the benefits of economic growth.
The United Nations (UN), its agencies, and development partners should support national efforts to reduce income inequality building upon Sustainable Development Goal 10.1 ("progressively achieve and sustain income growth of the bottom 40% of the population at a rate higher than the national average"). The UN should measure and report on each country's progress in increasing the share of the bottom 40% to 25% of national income by 2030, and ensure that development assistance to countries with rising income inequality disproportionately benefits the bottom 40%, and leverages fiscal, wage, and social policy reforms that contribute to greater income equality.
Updated August 2022