Economic inequality is widespread, to some extent inevitable, and always at the center of debates about how societies should be organized. The unexpected COVID crisis illustrates this clearly. It has shut down large sectors of the economy, depriving many of their livelihood. Yet in many countries, compensatory income support systems were set in place very quickly, demonstrating the great power of societies, through their governments, to alleviate inequality and to avoid social and political catastrophes.
Generally speaking, how economies should distribute the incomes they generate, across national populations and across the world is the source of heated debate. Is economic growth distributed fairly? Is the social safety net wide and deep enough? Are low-income countries catching up with richer ones? Are racial and gender inequalities falling? Around the world, people hold strong and often contradictory views on what constitutes acceptable and unacceptable inequality, and what should be done about it.
Our objective is not to get everyone to agree about inequality: this will never happen, for the simple reason that no single, scientific truth exists regarding the ideal level of inequality, let alone the ideal social policies and institutions that would be required to achieve and maintain it. Ultimately, we can only make these difficult decisions through public deliberation, and via our political institutions. Our goal here then is more modest: we hope and believe that it is possible to agree about certain facts about inequality. The immediate goal of this report is to bring together new data series from the World Wealth and Income Database (WID.world) in order to document several new findings about global inequality and its evolution.
WID.world is a cumulative and collaborative research process that began in the early 2000s and now includes over one hundred researchers aiming to cover all countries in the world. WID.world provides open access to the most extensive available database on the historical evolution of the distribution of income and wealth, both within and between countries.
The 2022 report present novel findings in four main areas.
First,weprovidetrulycomprehensiveincome inequality data for almost all countries in the world over long time periods. This allows us to present systematic data on inequality at the global level and to analyze how it has evolved over time. Global income inequality has always been very great, reflecting the persistence of a world economic system that is extremely hierarchical both between countries and within them. Global inequality increased between 1820 and 1910, in the context of the rise of Western dominance and colonial empires, and then stabilized at a very high level between 1910 and 2020. Since 1980, domestic inequality has grown, but inter-national inequality started to decline thanks to fast growth in the large so-called emerging economies. These two effects balance each other out so that in past few decades, global inequality has been basically stable, albeit at a very high level.
Second, our 2022 report provides much more in-depth evidence on wealth and its distribution worldwide than has been available until now. In recent decades, the weight of private wealth has increased at the expense of public wealth, due to deregulation, privatization, and increasing government debt. Furthermore, the concentration of private wealth has also increased, with the largest wealth increases occurring among the billionaire class.
Third, we analyze gender inequality by creating systematic data on the share of world labor income earned by women and how well represented women are at the top of the labor income distribution. Globally, the share of labor income paid to women stands at slightly under 35% and shows a positive trend over the past 30 years, up from around 31% in 1990. Men earn approximately twice as much as women across the world, on average. Further, the data reveal that women are significantly underrepresented at the top of the distribution, even though the fraction of women at the top has been increasing since the 1990s in many countries. Strikingly, women are now better represented at the top in some emerging economies such as Brazil than in advanced economies such as the United States.
Fourth, we present new evidence of inequality in carbon emissions across the world. Using a newly assembled set of carbon and energy accounts based on historical records, input– output tables and distributional statistics, we show how total carbon emissions are distributed not only between countries but also within them. Worldwide, carbon emissions are about as unequally distributed as income. The top 1% of carbon emitters contributed significantly more to global emissions growth than the entire bottom half of the global population. Policies aiming at reducing global emissions should, then, primarily target the very high emitters.
Finally, we discuss other policies that could reduce inequality. Progressive wealth taxes have (re)emerged in the debate as a promising tool for curbing extreme wealth concentration and generating much needed government revenue. Using our data, we analyze the revenue potential of wealth taxes and discuss how they could be successfully enforced based on lessons learned from existing and past progressive wealth taxes.
Currently, multinational companies can easily escape paying corporate taxes by shifting their profits to tax havens, but there is an on-going international effort to set up a minimum tax agreement. We discuss the role of corporate taxation in fighting inequality, and global vs. unilateral approaches to tax justice. We also offer broader perspectives on how to reinvent the social state in the 21st century.
As this report shows, WID.world has produced valuable inequality data in many dimensions, yet we are acutely aware that we still face important limitations in our ability to measure the evolution of income and wealth inequality. Our objective in WID.world and in the World Inequality Report is not to claim that we have perfect data series, but rather to make explicit what we know and what we do not know, and to flag clearly which countries are doing better in terms of data production and publication in their efforts to establish inequality statistics.
Part of our aim is to put pressure on governments and international organizations to release more raw data on income and wealth. In our view, the lack of transparency about income and wealth inequalities seriously undermines the possibilities for peaceful democratic discussion in today’s globalized economy. In particular, it is crucial that governments provide public access to reliable and detailed tax statistics, which in turn requires that they operate properly functioning reporting systems for income, inheritance, and wealth. Without this, it is very difficult to have an informed debate about the evolution of inequality and what should be done about it.
Our most important reason for providing all the necessary details about data sources and concepts that underlie all our inequality estimates is to enable interested citizens to make up their own minds about these important and difficult issues. Economic issues do not belong to economists, statisticians, government officials, and business leaders. They belong to everyone, and it is our chief objective to contribute to the power of the many.
We live in a data-abundant world and yet we lack basic information about inequality. Economic growth numbers are published every year by governments across the globe, but they do not tell us about how growth is distributed across the population – about who gains and who loses from economic policies. Accessing such data is critical for democracy. Beyond income and wealth, it is also critical to improve our collective capability to measure and monitor other dimensions of socio- economic disparities, including gender and environmental inequalities. Open-access, transparent, reliable inequality information is a global public good.
This report presents the most up-to-date synthesis of international research efforts to track global inequalities. The data and analysis presented here are based on the work of more than 100 researchers over four years, located on all continents, contributing to the World Inequality Database (WID.world), maintained by the World Inequality Lab. This vast network collaborates with statistical institutions, tax authorities, universities and international organizations, to harmonize, analyze and disseminate comparable international inequality data.
An average adult individual earns PPP €16,700 (PPP USD23,380) per year in 2021, and the average adult owns €72,900 (USD102,600)1.1 These averages mask wide disparities both between and within countries. The richest 10% of the global population currently takes 52% of global income, whereas the poorest half of the population earns 8.5% of it. On average, an individual from the top 10% of the global income distribution earns €87,200 (USD122,100) per year, whereas an individual from the poorest half of the global income distribution makes €2,800 (USD3,920) per year (Figure 1).
Global wealth inequalities are even more pronounced than income inequalities. The poorest half of the global population barely owns any wealth at all, possessing just 2% of the total. In contrast, the richest 10% of the global population own 76% of all wealth. On average, the poorest half of the population owns PPP €2,900 per adult, i.e. USD4,100 and the top 10% own €550,900 (or USD771,300) on average.
“MENA” is the most unequal region in the world, Europe has the lowest inequality levels
Figure 2 shows income inequality levels across the regions. Inequality varies significantly between the most equal region (Europe) and the most unequal (Middle East and North Africa i.e. “MENA”). In Europe, the top 10% income share is around 36%, whereas in “MENA” it reaches 58%. In between these two levels, we see a diversity of patterns. In East Asia, the top 10% makes 43% of total income and in Latin America, 55%.
The world map of inequalities (Figure 3) reveals that national average income levels are poor predictors of inequality: among high-income countries, some are very unequal (such as the US), while other are relatively equal (e.g. Sweden). The same is true among low- and middle-income countries, with some exhibiting extreme inequality (e.g. Brazil and India), somewhat high levels (e.g. China) and moderate to relatively low levels (e.g. Malaysia, Uruguay).
Income and wealth inequalities have been on the rise nearly everywhere since the 1980s, following a series of deregulation and liberalization programs which took different forms in different countries. The rise has not been uniform: certain countries have experienced spectacular increases in inequality (including the US, Russia and India) while others (European countries and China) have experienced relatively smaller rises. These differences, which we discussed at length in the previous edition of the World Inequality Report, confirm that inequality is not inevitable, it is a political choice2.
While inequality has increased within most countries, over the past two decades, global inequalities between countries have declined. The gap between the average incomes of the richest 10% of countries and the average incomes of the poorest 50% of countries dropped from around 50x to a little less than 40x (Figure 5). At the same time, inequalities increased significantly within countries. The gap between the average incomes of the top 10% and the bottom 50% of individuals within countries has almost doubled, from 8.5x to 15x (see Chapter 2).This sharp rise in within country inequalities has meant that despite economic catch-up and strong growth in the emerging countries, the world remains particularly unequal today. It also means that inequalities within countries are now even greater than the significant inequalities observed between countries (Figure 6).
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Global inequalities seem to be about as great today as they were at the peak of Western imperialism in the early 20th century. Indeed, the share of income presently captured by the poorest half of the world’s people is about half what it was in 1820, before the great divergence between Western countries and their colonies (Figure 7). In other words, there is still a long way to go to undo the global economic inequalities inherited from the very unequal organization of world production between the mid-19th and mid- 20th centuries.
One way to understand these inequalities is to focus on the gap between the net wealth of governments and net wealth of the private sector. Over the past 40 years, countries have become significantly richer, but their governments have become significantly poorer. The share of wealth held by public actors is close to zero or negative in rich countries, meaning that the totality of wealth is in private hands (Figure 8). This trend has been magnified by the Covid crisis, during which governments borrowed the equivalent of 10-20% of GDP, essentially from the private sector. The currently low wealth of governments has important implications for state capacities to tackle inequality in the future, as well as the key challenges of the 21st century such as climate change.
The rise in private wealth has also been unequal within countries and at the world level. Global multimillionaires have captured a disproportionate share of global wealth growth over the past several decades: the top 1% took 38% of all additional wealth accumulated since the mid-1990s, whereas the bottom 50% captured just 2% of it. This inequality stems from serious inequality in growth rates between the top and the bottom segments of the wealth distribution. The wealth of richest individuals on earth has grown at 6 to 9% per year since 1995, whereas average wealth has grown at 3.2% per year (Figure 9). Since 1995, the share of global wealth possessed by billionaires has risen from 1% to over 3%. This increase was exacerbated during the COVID pandemic. In fact, 2020 marked the steepest increase in global billionaires’ share of wealth on record (Figure 10).
Wealth inequality was significantly reduced in Western countries between the early 20th century and the 1980s, but the poorest half of the population in these countries has always owned very little, i.e. between 2% and 7% of the total (Figure 11). In other regions, the share of the bottom 50% is even lower. These results show that much remains to be done, in every region of the world, if we are to reduce extreme wealth inequalities.
The World Inequality Report 2022 provides the first estimates of the gender inequality in global earnings. Overall, women’s share of total incomes from work (labor income) neared 30% in 1990 and stands at less than 35% today (Figure 12). Current gender earnings inequality remains very high: in a gender equal world, women would earn 50% of all labor income. In 30 years, progress has been very slow at the global level, and dynamics have been different across countries, with some recording progress but others seeing reductions in women’s share of earnings (Figure 13).
Global income and wealth inequalities are tightly connected to ecological inequalities and to inequalities in contributions to climate change. On average, humans emit 6.6 tonnes of carbon dioxide equivalent (CO2) per capita, per year. Our novel data set on carbon emissions inequalities reveals important inequalities in CO2 emissions at the world level: the top 10% of emitters are responsible for close to 50% of all emissions, while the bottom 50% produce 12% of the total (Figure 14).
Figure 15 shows that these inequalities are not just a rich vs. poor country issue. There are high emitters in low- and middle-income countries and low emitters in rich countries. In Europe, the bottom 50% of the population emits around five tonnes per year per person; the bottom 50% in East Asia emits around three tonnes and the bottom 50% in North America around 10 tonnes. This contrasts sharply with the emissions of the top 10% in these regions (29 tonnes in Europe, 39 in East Asia, and 73 in North America).
This report also reveals that the poorest half of the population in rich countries is already at (or near) the 2030 climate targets set by rich countries, when these targets are expressed on a per capita basis. This is not the case for the top half of the population. Large inequalities in emissions suggest that climate policies should target wealthy polluters more. So far, climate policies such as carbon taxes have often disproportionately impacted low- and middle-income groups, while leaving the consumption habits of wealthiest groups unchanged.
The World Inequality Report 2022 reviews several policy options for redistributing wealth and investing in the future in order to meet the challenges of the 21st century. Table 1 presents revenue gains that would come from a modest progressive wealth tax on global multimillionaires. Given the large volume of wealth concentration, modest progressive taxes can generate significant revenues for governments. In our scenario, we find that 1.6% of global incomes could be generated and reinvested in education, health and the ecological transition. The report comes with an online simulator so that everybody can design their preferred wealth tax at the global level, or in their region.
We stress at the outset that addressing the challenges of the 21st century is not feasible without significant redistribution of income and wealth inequalities. The rise of modern welfare states in the 20th century, which was associated with tremendous progress in health, education, and opportunities for all (see Chapter 10), was linked to the rise of steep progressive taxation rates. This played a critical role in order to ensure the social and political acceptability of increased taxation and socialization of wealth. A similar evolution will be necessary in order to address the challenges of the 21st century. Recent developments in international taxation show that progress towards fairer economic policies is indeed possible at the global level as well as within countries. Chapters 8, 9 and 10 of the report discuss various options to tackle inequality, learning from examples all over the world and throughout modern history. Inequality is always political choice and learning from policies implemented in other countries or at other points of time is critical to design fairer development pathways.
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