http://www.chron.com/business/economy/article/World-s-income-inequality-has-worsened-report-12435256.php
World's income inequality has worsened, report says
Published 10:42 pm, Friday, December 15, 2017
TOKYO - Global income inequality has worsened over the past four decades, a report finds, with the wealthiest 1 percent of the world's population capturing twice as much income growth as the bottom half.
The world's middle class, made up mostly of people in North America and Europe, has by some measures fared the worst. Globalization has boosted incomes for hundreds of millions of people in developing countries, particularly China and India. And it has lowered pay for manufacturing workers and other middle-income employees in the developed world.
The World Inequality Report 2018 is based on an interactive collection of data compiled by an international team of researchers that includes renowned economists Thomas Piketty and Emmanuel Saez. Their previous research drew attention to widening inequality in the United States by highlighting the disproportionate income gains enjoyed by the richest 1 percent since 1980.
The new report argues that countries can reduce inequality through more progressive taxation and by subsidizing education. It points out that the U.S. 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.
That divergence occurred partly because the U.S. tax code became less progressive, while Europe provided more support for education, which benefited lower- and middle-income families, the study said.
Policy choices can also worsen inequality, says one of the study's authors, Gabriel Zucman, an economist at the University of California, Berkeley. The tax cut now moving through Congress will mostly benefit wealthier Americans and worsen the wealth gap, Zucman says.
The share of income earned by the bottom 50 percent of Americans sank from more than 20 percent in 1980 to 13 percent in 2016, it said.
The authors said the data came from a wide range of government sources over 15 years. One of the study's goals was to push governments to be more transparent about financial data to ensure that debates over inequality and income policies 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 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.
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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