SDG 10 calls for reducing inequalities in income as well as those based on sex, age, disability, race, class, ethnicity, religion and opportunity – both within and among countries.
The international community has made significant strides towards lifting people out of poverty. The most vulnerable nations – the least developed countries, the landlocked developing countries and the small island developing states – continue to make inroads into poverty reduction. However, inequality persists and large disparities remain regarding access to health and education services and other assets.
There is growing consensus that economic growth is not sufﬁcient to reduce poverty if it is not inclusive and if it does not involve the three dimensions of sustainable development – economic, social and environmental.
Fortunately, income inequality has been reduced both between and within countries. At the current time, the per capita income of 60 out of 94 countries with data has risen more rapidly than the national average.
To reduce inequality, policies should be universal in principle, paying attention to the needs of disadvantaged and marginalized populations. An increase in duty-free treatment and continuation of favoring exports from developing countries could be helpful, in addition to increasing the share of developing countries’ votes within the IMF. Finally, innovations in technology can help reduce the cost of transferring money for migrant workers.
Target 10.1 seeks to ensure that income growth among the poorest 40% of the population in every country is more rapid than its national average. This was true in 56 of 94 countries with data available from 2007 to 2012.
This was especially true in Latin America and the Caribbean and in Asia, where 88% and 67% of countries, respectively, saw gains for the poorest 40% of households. That said, faster growth for the poorest does not necessarily imply greater prosperity, since nine of the 56 countries experienced negative income growth rates over this period.
Reducing inequality requires transformative change. Greater efforts are needed to eradicate extreme poverty and hunger, and invest more in health, education, social protection and decent jobs especially for young people, migrants and other vulnerable communities.
Labour share of GDP
The labour share of GDP, which represents the proportion of wages and social protection transfers in an economy, provides an aggregate measure of primary income inequality.
The share of GDP that is attributed to labour has been trending downward over the past 15 years as processes have become more mechanized and capital assumes a growing share of GDP. While the labour share of GDP fell from almost 58% in 2000 to just over 55% in 2015 for developed regions, developing regions experienced a slight improvement to 55%. Stagnating wages across all regions contributed significantly to these results.
Over this period, the labour share of GDP only increased in Oceania and Latin America and the Caribbean, where it was at 48 and 52%, respectively in 2015. Eastern Asia saw a flat growth of labour share of GDP and continues to maintain the highest share in the world at 61.4% of GDP.
What does this mean and what does this look like?
In economic research regarding global inequality, the year 2013 brought to life a graph which became known as the “elephant graph”.
The chart uses World Bank data to show how income was distributed globally from 1988 to 2008. The paper from the researchers Christoph Lakner and Branko Milanovic included this chart that represents the global population (on the x-axis where the number 100 indicates 100% of the population) and the growth of income per percentile (on the y-axis where income growth reached a high of 80% in some cases).
This means that several groups of people experienced an important growth in their income, but also a decline in the 70 to 80 percentile and very little growth in the 80 to 90 percentile. This is basically due to the fact that the global middle class increased, in particular people in East Asia (especially China) and South Asia (especially India), and that in some parts of Sub-Saharan Africa people finally escaped extreme poverty. Another reason is the increase in income among the ultrarich, who live mainly in rich countries in Europe or North America.
The data analyzed in this chart finished in the year 2008, so in the year 2018 a team of economic researches published the World Inequality Report to update this graph, taking into account the years 1980-2016. But it stopped looking like an elephant and was dubbed as the “Loch Ness monster”.
What exactly is the difference? If you compare the two graphs, you will see that in this second case the growth rate only reaches a 40% increase among most income groups, thus showing less increase for most of the global population. But the elephant trunk has now become Nessie’s neck, which means that there is an even higher concentration of economic growth in the top 1%.
There are different reasons behind this change in appearance, however, we should use this graph to remind us that the incomes of the world’s richest people have grown much more than any other population group in recent decades, and, that still, in absolute terms, the bottom half of the world’s income distribution has increased enormously.