What will global income inequality look like in 2050? Will the economic catch-up of developing countries lead to a more equitable world? Or will the rise of top incomes maintain or even exacerbate today’s high levels of inequality? What measures can governments implement to influence future global inequality dynamics?
In a new study, Philipp Bothe, Lucas Chancel, Amory Gethin and Cornelia Mohren address these questions leveraging on a new dataset that includes WID distributional data, UN projections and climate change projections through 2050. They outline diverging pathways for the future of global income inequality horizon 2050.
KEY FINDINGS
- In a business-as-usual scenario, overall global income inequality will remain largely unchanged in 2050 compared to today. Without significant changes to current redistribution policies, rising within-country inequality will continue disproportionately benefit the global top 1% who will continue to receive 17% of worldwide income. Meanwhile, rapid growth in developing countries will only slightly increase the average income of the world’s poorest 50%, with their share rising from 10% to 12%.
- Progressive “post-tax redistribution” policies, in the form of taxation and cash transfers at a country level, are important but will most likely have a limited impact on the global income distribution on their own.
- On the other hand, “pre-tax redistribution”, through measures reshaping the distribution of labor and capital income (e.g. increased government spending on public education and health, and minimum wage policies), will play an essential role in reshaping future inequality.
- If all countries aligned both their pre-tax inequality and post-tax redistribution policies with those of the most progressive country in their region, the global bottom 50% income share could double by 2050, reaching nearly 20%. Such policy convergence could be sufficient to offset the effect of four decades of rising within-country inequality.
- Climate change is likely to exacerbate existing inequalities further. In a high climate impact scenario, the bottom 50% of the world population could see their income share fall to levels not seen since 1980. This group stands to bear the brunt of climate-related shocks, absorbing nearly three-quarters of total relative income losses.
Lucas Chancel, co-author of the study and co-director of the World Inequality Lab, warns:
“Convergence between countries will not be enough to significantly reduce global inequality by 2050. What will matter most is how income is redistributed within each country. If all countries aligned with their most equal neighbour, the share of income going to the poorest 50% could nearly double — rising from 10% to 19% of global income.”
AUTHORS
- Philipp Bothe, Paris School of Economics, World Inequality Lab
- Lucas Chancel, Sciences Po and Paris School of Economics, World Inequality Lab
- Amory Gethin, The World Bank, World Inequality Lab
- Cornelia Mohren, Sciences Po and Paris School of Economics, World Inequality Lab
MEDIA CONTACT
- Alice Fauvel, Communications Manager, alice.fauvel[at]psemail.eu, press[at]wid.world
