The overall gender gap has been almost halved over the last half-century, but it has far from disappeared. The more comprehensive way to measure the gender gap is to compute the ratio of average labor income of working-age men aged 20—65 to average labor income of working age women aged 20—65 , regardless of whether and how much they work.
As illustrated in Figure 2. Still, considerable gender inequalities persist, particularly at the top of the labor income distribution, as illustrated by Figure 2. Their representation, however, grows smaller at each higher step along the distribution of income. There has been only a modest increase in the share of women in top labor income groups since The glass ceiling is still far from being shattered. This average, however, disguises significant variations among groups within the distribution.
Income inequality in France has varied significantly since the start of the twentieth century. While income inequality in France is by no means insignificant today, it has fallen notably since This reduction in inequality has taken place, however, in a haphazard and disorderly manner, undergoing numerous evolutions over the last century that are the result of a complex mix of historical events and political decisions. To better comprehend recent developments in income inequality in France, it is first important to analyze how average income evolved from to However, this growth in national income per adult was far from steady.
Between and , per-adult national income declined on average by This pattern was not unique to France, however. Similar trends were experienced in most European countries and Japan, and to a lesser extent in the United States and in the UK, where the shocks created by the First and Second World Wars were less damaging than in Continental Europe.
The evolution of income inequality over the last century can be broken down into three broad periods. As visualized in Figure 2. This decline was mainly due to the collapse of capital income, which was hit by a number of negative shocks. Both wars involved the destruction of capital stocks, and bankruptcies were not infrequent. Inflation reached record levels the price index was multiplied by more than a hundred between and , severely penalizing individuals with bond holdings and, more broadly, with fixed income assets.
The control of rents during the period of inflationism led to a tenfold fall in their real value, and additionally, nationalization and the high level of taxation of certain assets in contributed to a sharp fall in capital income. From to , the inequality in wages that had existed before the world wars was rebuilt and the share of capital in the French economy also rose, leading to a period of rising income inequality. As illustrated by Figure 2. Following the events of May , however, this trajectory of rising inequality abruptly stopped.
May was a volatile period of civil unrest in France, punctuated by demonstrations, general strikes, and protester occupations of universities and factories across the country. This marked the beginning of a period of steady increases in the minimum wage and of the purchasing power of the poor between and These factors led to a compression in the distribution of wages and reduced income inequality more generally.
However, the rise in unemployment that started during the mids also marked the beginning of a new period. The program was an attempt to combat high inflation rates and rapid deteriorations in the budget and trade deficits between and that could have seen France leave the European Monetary System. Taxes were also increased, subsidies to state-owned enterprises were reduced, and social security and unemployment insurance payments were restrained.
During this period, inequality was relatively stable except at the top of the distribution. Very top incomes increased substantially. One way to better understand the magnitude of the turning point that occurred in the s is to look at the total growth curve by income group. That is, we can ask: What was the change in the average income of each group over the different time periods?
However, actual total growth was not the same for all income groups, as illustrated by the impressive upward slope on the right hand of the — growth curve in Figure 2. The contrast between — and — in terms of the total growth rates of income groups is particularly stark. Another way to measure these diverging evolutions is to compare the shares of total economic growth going to the different income groups.
Summing up, although the rise of inequality was less pronounced in France and to a large extent in Europe than in the United States, the break between the — period, when bottom groups enjoyed larger growth than the top, and the — period, when the exact opposite pattern prevailed, is very visible. Recent growth at the top is due to higher salaries and returns on capital assets. As stated above, this trend of rising inequality among the highest earners is even more pronounced for the top 0.
The difference between the average national income before tax and those of top earners has almost doubled over the preceding thirty years. Why has there been a rise in top incomes over the recent period? In the case of France, top earners have experienced significant increases in their incomes from both labor and capital. Between and , the labor income of the top 0.
It is difficult for standard explanations based on technical change and the changing supply and demand of skills to explain rising income concentration at the very top, whether around the world or in France specifically. Evolutions in top marginal tax rates have also likely had an impact on labor income inequality. Reduced top income tax rates can affect wage-setting at the top; as top earners expect less taxes, they may be more inclined to ask for increases in wages. Effective tax rates total taxes paid on total income are actually inferior for very top income groups than for the middle class.
Increases in top labor income inequality have in certain cases been correlated with increases in top capital income inequality. Top managers, for example, have benefitted first from very high labor incomes through large bonuses or stock options some of which have been largely mediatized and then from very high capital incomes derived from improvements in the price of the stocks that they have come to own. Top capital incomes have also been rising due to the rising share of macroeconomic capital in a context of declining labor bargaining power and privatization policies.
While income inequality has increased since the s, gender gaps have been declining since the s. Still, gender gaps remain very high in France today. There are, however, strong variations in gender income gaps over age groups. Gender inequalities are also particularly high among higher paying jobs. Despite moderate improvements since , women still do not have equal access to them. Investigating the evolution of inequality using German income tax data has a long tradition, as particularly Prussian and Saxon tax data are internationally praised for their accuracy.
The early introduction of modern income taxation in German states at the end of the nineteenth century offers a special opportunity to compute inequality series from the industrialization phase until today. The series presented in this chapter are based on pre-tax income data from historical German income-tax statistics collected by Charlotte Bartels. One should note, however, that the impressive length of the period covered in Germany comes with a price, in that changing territories are covered by the series.
The two world wars of the twentieth century, the division of Germany after the Second World War, and its reunification in leave the researcher with income tax systems applying across time to quite differently sized territories and populations. The evolution of income inequality from to can be split into five periods.
The first period starts with the foundation of German Reich in , which unified German states, and ends with the First World War. The top percentile was the greatest beneficiary of this industrialization period. The sharp increase observed during that war might have been the result of extraordinarily high profits from military spending. Strong unions and the rise of collective bargaining contributed to an increase in wages which resulted in lower labor income inequality.
Hyperinflation eroded financial assets and greatly reduced capital incomes during this period. Additionally, industrial firms generated very low profits throughout the s, if any at all, and mostly did not pay out dividends. After , the Statistical Office stopped publishing income tax statistics so it is impossible to know how income distribution changed during the Second World War. As in most rich countries, economic recovery after the Great Depression started in in Germany.
Industrial firms saw their profits rise sharply between and Ferguson and Voth find evidence that firms with strong ties to the Nazi party disproportionately benefited from the recovery, which probably contributed to further concentration of incomes at the top. The post-war period is marked by a relatively stable but high top percentile income share. The German postwar period is characterized by a comparably high income concentration at the top, paralleled by a rather compressed wage distribution.
This finding is particularly striking as the policies especially nationalizations and rent control after the Second World War and destructions during the Second World War are generally seen as long-lasting equalizing forces both in Germany and in other war-participating countries. The currency reform in eradicated capital incomes from financial assets for the second time in the twentieth century, while leaving business assets and real estate untouched.
Savings accounts were reduced to about a tenth of their former value. As rents were heavily regulated, top incomes stemmed from business profits. On the other hand, strong labor demand and the high national income growth rates of the German Wirtschaftswunder coincided with powerful unions, low unemployment, and a rather compressed wage distribution. It was not until the s that top wage earners increasingly entered top-income groups and the wage distribution became increasingly unequal.
The fifth and last period corresponds to reunified Germany. The first years after reunification were marked by exceptionally high national income growth rates for the reunified German economy. Industrial production quickly collapsed in the East and unemployment rose accordingly. Those keeping their jobs benefitted from an unprecedented jump in real wages, thanks to bargaining by the Eastern German labor unions that aimed to reach parity with West German wage levels in Highly qualified employees like engineers, lawyers, and doctors have benefitted from high wage growth and have been increasingly present in top-income groups.
However, very top incomes are still exclusive to business owners, and profits fluctuate with business cycles. It suffered large shocks in the German unification crisis in the mids, the burst of the new economy bubble in the early s, and the Great Recession in During the first stage of reform, market principles were introduced into the agricultural sector through the de-collectivization of production. While foreign investment and entrepreneurship were permitted under state guidance, the vast majority of industry remained state-owned until the mids.
The following decades saw a second stage of deeper reforms implemented. Soviet-style central planning in industry was dismantled through the privatization and contracting out of state-owned enterprises, though the state maintained its control of monopolies in some sectors, including banking and petroleum. Furthermore, liberalization of markets over this period saw the lifting of price controls and the reduction of protectionist policies and regulations, aiding the dramatic growth of the private sector. The subsequent impacts of these privatization and opening reforms have been of great interest worldwide, particularly given the significant growth the country has experienced over the last forty years and its accompanying improvements in poverty rates.
They find a significant increase in per-adult pre-tax income inequality from to As China began its privatization process as also discussed in chapter 3. Put in another way, these groups captured the same amount of total income, but the former had a population five times smaller than the latter. This coincided with the eight-year period that saw the Chinese government introduce a new set of policies for the privatization of state-owned enterprises, mainly in the tertiary sector. Income inequality apparently stabilized thereafter, with the shares of all three of the main income groups in remaining pretty much similar to their levels in This stabilization of inequality since should be regarded with caution as it could partly reflect data limitations, due in particular to the lack of national data made available on high-income taxpayers since Second, both the level and the rise of inequality are larger in the aforementioned corrected series than in the official series.
Most of the difference between these estimates and the raw surveys comes from the finer level of precision among top income earners enabled by income tax data. Since , Chinese top-income groups benefitted from quadruple-digit growth rates. The new data series constructed by Piketty, Yang, and Zucman on the distribution of national income also allow a decomposition of national income growth by income group. This in turn enables a quantitative assessment of the extent to which various groups of the population have benefitted from the enormous growth China has experienced since See Table 2.
Average national income per adult has grown close to ninefold between and , corresponding to an average annual increase of 6. This growth has not been equally shared; the higher the income level, the higher the rate of growth over the time period considered. However, the same pattern, by which income growth rates rise more quickly the higher up the distribution one goes, was evident for all countries.
The urban-rural gap continues to grow, but it is within-region inequality that spurs overall growth in inequality. What role has the urban-rural gap played in the evolution of Chinese inequality? This question is important as inequality could be driven mainly by growing differences between cities and rural areas and not by inequality among individuals within areas. Policy implications are indeed dependent on which force dominates in the mix. To answer this question, it is first important to identify how the populations of urban and rural areas has changed post , as this will in part determine the urban and rural shares in national income.
In the urban areas of China, the adult population rose from million in to almost million in During this same period, the adult rural population remained roughly stable, rising from million in to almost million by the mids, before declining to less than million in Secondly, the income gap between urban and rural China has always been large and it has grown over time. Urban households earned twice as much income on average as rural households in , but in they earned 3. Combining this data also demonstrates that there has always been more inequality within rural areas than within urban China, and this will remain the case if current trends continue.
Since the fall of the Soviet Union in —, Russia has experienced dramatic economic and political transformations. National income and gross domestic product fell abruptly from to , when inflation skyrocketed, but then started to recover during and , ushering in a decade of robust growth. The world financial crisis and the fall in oil prices interrupted this process in — and, since then, growth has been sluggish.
However, there is little doubt that average incomes are significantly higher in Russia today than they were in — The average income of the 1. Together with rising shortages and general frustration among the comparatively highly educated population, the relative sluggishness of living standard improvements arguably contributed to the complex social and political processes that eventually led to the fall of the Soviet Union.
Yet the consequences of these dramatic transformations of the distribution of income and wealth are not well documented or well understood, particularly following the fall of the Soviet Union. There is no doubt that income inequality has increased substantially since ——at least in part because monetary inequality was unusually, and to some extent artificially, low under Communism—but there has been little empirical work to measure the exact magnitude of the increase and how this compares to change in other countries.
The striking rise in income inequality after the fall of the Soviet Union was dramatic in terms of both speed and quantitative change. Privatizations were partly done through a voucher privatization strategy, whereby citizens were given books of free vouchers that represented potential shares in any state-owned company.
However, voucher privatization of state-owned enterprises took place very quickly, with the ownership of over fifteen thousand firms transferred from state control between and The transformation of the labor market from state-led to market-led also led to an increase in income inequality through higher inequality of labor income. This ensured generally egalitarian inequality outcomes as compared to market economies. When the transition toward free markets began, however, a significant amount of unemployment was created as workers moved from the state to the private sector.
Both state and private employment fell with the closure of state and private enterprises, while the imposition of hard budgets created intensely unfavorable conditions for investment and hiring, and left very little support for those seeking unemployment benefits—all of which hit the lowest earners the hardest. Given the abundance of excess labor and greater concentration of wealth, the labor market transition and the privatization process favored owners of capital to the detriment of labor. Price liberalization also saw the consumer price index multiply by nearly five thousand between and They never fully returned, however, to their — relative income share.
The world financial crisis and precipitous drop in oil prices interrupted Russian national income growth in —, and economic activity remained sluggish after that—only to fall again in —, partly due to the international sanctions that followed the Russian military intervention in Ukraine. However, as a result of the dynamics described above, the different income groups have enjoyed widely different growth experiences.
On average, the bottom earners benefited from very small or negative growth over the twenty-seven-year period Indeed, as Table 2. First, they show an even stronger tilt toward the top incomes due to a more precise estimation of top Russian incomes. Such a difference is far from marginal.
Consistent with the concepts used in this report and throughout WID. In doing so, they recognize the significant challenges of comparing real incomes for the Soviet and post-Soviet periods in a satisfactory manner. The changes in the distribution of income that took place in the post-communism period of — look very different from those that took place after The death of Joseph Stalin in and the introduction thereafter of comparatively liberal policies known as de-Stalinization policies, which included the end of mass forced labor in Gulags, saw further changes to income shares that favored those earning lower incomes.
These figures reiterate the stark difference between living under the communist system and living after its end, in terms of the variance in average annual real growth rates experienced by income groups. The real contrast, however, is in the post period, when the divergence in annual growth rates rose to Such a divergence in growth rates at different ends of the distribution has not been witnessed throughout the twentieth century, even during the socialization of the Russian economy. As already mentioned, there are a number of limitations in the data sources employed by Novokmet, Piketty, and Zucman, which suggests that while broad orders of magnitude can be considered reliable, small variations in inequality should not be viewed as precisely true.
Indeed, their estimates suggest that inequality levels in tsarist and post-Soviet Russia are roughly comparable. But the lack of detailed income tax data—and the general lack of financial transparency—make their estimates for the recent period relatively imprecise, perhaps most importantly because their estimate for is at least as imprecise. It is also worth stressing that the measures of monetary inequality depicted in Figure 2. For example, inequalities in personal status and basic rights, including mobility rights, were pervasive in tsarist Russia, and persisted long after the official abolition of serfdom in Summarizing such inequalities with a single monetary indicator is clearly an oversimplification of a complex set of power relations and social domination.
The same general remark applies to the Soviet period, when monetary inequality was reduced to very low levels under communism. These factors should be kept in mind when making historical and international comparisons—in Russia or elsewhere. India introduced an individual income tax with the Income Tax Act of , under the British colonial administration. From that date up to the turn of the twentieth century, the Indian Income Tax Department produced income tax tabulations, making it possible to track the long-run evolution of top incomes in a systematic manner. Little has been known, however, about the distributional impacts of economic policies in India after , when real income growth was substantially higher than in previous decades.
This is largely because the Indian Income Tax Department stopped publishing income tax statistics in , but also because self-reported survey data often do not provide adequate information concerning the top of the distribution. In , the Income Tax Department released tax tabulations for recent years, making it possible to track the evolution of income inequality during the high average income growth years post Inequality rose from the mids after profound transformations of the economy.
Over the past four decades, the Indian economy has undergone profound evolutions. In the late seventies, India was recognized as a highly regulated, centralized economy with socialist planning. But from the s onwards, a large set of liberalization and deregulation reforms were implemented. Liberalization and trade openness became recurrent themes among Indian policymakers, epitomized by the Seventh Plan — led by Prime Minister Rajiv Gandhi — That plan promoted the relaxation of market regulation, with increased external borrowing and increased imports.
This period also saw the tax system undergo gradual transformation, with top marginal income tax rates falling from as high as The structural changes to the economy along with changes in tax regulation, appear to have had significant impact on income inequality in India since the s.
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What came to be known as the first set of economic reforms were implemented from to and in practice were the continuation of the mid s policy shift. These reforms placed the promotion of the private sector at the heart of economic policies, via denationalizations, disinvestment of the public sector and deregulation de-reservation and de-licensing of public companies and industries 42 , weighing the economy substantially in favor of capital above labor. These reforms were implemented both by the Congress government and its Conservative successors.
Indian income inequality by These pro-market reforms were prolonged after , under the 10th and subsequent five-year plans. The higher up the Indian income distribution one looks, the faster the rise in their share of the national income has been since the early s.
As depicted by Figure 2. An even stronger increase in the share of national income was experienced by the top 0. Income growth rates at the very top were extreme, as shown by Table 2. The recent surge in inequality mirrors inequality declines from the s to the s. After independence, Jawaharlal Nehru implemented a set of socialist policies, with strict government control over the economy, with an explicit goal to limit the power of the elite. The policies implemented by himself and his followers, including his daughter Indira Gandhi, up to the late s, included nationalizations, strong market regulation and high tax progressivity.
Nationalizations involved the railways and air transport in the earlys, oil in the mids and banking throughout the entire period, to cite but a few. Along with the transfer of private to public wealth and their implicit reduction in capital incomes, nationalizations brought government pay-scale setting with them that compressed wage distributions. These changes may have discouraged rent-seeking behavior at the top of the distribution, which can be seen as an efficient strategy in the presence of excessive bargaining power and rent-seeking activity.
How do these vast institutional and policy changes translate in terms of income growth rates for different groups of the population? As Figure 2. However, this dynamic changed dramatically during the s and has remained as such ever since. This situation was prolonged throughout the —s.
During this period, the higher the group in the distribution of income, the lower the growth rate they experienced. Furthermore, the top 0. It is particularly interesting to compare the pre with the post growth rates. Since , it is also striking that the top 0. It is a sharp contrast with the million individuals that made up the bottom half of the adult population in For the top 0. Following the Arab Spring movement, there has been renewed interest in inequality measurement in Middle East countries, as calls for greater social justice were amongst the leading demands of these popular movements.
However, existing studies have argued that income inequalities within these countries do not seem to be particularly high by international standards, suggesting that the source of dissatisfaction might lie elsewhere. Among the literature seeking to address this surprising finding is a recent paper by Facundo Alvaredo, Lydia Assouad and Thomas Piketty.
They argue that previous results, based on household survey data only, highly underestimate inequality and they offer novel estimates using the only fiscal data available in the region that has been recently released. Inequality in the Middle East is therefore among the highest of any region worldwide. Comparing the Middle East performance in terms of inequality with other countries in the World is legitimate and informative—at least as much as the usual inequality comparisons between nation-states. While these results contradict the aforementioned studies, they are robust to different estimation techniques.
When the income distribution is computed using purchasing power parity figures, which reflect the difference in the living standards of each country, inequality levels decline but not by a significant amount. Changing the geographical definition of the Middle East also has a relatively limited impact on inequality: by excluding Turkey from the analysis, a country whose average income is between those of the poorest countries—Egypt, Iraq, Syria, Yemen, etc.
The origins of inequality are, however, distinctive amongst these different groups of countries.
In the case of the Middle East, they are largely due to the geography of oil ownership and the transformation of oil revenues into permanent financial endowments, as we shall see below. In contrast, In Brazil, the legacy of racial inequality continues to play an important role together with huge regional inequalities see chapter 2. Extreme inequality in South Africa is intimately related to the legacy of the Apartheid system see chapter 2.
It is striking to see that the Middle East, in spite of its much larger racial and ethno-cultural homogeneity, has reached inequality levels that are comparable to, and even higher than, those observed in South Africa or Brazil. Extreme inequality in the Middle East is driven by enormous and persistent between-country inequality.
The rise in average income has been much more modest, however. The PPP viewpoint should of course be preferred if we are interested in the living standards of the inhabitants living, working and spending their incomes in the various countries which is the case of most inhabitants. However the MER viewpoint is more relevant and meaningful if we are interested in external economic relations: e. Here market exchange rates matter a lot, and may also have an important impact on perceptions of inequality.
It is critical to stress that enormous and persistent between-country inequality exists behind the Middle East average. In contrast, Gulf countries represent almost half of the total income of the region in market exchange rates. This reveals the large gap in per-adult national income between Gulf countries and other countries in the region.
These marked difference help us understand why albeit novel, regional Middle East inequality estimates are not entirely unexpected. The evolution of income inequality in the Middle East has been driven by the dynamics of between-country inequality. The narrowing of per-adult income inequality between Gulf countries and the other four country blocs identified above reduced regional inequality over the — period.
However, the income gap between these two groupings remains enormous. The fall in the income gap between Gulf countries and the rest of the Middle East reflects a number of complex and contradictory forces. It was partly due to the evolution of oil prices and output levels in Gulf countries, as well as to the relative fast output growth in non—Gulf countries including Turkey, but the very large rise of migrant workers also played a significant role, leading to an artificial reduction of national income per adult in Gulf countries.
The massive inflow of foreign workers, especially in the construction sector and domestic services sector, quite simply led to a stronger increase in the population denominator than in the income numerator of Gulf countries.
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From this viewpoint, it is also useful to distinguish between two groups of Gulf countries. This second group made about one quarter of total population of Gulf countries in , but this rose to about one third by Income tax data is unfortunately extremely limited in the Middle East and therefore prevents a detailed and precise analysis of within-country inequality. It is unfortunate that the only country for which data is currently available is Lebanon, as household surveys in the Middle East appear to underestimate top incomes at least as much as in the rest of the world and possibly more.
The lack of good data is particularly acute in the case of the Gulf countries, where the low official Gini coefficient might indeed hide important aspects of their political economy, namely the growing share of the non-national population, a large majority of which is composed of low-paid workers, living in difficult conditions. The substantial growth of migrant workers in Gulf countries give incentives to nationals within Gulf countries to defend their numerous privileges, beginning by restraining naturalization given that national citizens typically do not pay income tax, benefit from significant social spending, including free healthcare and education, receive subsidies for electricity and fuel, and often receive other benefits such as land grants.
Furthermore, some citizens also have expectations that the state provides them with a job and housing, an idea enshrined in some Gulf country constitutions. Alvaredo, Assouad and Piketty are the first researchers to distinguish systematically between the two populations and lead to a large upward revisions of inequality estimate in the survey distribution.
Unfortunately, there are still important limitations to the empirical understanding of these issues. Accessing better quality and larger volumes of country-level inequality data for the whole of the — period in Middle East countries might lead to different conclusions than those presented in this paper. In particular, a rise of within-country inequality could possibly counterbalance the reduction of between-country inequality between Gulf countries.
Rising within-country inequality trends are found in a large number of very different countries across the world, e. It is also possible that Middle East countries—along with Brazil—belong to a different category, that is, countries where inequality has always been very large historically and thus has not risen in recent decades. However, given the data sources currently available, it is not possible to draw precise conclusions on this phenomenon with a satisfactory degree of precision.
All in all, it is very difficult to have an informed public debate about inequality trends—and also about a large number of substantial policy issues such as taxation and public spending—without proper access to such data. While the lack of transparency on income and wealth is an important issue in many, if not most, areas of the world, it appears to be particularly extreme in the Middle East, and arguably raises a problem of democratic accountability in itself, independent from the levels of inequality observed.
Brazil has consistently been ranked among the most unequal countries in the world since data became widely available in the s. However, from the mids, household surveys began to show that inequality was falling, due to a combination of strong labor market performance, declines in the skill wage premium due to educational expansion, systematic increases in the minimum wage indexed to social benefits , and the growing coverage of social assistance programs.
Indeed, this apparent decline in Brazilian income inequality drew significant attention worldwide, as examples of large economies that could reduce inequality while growing solidly are relatively rare. However, as described earlier in this report, household surveys only tell part of the story.
Recent releases of income tax data by the Federal tax office have painted a different picture, showing that inequality in Brazil was higher than previously thought. By ensuring the consistency of the surveys and tax declarations with macroeconomic totals, he is able to provide the most representative income inequality statistics to date that show a sharp upward revision of the official estimates of inequality in Brazil.
The novel data also suggests that, if contrary to other emerging countries such as Russia, India or China, pre-tax inequality has remained relatively stable in Brazil since the turn of the new century, it has not declined as much as many commentators have argued. Total income inequality has remained at very high levels in Brazil despite the fall in labor income inequality.
The findings highlight the large extent of income concentration in Brazil. This clearly reveals that inequality in Brazil is principally affected by the extreme concentration at the top of the distribution. This concentration becomes less extreme when we look at the labour income distribution. Since , total income inequality has remained relatively stable. The stability in the total income inequality should not mask the registered decline in the inequality of labour incomes. This is even more apparent the higher up in the hierarchy the comparison is made.
These extreme levels of inequality manifested themselves in large differences between the average incomes of the aforementioned groups, as represented by Table 2. Higher up the distribution, the trend is similar, with the elites capturing a disproportionate share of Brazilian income. Morgan in the same work also compares the raw estimates from the surveys with his benchmark national income series combining national accounts, surveys and fiscal data.
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There are clear, large discrepancies in the level and change in inequality that grow increasing larger the higher up the distribution one looks. These discrepancies thus highlight why relying exclusively on surveys and ignoring undistributed income in national accounts flowing to corporations can distort understanding of how income inequality has developed in Brazil. The general trend is therefore one of an increase in the concentration of national income shares at the top of the income distribution, small increases at the bottom and an ever-smaller share for the middle.
Brazilian income inequality rises as the richest experience higher growth in incomes. The question that arises from this evolution is how the income growth of different groups of the income distribution compares to this number. Among the top percentiles, growth was equally strong. Despite the growth of incomes in the bottom half of the income distribution, the top of the distribution captured a disproportionately large part of the total income growth between and Note to readers : "Values presented in Table 2.
In the French and English print edition of the World Inequality Report respectively, Le Seuil and Harvard University Press , due to a technical issue, the text associated to the table still refers to the values present in the initial online edition of the Report. This webpage shows the fully updated version of this section. South Africa is one of the most unequal countries in the world. Otherwise said, in terms of top income shares, South Africa ranks with the most unequal Anglo-Saxon countries, but, at the same time, there is less concentration within the upper income groups, mostly composed by the white population.
In light of these statistics, the recently debated emergence of a so-called middle class is still very elusive. Rather, two societies seem to coexist in South Africa, one enjoying living standards close to the rich or upper middle class in advanced economies, the other left behind.
Inequality has decreased from the unification of South Africa to the end of apartheid. South Africa is an exception in terms of data availability in comparison with other African countries. The period for which fiscal data are available starts in for the Cape Colony, seven years before the Union of South Africa was established as a dominion of the British Empire, and ends in , with some years sporadically missing, and noticeably an eight-year interruption following the end of apartheid in As is often the case with historical tax data series, only a very small share of the total adult population was eligible to pay tax in the first half of the twentieth century.
With important short run variations, the evolution of income concentration over the — period seems to follow a very clear long-term trend. Indeed, the share of the top 0. Consequently, while the top 0. This was also a time in which South Africa progressively developed its industrial and manufacturing sector, enjoying notable accelerations in the s that were to the benefit of the large majority of the population.
Aside from a brief fall during the Great Depression, average real income per adult then increased steadily. In the s, both averages grew approximately at the same rate such that inequality remained relatively constant. Following 60 years of successive increases, national average income was almost four times greater by the early s than in Inequality resumed its downward sloping trend from , but this also marked a period of overall income growth stagnation in South Africa until that culminated in a three-year recession.
For the first time in the previous 90 years, gold output started falling. Richer seams were exhausted and extraction costs increased rapidly. The industry that was once the engine of the economy started to weaken. In the s, international sanctions and boycotts were placed on South African trade as a response to the apartheid regime, adding further pressure to that created by domestic protests and revolts, and contributed to the destabilization of the regime in place. The progressive policies implemented after the apartheid were not sufficient to counter a profoundly unequal socio-economic structure.
There are no fiscal data to estimate top-income shares for the eight years that followed However, joining up the data points to the next available figure in suggests that income inequality has increased sharply between the end of apartheid and the present, even if the magnitude of the increase must be taken with caution, as the estimates in these two periods may not be totally comparable. Part of the increase from to should come from changes in the tax code.
In particular, before , capital gains were totally excluded, which is very likely to downward bias the share of top-income groups. Also, the tax collection capabilities seem to have increased substantially in the last years. At first, it might seem puzzling that the abolishment of a segregationist regime was followed by an aggravation of economic inequality. The establishment of a multi-racial democracy, with a new constitution and a president of the same ethnic origin as the majority of the population, did not automatically transform the inherited socio-economic structure of a profoundly unequal country.
In explaining these changes scholars agree in that the labor market played a dominant role, where a rise in the number of blacks employed in skilled jobs including civil service and other high-paying government positions coupled with increasing mean wages for this group of workers. However, in spite of these redistributive policy efforts, surveys consistently show that top-income groups are still overwhelmingly white.
Other studies further demonstrate that such dualism is itself salient along other key dimensions such as unemployment and education. Furthermore wealth, and in particular land, is still very unequally distributed. This hypothesis would also explain the fact that income inequality in South Africa did not increase in the s, while boycotts were put in place, contrary to other former Dominions New Zealand, Canada and Australia despite the country having so far followed a similar trend.
Furthermore, the implementation of the Growth, Employment and Redistribution GEAR program in , which consisted of removing trade barriers, liberalizing capital flows and reducing fiscal deficit might also have contributed, at least in the short run, to enrich the most well off while exposing the most vulnerable, in part by increasing returns to capital over labor and to skilled workers over unskilled workers.
The rapid growth experienced from the early s until the mids was essentially driven by the rise in commodity prices and was not accompanied with significant job creation as the government hoped it would. The fact that these variations closely mirror the fluctuation in commodity prices suggest that a minority benefiting from resource rents could have granted themselves a more than proportional share of growth.
Part I. Part II - Trends in global income inequality 2. However, by combining consistent and comparable data, as we have done in this World Inequality Report, we can provide striking insights. Since , income inequality has increased rapidly in North America and Asia, grown moderately in Europe, and stabilized at an extremely high level in the Middle East, sub-Saharan Africa, and Brazil. The poorest half of the global population has seen its income grow significantly thanks to high growth in Asia.
But the top 0. This includes North American and European lower- and middle-income groups. The rise of global inequality has not been steady. The trend break after is due to a reduction in between-country average income inequality, as within-country inequality has continued to increase. Global income growth dynamics are driven by strong forces of convergence between countries and divergence within countries.
Standard economic trade models fail to explain these dynamics properly—in particular, the rise of inequality at the very top and within emerging countries. Global dynamics are shaped by a variety of national institutional and political contexts, described and discussed in the following chapters of this report. Managing data limitations to construct a global distribution of income The dynamics of global inequality have attracted growing attention in recent years. Chancel and A. Building a global inequality distribution brick by brick A powerful way to visualize the evolution of global income inequality dynamics is to plot the total growth rate of each income groups see Box 2.
Total income growth by percentile across all world regions, — The geography of global income inequality was transformed over the past decades What is the share of African, Asians, Americans, and Europeans in each global income groups and how has this evolved over time? Since , the picture is more nuanced but within-country inequality is on the rise How did global inequality evolve between and ? Measured at market exchange rate, global inequality is even higher Prices can be converted from one currency to another using either market exchange rates or purchasing power parities as we did above.
When focusing on income inequalities between countries, it is more meaningful to compare national incomes than gross domestic product GDP. National income takes into account depreciation of obsolete machines and other capital assets as well as flows of foreign income. North Americans enjoy an income three times higher, while Europeans have an income two times higher.
Average per-adult income in China is slightly lower than the global average. Over this period, strong converging forces were in play which reduced global income inequality between countries. While growth slowed in Western Europe, it skyrocketed in Asia and China in particular, following the modernization of its economy and its opening to global markets. However, diverging forces were also in play in other parts of the world.
From to now, average incomes in sub-Saharan Africa and South America fell behind the world average. The distribution of world national income and gross domestic product, Purchasing Power Parity. The distribution of world national income and gross domestic product, Market Exchange Rates. Average income in Africa and Asia relative to the global average, — Average income in China and Latin America relative to the global average, — The past four decades, however, display a variety of national pathways, highlighting the importance of political and institutional factors in shaping income dynamics.
In the industrialized world, Anglo-Saxon countries have experienced a sharp rise in inequality since the s. Continental European countries were more successful at containing rising inequality, thanks to a policy and institutional context more favorable to lower- and middle-income groups. In China, India, and Russia, three formerly communist or highly regulated economies, inequality surged with opening and liberalization policies. The steepest rise occurred in Russia, where the transition to a market economy was particularly abrupt.
Little is known of the long-run dynamics of income inequality in many low-income countries. More information is essential for peaceful democratic debates in these countries, especially given that official estimates are very likely to understate existing levels of inequality. After a historical decline from the s to the s, income inequality is on the rise in most regions of the world Income inequality was sharply reduced in the first half of the twentieth century—more precisely, between the s and the s—in most countries of the world, but it has been on the rise almost everywhere since the late s.
Inequality in enlarged Europe with a population of million is now substantially smaller than in the United States million We also compare in Figures 2. Continental European countries were more successful in preventing the rise of incomes at the top and the stagnation of incomes at the bottom In western continental Europe, inequality has also been on the rise since the late s, though both the levels of inequality and the rise in inequality were less striking than in the United States.
In Russia, China, and India, income inequality surged after the s Income concentration and wealth concentration were particularly high in tsarist Russia before the Soviet revolution of see chapter 2. In low-income countries, inequality is likely to be higher than previously thought, but data is scarce We still know very little about the evolution of income inequality in the rest of the developing and emerging world.
Income inequality in the United States is among the highest of all rich countries. Income has boomed at the top. While the upsurge of top incomes was first a labor-income phenomenon in s and s, it has mostly been a capital-income phenomenon since Increased female participation in the labor market has been a counterforce to rising inequality, but the glass ceiling remains firmly in place. Income inequality in the United States is among the highest of rich countries In , the distribution of US national income exhibited extremely high inequalities.
Pre-tax income inequality has risen notably since the s, slightly more than post-tax income inequality The trends described above should also be put into their longer historical context. Taxes have become less progressive over the last decades The progressivity of the US tax system has declined significantly over the last few decades, as illustrated in Figure 2.
The reduction in the gender wage gap has been an important counterforce to rising US inequality The reduction in the gender gap has been an important force in mitigating the rise in inequality that has largely taken place after Difference in the pre-tax labor income between working-age men and women in the US, — Share of women in the employed population by labor income group in the US, — Although income inequality in France was by no means insignificant in , it sharply contrasts with the situation a century ago.
Income inequality decreased significantly between the start of the First World War and the end of the Second World War due to the fall of top capital incomes resulting from the destruction of physical capital, the damaging impact of inflation, and the effects of nationalizations and rent-control policies. The struggle between labor and capital to share the fruits of growth between and characterized a turbulent period for income inequality, rising until , when civil unrest pressured the government into reducing wage differentials.
Austerity measures introduced in , including the end of indexing wages to inflation, started a trend of rising inequality. Wage differentials and returns to capital increased thereafter. Income inequality in France has varied significantly since the start of the twentieth century While income inequality in France is by no means insignificant today, it has fallen notably since Incomes shares in France, — The rise of the lower and middle classes. It then decreased dramatically when social policies were implemented by the Weimar Republic.
The Nazi prewar period is associated with economic recovery and favorable policies for large businesses, and saw temporary surges in top incomes. Top income earners in Germany have been business owners throughout the twentieth century and up to the present. Starting in the s, however, highly qualified employees have increasingly entered top-income groups. In Germany, high income concentration of the industrialization period dropped as soon as the s and fluctuated around this level throughout the postwar period.
This contrasts with other rich countries like United States, the United Kingdom, and France, where the Second World War brought strong and lasting reductions in income concentrations at the top. Long-run German income inequality dynamics can be split into five periods The evolution of income inequality from to can be split into five periods. The post-war period is marked by a relatively stable but high top percentile income share The German postwar period is characterized by a comparably high income concentration at the top, paralleled by a rather compressed wage distribution.
Income inequality is rising at the top since reunification The fifth and last period corresponds to reunified Germany. The urban-rural gap in national income has grown considerably between and due to a rise in urban incomes and population. Despite this rising gap, it is mainly inequality within regions that has spurred the growth of inequality at the national level.
Measure of America - a project of the Social Sciences Research Council that attempts to "provide easy-to-use yet methodologically sound tools for understanding well-being and opportunity in America. Bureau of Labor Statistics. Equality Trust - from the UK and founded by authors of The Spirit Level whose research shows the impacts of inequality. Stanford Center on Poverty and Inequality - one of three national centers focused on research on poverty.
Too Much - great list of links to other inequality sites, weekly newsletter, and other materials. MSU Libraries. Ask a Librarian Account Events. Poverty and Inequality: Inequality Finding information to understand and address poverty and inequality in the U. Subject Matter and Terminology Inequality is a word used increasingly as the measures of it have accelerated in the wake of the global Occupy movement. Rising income inequality from the mids to the present was characterized by rapid income growth among top earners and new patterns of employment and income pooling across families and households.
Research on economic inequality expanded from a more narrow focus on wage inequalities and labor markets to other domains including incentive pay, corporate governance, income pooling and family formation, social and economic policy, and political institutions. We review and provide a critical discussion of recent research in these new domains and suggest areas where sociological research may provide new insight into the character and causes of contemporary income inequality.
Data Measure of America - a project of the Social Sciences Research Council that attempts to "provide easy-to-use yet methodologically sound tools for understanding well-being and opportunity in America. Websites focusing on inequality Equality Trust - from the UK and founded by authors of The Spirit Level whose research shows the impacts of inequality. Subjects: Public Policy.