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Why the wealth and income gap is widening

Philippe Waechter
Philippe Waechter12/22/2017 11:34 AM GMT+08  • 5 min read
Why the wealth and income gap is widening
(Dec 22): The report published recently by the Paris School of Economics measures income and wealth inequality around the world and reveals the high share of total income accounted for by the top earners, reflecting a very worrying situation. The report n
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(Dec 22): The report published recently by the Paris School of Economics measures income and wealth inequality around the world and reveals the high share of total income accounted for by the top earners, reflecting a very worrying situation. The report notes that the top 1% of earners worldwide captured 27% of total income growth since 1980 (net of inflation), while the bottom 50% captured only 12% of income growth over the same period. The world’s reference points have definitely changed over this period. Individual country income-inequality trajectories are sometimes even more stark, but inequality in Europe has remained relatively stable since 1980.

Income distribution inequality raises a number of questions, particularly the challenge of achieving strong and sustainable growth. If growth only benefits a very small minority, then our aims cannot merely be restricted to growth at any price. The trickle-down theory whereby the poor derive benefits when the rich get richer is clearly not working, so it is vital to come up with different targets and mechanisms alongside growth to ensure a more balanced society.

Some observers attribute Trump’s election success in the US last year to part of the population feeling that growth had passed them by, as illustrated by Branko Milanovic’s famous elephant chart, which suggests that US low and middle classes became worse off over the 1998-2008 period. They watched growth, had the drive to want to get a job, but it was all of little comfort to them.

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