The Executive Summary of this report summarizes our initial findings and
conclusions. Three significant points are worth stressing here. First, it appears
increasingly clear to us that if the drivers of inequality are not addressed, then
inequality may become an increasing drag on economic growth due to a variety of
factors which we assess throughout this report and which we shall investigate
further in future research. The drag reflects wasted potential and a skills mismatch
within labor forces and also that more unequal societies are less successful at
investing productively for the long term. Indeed, we highlight that more unequal
countries now seem to be growing less robustly than more equal ones, i.e., growth
may be lower and more fragile at higher levels of economic inequality. From an
investment perspective, an inequality-driven economic drag could take quite
different paths in different countries leading to a consequent impact on longer-term
relative asset prices and exchange rates. In other words, and put bluntly, it makes
good economic sense to understand and address inequality.
Second, economic inequalities are everywhere, which makes addressing the
underlying issues with simple policy responses very challenging. We show in this
report that inequalities have grown not just between countries but between regions
within countries, between generations, between industries, and between firms. In
particular, demographic forces, most notably the aging population in the developed
markets, are creating a new set of inter-generational inequality challenges that are
likely to get worse. Globally, wealth inequality is significantly higher than income
inequality. Putting an inter-generational lens on this sharpens the issue. The debate
around inequality thus needs to be related to issues such as youth unemployment,
social mobility, and pension funding.
Third, inequality, as well as the impact of other exacerbating factors such as lower
social care budgets and the reduced provision of other government-funded
services, is now clearly a critical focus in the mainstream political process and in
election campaigns in many countries. In aggregate, it appears that inequality is
contributing markedly to declining social trust, the erosion of social cohesion, and
the fragmentation of the political process. Inequality will likely be an increasing
factor in election outcomes, with social media playing a growing role in shaping
perceptions. A consensus urgently needs to be reached between government, the
public sector, the private sector, and society at large about how to tackle the
challenge of inequality in a way that promotes inclusive and necessary economic
growth. At the moment, we risk political paralysis, or worse. […]
Why Inequality Matters:
– Economic inequalities have soared: Income and wealth inequality have risen
significantly across most advanced economies since the 1980s. Top income and
wealth shares have driven much of the increase in inequalities. There is no sign
of a reversal.
– Inequalities are everywhere: Inequalities have been rising between regions,
between generations, between industries, and between firms.
– Inequality is not exogenous: While technological change is contributing to
inequality, inequality was falling until the 1980s when tax rates began to become
less progressive, labor unions were weakened and the financial sector was
deregulated. Differences in inequality levels across countries are large.
– Inequality has contributed to declining social trust, the erosion of social
cohesion, and degradation of political processes: Civic engagement and
political participation have declined as economic inequalities have risen.
Inequality is also linked to rising support of populism.
– Inequality may undermine growth: More unequal countries tend to grow ‘less
fast’ than more equal ones. Global growth has declined in recent decades, while
inequalities have risen.
E per quanto riguarda le disuguaglianze intergenerazionali, ci dice che:
[…] Despite these various mediating factors, a recent U.S. study controlled for a range
of these variables and concluded that intergenerational mobility is still lower in areas
with greater income inequality (Chetty, Hendren, Kline, Saez, 2014). A related study,
also for the U.S., provides even stronger support for a causal effect. This finds,
strikingly, that the gaps in future income between children from families towards the
top versus the bottom of the income distribution is larger the greater the inequality in
the area they are living (Chetty and Hendren, 2016). A range of other factors (such
as high residential segregation, low quality of school and social capital), were found
to mediate the effects of economic inequality on mobility. However, the impact of
high income inequality remained when these were incorporated into the analysis.
Given this, and given income inequality increased in many advanced economies, a
key issue is whether intergenerational mobility has measurably deteriorated. There
are several complementary trends that suggest equality of opportunity may be
worsening. Increasing relative returns to education incentivize individuals to invest
in tertiary education. Recent, sustained growth in relative returns implies worsening
educational access — many individuals are simply unable to gain access to these
opportunities. In recent years, access issues relating to increasing upfront costs of education and stagnating real wages mean household income may have become a particularly important determinant of educational access.
This is crucial. Not only are growing wage premiums inefficient in aggregate (as all
those who could productively study are not doing so) but they increasingly reflect
allocative inefficiencies as access to limited opportunities is largely not meritocratic
but instead based on means. Historically, returns to college and intergenerational
mobility over time in the U.S. mimic each other quite remarkably since at least the
1940s (Mazumder, 2012). Further, there is a strong correlation between existing
returns to schooling and intergenerational mobility among advanced economies.
This may have also played a role in reductions in absolute mobility107 noted in
recent years in both the U.S. and U.K. as the best among younger
groups are increasingly unable to invest in in-demand skills. […]
Alcune conclusioni a cui giunge il report:
[…] But a few common elements likely apply. Just as inequality has many drivers and
operates at many different levels, the required policy responses also need to be
broad-based. Reinforcing redistribution and safeguarding the standard of living for
the poor as well as the middle class and providing them with a tangible stake in the
prospects of economies and societies is undoubtedly important, but probably only
part of the answer. To be effective, such actions also have to be focused on
changing the distribution of incomes from the market. Income from work is central,
supporting earnings will be key but a more even distribution of capital and the
income from it will also be vital.
Smart regulation of market forces will be required — smart to intervene to ensure
vibrant levels of competition in the product market, preventing and breaking up
monopolies where they stand in the way of innovation or prosperity, but also
mitigating incentives for rent-seeking. Safeguarding access to opportunity is critical.
This will likely require public investments in education, training and retraining, and
measures to increase access to capital for investments, including for human capital