Are Rising Inequalities Reversible?

By Gemma Tabet

Written: December 15, 2021

Theme of Issue: SDG 1, No Poverty. Here is the official UN link where you can learn more about this particular Sustainable Development Goal: https://sdgs.un.org/goals/goal1

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Photo from Unsplash by Ev

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The World Social Report 2020 published by the United Nations (UN) Department of Economic and Social Affairs (DESA) found that more than two thirds of the globe is affected by rising inequalities. It’s not just an issue that developing countries face, even countries with rapidly growing economies, like China or India have been faced with this challenge. Rising inequalities, from income differences, job insecurities and gender or ethnic discrimination, have led to mass protests such as Black Lives Matter marches and climate change activism in the past few years. Even though average incomes in developing countries are increasing at a faster rate, the income disparity is still great, and as UN’s Secretariat General, António Guterres wrote, “Income disparities and a lack of opportunities, are creating a vicious cycle of inequality, frustration and discontent across generations.” But why are inequalities rising? And are they reversible?

The World Social Report showed that 1% of the population, the ‘winners’ whose income has been growing since 1990, own 43% of global personal wealth, while the bottom 50% own only 1%. This 1% are those who earn at least $700,000 a year, and this gap in high-income countries is greatest in the United States (US) followed by the United Kingdom (UK). Here, neoliberalism advanced the most, aiming to reduce the size of the government through tax reduction and redistribution, undermining trade unions, privateering of state enterprises, and limitations of rules on the private sector. Meanwhile, Northern European and East Asian countries have lower levels of inequalities mostly because of greater public investment in education, housing and health, paid by higher taxes on the wealthy.

Rising inequalities are mainly impacted by four megatrends: technological innovation, climate change, urbanisation and international migration. Although technological innovation offers new economic growth, furthering health care, education and communication, it often leads to greater wage inequality and displaces workers. Advancements in technology in areas such as robotics and artificial intelligence means the abolishment of old jobs to create new occupations, but for now, only high-skilled workers are part of this 'fourth industrial revolution’, while middle and low skilled workers see lost opportunities and jobs.

The climate crisis is suffered most by developing countries, and according to the 2020 report, means that poor countries are becoming poorer, reversing much progress towards equality while richer countries continue to exploit resources. Rapid urbanisation means cities have huge disparities between the poor and the wealthy, who live closely to one another, highlighting inequalities of income, health care and more. 2020 also marked the first time in history where more people lived in urban areas than rural ones. Finally, international migration, in which more citizens of middle-income countries migrate abroad compared to low-income countries, means migrants have to compete for low-skilled work with low wages. This last megatrend, if carefully managed, could potentially have a positive side with aiding unemployment, creation of new opportunities and reduction of global disparities.

But the Covid-19 pandemic has only worsened inequalities, both for income and gender. The wealthy are not only able to keep well-paid jobs but also profit with rising stock markets and house prices. On the other hand, low-paid workers are more likely to have jobs suspended, by working in sectors like tourism or hospitality. In addition, their jobs, varying from nurses, teachers to cleaning, expose them more to the virus, a risk further elevated by cramped living spaces in apartments. This pandemic came on top of a decade of decreasing wages in the UK, US, and many other countries and has resulted in 71-100 million more people pushed into extreme poverty (earning around $1.90 a day).

Around 9.4% of the world’s population is in extreme poverty today, an almost 1% increase due to the Covid-19 pandemic. Source: World Bank

But apart from the rising income inequality, gender equality has been greatly hindered as well. Women work in most jobs hit hardest by the pandemic, are more likely to lose jobs than men, and female unpaid care work, which contributes to $10.8 trillion a year, has greatly risen with need of elder care, lockdown and the closure of schools and childcare facilities. Violence against women has risen too, as stay at home orders force many women to be stuck with their abusers, and a study in 13 countries showed that 1 in 2 women report direct or indirect acts of violence since the start of the pandemic.

It is clear then, that inequalities have risen in almost all sectors mainly due to four megatrends and the Covid-19 pandemic. The pay disparity has never been greater and progress in gender equality has been set back years, along with reduction of poverty. Today, 7 in 10 people live in countries where income inequality has increased. But is it all reversible? The 2020 World Social Report believes so, through the harnessing of the megatrends and with three key strategies.

By ensuring reduced inequalities are a central role in decision making, countries could effectively make the world a fairer place, both internally and externally. This means making sure new technology is used to reduce poverty and create jobs, protecting vulnerable people against climate change, creating inclusive cities and actively organising migration to be safe. The report outlines three strategies: ensuring equal access to opportunities, creating social policies for those in need (unemployment or disability) and true initiative to tackle prejudice and discrimination. Rising inequalities are a serious issue which must be dealt with on a global scale with international cooperation, and as António Guterres rightly said, “We stand together, or we fall apart.”