Why Income Inequality Is a Growing Threat
Income inequality is the top threat facing the world in 2015, according to experts from the World Economic Forum. Along with increasing joblessness, global pollution, and severe weather events, inequality is a pressing concern cited in a report released by the World Economic Forum’s Global Agenda Councils. The report includes data from a survey of 1,767 leaders from academia, business, government, and non-profits.
That income inequality is a concern is not new, but the amount at which it’s growing makes the threat more real. “There’s been a staggering rise in inequality,” Christine Lagarde, the managing director of the International Monetary Fun, said in early October. “Seven out of 10 people in the world today live in countries where inequality has increased in the last three decades. And yet we know that excessive inequality stops growth, inhibits inclusion, and undermines social capital as well as trust.”
According to the Pew Research Center, “[m]ajorities in all of the 44 nations polled say the gap between rich and poor is a big problem facing their countries, and majorities in 28 nations identify this as a very big problem.” That’s right; 60% of the world says the income gap is a “very big problem in their country.” That concern is worse in developing economies and emerging markets, but is held by those in advanced markets as well.
However, people in advanced economies are reported to show more concern about public debt and unemployment than inequality, though they should note that the United States has seen quite an increase in inequality. Numbers from the U.S. Federal Reserve show that America’s richest 10% saw income increases of 10%, while the incomes of the poorest 20% fell by 8% between 2010 and 2013.
The center says that causes for this inequality are various, but people surveyed tend to rate governmental economic policies as the worst offender (with 29% saying those policies create the gap between the rich and poor). The next most-cited cause is wages, with 23%, followed by the educational system (11%), lack of individual hard work (10%), trade between countries (8%), and the structure of the tax system (8%). The World Economic Forum’s Outlook 2015 report suggests improving education, tax policy, and job creation are possible solutions to ameliorating the inequality problem.
Another huge problem looming is joblessness, which is not being seen as an issue of economic lull, but rather one of the what the job landscape looks like for the future. Harvard professor Larry Summers cited technological changes and increasing automated work as causes for this problem. The Pew Research Center’s 2014 #web25 survey of technology experts found that “half envision a future in which robots and digital agents have displaced significant numbers of both blue- and white-collar workers.”
“Everything that can be automated will be automated,” said Robert Cannon, an Internet law and policy expert. “Non-skilled jobs lacking in ‘human contribution’ will be replaced by automation when the economics are favorable. At the hardware store, the guy who used to cut keys has been replaced by a robot. In the law office, the clerks who used to prepare discovery have been replaced by software. IBM Watson is replacing researchers by reading every report ever written anywhere. This begs the question: What can the human contribute? The short answer is that if the job is one where that question cannot be answered positively, that job is not likely to exist.” Of course, only half the experts felt that there would be a significant displacement of workers, and many remained positive about what jobs technology combined with human ingenuity would continue to create.
Other threats on the Pew Research Center’s top 10 list include severe weather events and the weakening of democracy, but the No. 10 threat might be interesting to many in light of debates to come for the Affordable Care Act. Obviously, health care is even more of an issue in poor and developing nations, but here in the U.S. it’s still of the utmost concern. The Pew Research Center notes that the growing importance of health care is the No. 10 biggest threat in 2015, because, as “developing nations grow, health care spending in those countries is also expected to increase,” and a median of 59% across 34 nations call health care “a very big problem in their country.”