WORLD SOCIAL REPORT 2020
INEQUALITY
IN A RAPIDLY
CHANGING
WORLD
DEPARTMENT OF ECONOMIC AND SOCIAL AFFAIRS
WORLD SOCIAL REPORT 2020
INEQUALITY IN A RAPIDLY CHANGING WORLD
WORLD SOCIAL REPORT 2020
DEPARTMENT OF ECONOMIC AND SOCIAL AFFAIRS
The Department of Economic and Social Affairs of the United Nations Secretariat is a vital
interface between global policies in the economic, social and environmental spheres and
national action. The Department works in three main interlinked areas: (i) it compiles, generates
and analyses a wide range of economic, social and environmental data and information on which
States Members of the United Nations draw to review common problems and to take stock of
policy options; (ii) it facilitates the negotiations of Member States in many intergovernmental
bodies on joint courses of action to address ongoing or emerging global challenges; and (iii)
it advises interested Governments on the ways and means of translating policy frameworks
developed in United Nations conferences and summits into programmes at the country level
and, through technical assistance, helps build national capacities.
NOTE
The designations employed and the presentation of the material in the present publication
do not imply the expression of any opinion whatsoever on the part of the Secretariat of the
United Nations concerning the legal status of any country or territory or of its authorities, or
concerning the delimitations of its frontiers. The term “country” as used in the text of this
report also refers, as appropriate, to territories or areas. The designations of country groups in
the text and the tables are intended solely for statistical or analytical convenience and do not
necessarily express a judgement about the stage reached by a particular country or area in the
development process. Mention of the names of rms and commercial products does not imply
the endorsement of the United Nations. Symbols of United Nations documents are composed
of capital letters combined with gures.
ST/ESA/372
United Nations publication
Sales No. E.20.IV.1
ISBN 978-92-1-130392-6
eISBN 978-92-1-004367-0
Copyright © United Nations 2020
All rights reserved
INEQUALITY IN A RAPIDLY CHANGING WORLD
I
The World Social Report 2020: Inequality in a rapidly changing world comes as we
confront the harsh realities of a deeply unequal global landscape. In North and South
alike, mass protests have ared up, fueled by a combination of economic woes,
growing inequalities and job insecurity. Income disparities and a lack of opportunities
are creating a vicious cycle of inequality, frustration and discontent across generations.
The World Social Report 2020 documents deep divides within and across countries
despite an era of extraordinary economic growth and widespread improvements in
living standards. The report also underscores how gender, along with ethnicity, race,
place of residence and socioeconomic status, continue to shape the chances people
have in life.
In some parts of the world, divides based on identity are becoming more pronounced.
Meanwhile, gaps in newer areas, such as access to online and mobile technologies,
are emerging. Unless progress accelerates, the core promise of the 2030 Agenda
for Sustainable Development – to leave no one behind – will remain a still distant goal
by 2030.
The inequality challenge is global, and intimately connected to other pressing issues of
our times: not only rapid technological change, but also the climate crisis, urbanization
and migration. In many places, the growing tide of inequality could further swell under
the force of these megatrends.
The World Social Report 2020 sends a clear message: the future course of these complex
challenges is not irreversible. Technological change, migration, urbanization and even
the climate crisis can be harnessed for a more equitable and sustainable world, or they
can be left to further divide us.
Governments are key players in creating more equitable societies, protecting the most
vulnerable from the negative effects of these trends and ensuring that their benets
as well as adaption costs are broadly and equitably shared. But, in our increasingly
interconnected world, the decisions of other countries can constrain national
policy-making.
International cooperation is more important than ever.
FOREWORD
WORLD SOCIAL REPORT 2020
II
As we enter a Decade of Action to achieve the Sustainable Development Goals, the
United Nations system will be at the forefront of the ght against inequality, linking
global principles and policy know-how to local action.
The start of the Decade of Action coincides with the seventy-fth anniversary of the
United Nations. To mark this important occasion, we are opening a global conversation
on building the future we want. In a world of dramatic global changes, I encourage
people to express their views on how enhanced international cooperation can help build
a fair globalization.
The World Social Report 2020 frames the debate on how to curb inequality in these
turbulent times. Together, we must challenge the status quo and take action to tackle
deep-seated as well as emerging inequalities once and for all.
António Guterres
Secretary-General
of the United Nations
INEQUALITY IN A RAPIDLY CHANGING WORLD
III
The World Social Report is the agship publication on major social development
issues of the Department of Economic and Social Affairs (DESA) of the United Nations
Secretariat.
The 2020 report was prepared by a team managed by Wenyan Yang in the Division
for Inclusive Social Development, under the guidance of Elliott Harris and Daniela Bas.
The report’s core team, led by Marta Roig, included Maren Jiménez, Alex Julca, Hiroshi
Kawamura, Martijn Kind, Yern Fai Lee, Jonathan Perry and Julie Pewitt. Valuable inputs
were provided by other colleagues in DESA, including Astra Bonini, Clare Menozzi,
Vinod Mishra and Shantanu Mukherjee. The team is grateful to Eduardo Moreno and
his team at UN-Habitat for their valuable inputs to chapter 4 of the report.
The analysis contained in the report is based in part on background papers
prepared by independent experts Aaron Benavot and Kathleen Newland. The
collection and analysis of household survey data conducted by Bin Lian was
extremely important. Sabina Alkire, Corrine Mitchell and their team at the Oxford
Poverty and Human Development Initiative graciously provided data on the
multidimensional poverty index.
The team is particularly grateful to Francisco Ferreira, Carlos Gradín, Stephane
Hallegatte, Kenneth Iverson, Alfredo Jefferson, Christoph Lakner, Hitoshi Osaka,
Heriberto Tapia, Narasimha Rao, Julie Rozenberg and Brian Walsh for their guidance
and advice during the preparation of the report. The team would also like to thank
Jeni Klugman, Jorge Rodríguez as well as those DESA colleagues who provided
comments to the draft report during the formal review process.
At an early stage, the team also beneted from consultations on new research
on inequality with Robert Andersen, Bea Cantillon, Lucas Chancel, Miles Corak,
Hai-Anh Dang, Vidya Diwakar, Anirudh Krishna, Leslie McCall, Abigail McKnight,
Pippa Norris, Celine Thévenot and Stephen Younger.
The report was skillfully edited by Lois Jensen. Camilo Salomon provided the cover,
publication and graphics design.
ACKNOWLEDGEMENTS
WORLD SOCIAL REPORT 2020
IV
Foreword II
Acknowledgements IV
Explanatory notes XII
Executive summary 2
Introduction 16
1. Inequality: where we stand today 19
Key messages 20
Introduction 21
A. Economic inequality 21
1. Income inequality across countries 22
2. Trends in economic inequality within countries 26
a. Regional trends 26
b. Labour and capital 31
c. The impact of policy 32
B. Inequality of opportunity 34
1. Group-based disadvantage, poverty and income inequality 37
2. Trends in group-based inequality 40
C. The price of inequality 45
1. Slower economic growth and poverty reduction 45
2. Limited upward mobility 46
3. Captured political processes, mistrust of institutions and growing unrest 48
D. Conclusions 52
Annex 1: Measuring economic inequality 53
Annex 2: Group-based disparities in access to electricity and sanitation 56
CONTENTS
INEQUALITY IN A RAPIDLY CHANGING WORLD
V
2. The technological revolution: winners and losers 57
Key messages 58
Introduction 59
A. Technology, employment and inequality 60
1. Labour-saving and skill-biased technologies 61
2. Share of labour in national income: impacts of labour-saving technology 63
3. Wage divergence: impacts of skill-biased technology 65
B. Current technological divides and opportunities for inclusion 71
1. Technological divides and unequal access to basic services 71
2. New technologies and nancial inclusion 73
3. New technologies in other sectors 75
C. Policy considerations 78
3. Climate change: exacerbating poverty and inequality 81
Key messages 82
Introduction 83
A. Climate change through an inequality lens 84
1. Channels through which climate change exerts its effects 84
a. Livelihoods 84
b. Health and mortality 85
c. Agricultural production and food prices 86
d. Labour and economic productivity 86
2. Determinants of the uneven impacts of climate change 86
B. Unequal exposure and impacts across countries 88
C. Unequal exposure and impacts within countries 93
1. People living in poverty 93
a. Exposure 93
b. Susceptibility 94
c. Ability to cope and recover 95
WORLD SOCIAL REPORT 2020
VI
2. Other vulnerable groups 97
a. Smallholder farmers 97
b. Indigenous peoples 97
c. Rural coastal populations 98
D. Distributional effects of climate action: implications for policy 99
1. The effect of mitigation and adaptation policies on inequality 99
a. Mitigation policies 99
b. Adaptation policies 101
2. Promoting a just transition with equitable outcomes 104
a. A systems perspective 105
b. Climate action and social protection 105
4. Urbanization: expanding opportunities but deeper divides 107
Key messages 108
Introduction 109
A. Spatial inequalities: the rural-urban divide 109
B. An increasingly urban world 114
1. Inequality within cities: economic, spatial and social dimensions 115
2. Slums: home to more than 1 billion people 119
C. Policy implications: shared prosperity or rising inequality? 122
1. Cities that work for everyone 123
2. Coordinating, nancing and monitoring urban policies 125
5. International migration: a force for equality, under the right conditions 127
Key messages 128
Introduction 129
A. International migration and inequality among countries 130
1. Migration as part of the development process 130
2. The potential of migration to reduce inequality among countries 133
a. Migration of highly skilled workers 133
b. Migration of less-skilled workers 135
INEQUALITY IN A RAPIDLY CHANGING WORLD
VII
B. International migration and inequality within countries 135
1. The impact of remittances on income distribution 136
2. Migrants and the functioning of labour markets 138
a. In countries of destination 139
b. In countries of origin 140
3. Group-based inequality and the immigrant experience 140
C. Maximizing the potential of international migration 142
D. Conclusions 146
Annex 3 146
6. Promoting equality and social justice in a changing world 147
Key messages 148
A. Managing global trends through an equality lens 149
B. Reducing inequality within countries: what experience can teach us 152
1. Expanding people’s access to opportunity 153
a. Education: the great equalizer? 153
b. Investing in work 155
2. Promoting redistribution and strengthening social protection 157
a. The potential of progressive taxation 158
b. Strengthening social protection 159
3. The political economy of redistribution 162
4. Tackling prejudice and discrimination 164
C. Reducing inequality in an interconnected world 166
1. A crisis in multilateralism? 166
2. Revitalizing multilateralism to reduce inequality 168
References 171
WORLD SOCIAL REPORT 2020
VIII
BOXES
1.1 Improved data sources to measure income inequality 24
1.2 Trends in global income distribution 25
1.3 Brazil: the decline of income inequality and the uncertain road ahead 28
1.4 Group-based disadvantages: measuring inequality of opportunity 35
1.5 South Africa: promoting inclusion amidst record high inequality 36
1.6 The challenge of measuring who is being left behind 39
1.7 Socioeconomic status and the intergenerational transmission 44
of disadvantage
1.8 China: rising inequality alongside greater social mobility 47
1.9 The United States: opportunity “hoarding” among high-income households 49
1.10 Inequality and the rise of populism 51
2.1 United States of America: higher-education wage premiums atten 69
2.2 India: Harnessing the potential of digital technologies for more 76
inclusive development
3.1 Climate change and migration: what we know so far 87
3.2 Mitigation and adaptation: preventing and preparing for climate change 89
3.3 Climate change and poverty-environment traps 100
3.4 Tempering public reaction to rising fuel prices: a balancing act 102
4.1 China: bridging the rural-urban divide 113
4.2 Brazil’s planned capital: from a utopian vision to a cautionary tale 115
4.3 Viet Nam: small cities home to large share of urban poverty 117
4.4 Gated communities, symbols of exclusion 119
5.1 The place premium 135
5.2 Lending a helping hand: migrant networks 137
5.3 The women that stay behind 143
6.1 The viability of a universal basic income: the jury is still out 162
6.2 The Rohingya in Myanmar: citizenship denied on the basis of ethnicity 165
INEQUALITY IN A RAPIDLY CHANGING WORLD
IX
FIGURES
1.1 Mean incomes, top and bottom income deciles of selected 23
countries in 2015
B.1.1 Global growth incidence curve, 1988 to 2008 25
1.2 Share of income earned by the top 1 per cent, 1990 and 2015 30
1.3 Multidimensional poverty by ethnicity in selected countries 38
around 2010
1.4 Recent trends in the proportion of stunted children by socioeconomic 41
status and ethnic group, 1990s to 2010s
1.5 Recent trends in secondary school attendance by socioeconomic 41
status and ethnic group, 2000s to 2010s
1.6 Prociency scores in mathematics, reading and science literacy, 42
by origin of student, 2009 to 2018
1.7 Percentage of adults who completed secondary or higher 43
education by disability status, 1990s to 2010s
1.8 Labour force participation rates by disability status, 1990s to 2010s 43
A.1.1 Recent trends in the proportion of households with access 56
to electricity, by household head characteristics, 1990s to 2010s
A.1.2 Recent trends in the proportion of households with access to improved 56
sanitation by household head characteristics, 1990s to 2010s
2.1 Total employment shares by sector and by region, 1991 and 2018 61
2.2 Wages by workers’ level of education relative to workers with 63
no degree, United States of America, 1980-2015
2.3 Polarization of labour markets: changes in employment shares by skill 66
level in high- and low-income countries, around 1995 and around 2015
2.4 Estimates of the share of jobs at risk of being lost to automation 70
as a result of articial intelligence and advanced technologies, by study
2.5 Levels and trends of people worldwide without access to electricity, 72
by selected countries and regions, 2000-2018
2.6 Percentage of the global population with access to the Internet 73
by country groupings, 2005-2017
3.1 Climate risk by country, 2017 90
3.2 Climate-related economic losses by country income group, 1998-2017 92
WORLD SOCIAL REPORT 2020
X
4.1 Percentage of the population living in multidimensional poverty, 111
by region, 2018
4.2 Trends in four selected indicators of well-being for rural and 112
urban areas, 1990s to 2010s
4.3 Levels of urbanization in 1980, 2015 and projections to 2050 114
4.4 Proportion of urban population living in slums in developing 121
countries, 1990-2014
5.1 Migrants abroad by national income per capita, 2019 132
A.5.1 Emigration ratio by the Human Development Index of migrants’ 146
countries of origin, 2019
6.1 Impact of social insurance and social assistance programmes 160
on the Gini coecient of income in selected regions
6.2 Percentage of the global population with condence 167
in the United Nations
TABLES
1.1 Trends in income distribution by region, 1990 to 2016 27
2.1 Disparities in nancial account ownership by region, education, 74
income and gender, 2011-2017
3.1 Average ND-GAIN scores by country income group 91
4.1 Poverty share over proportion of total population by city size 116
INEQUALITY IN A RAPIDLY CHANGING WORLD
XI
The following symbols have been used in tables throughout the report:
A hyphen (-) between years, for example, 1990-1991, signies the full period involved,
including the beginning and end years.
A full stop (.) is used to indicate decimals.
A dollars sign ($) indicates United States dollars, unless otherwise stated.
Details and percentages in tables do not necessarily add to totals, because of rounding.
When a print edition of a source exists, the print version is the authoritative one. United
Nations documents reproduced online are deemed ocial only as they appear in the
United Nations Ocial Document System. United Nations documentation obtained
from other United Nations and non-United Nations sources are for informational
purposes only. The Organization does not make any warranties or representations as to
the accuracy or completeness of such materials.
The following abbreviations have been used:
BEPS Base erosion and prot shifting
CRED Centre for Research on the Epidemiology of Disasters
DHS Demographic and Health Surveys
FAO Food and Agriculture Organization of the United Nations
GDP Gross domestic product
GNI Gross national income
ICT Information and communication technologies
IEA International Energy Agency
ILO International Labour Organization
IMF International Monetary Fund
IOM International Organization for Migration
MICS Multiple Indicator Cluster Surveys
MPI Multidimensional Poverty Index
ND-GAIN Notre Dame Global Adaptation Initiative
OECD Organization for Economic Cooperation and Development
EXPLANATORY NOTES
WORLD SOCIAL REPORT 2020
XII
OPHI Oxford Poverty & Human Development Initiative
PISA Programme for International Student Assessment
PPP Purchasing power parity
SDGs Sustainable Development Goals
UBI Universal basic income
UNDP United Nations Development Programme
UN-HABITAT United Nations Human Settlements Programme
UN-ECLAC United Nations Economic Commission for Latin America
and the Caribbean
UN-ESCAP United Nations Economic and Social Commission for Asia
and the Pacic
UNESCO United Nations Educational Scientic and Cultural Organization
UNEP United Nations Environment Programme
UNFCCC United Nations Framework Convention on Climate Change
UNICEF United Nations Children’s Fund
UNISDR United Nations Oce for Disaster Risk Reduction
UNU-WIDER United Nations University World Institute for Development
Economics Research
WID World Inequality Database
WIID World Income Inequality Database
WHO World Health Organization
WMO World Meteorological Organization
For analytical purposes, countries are classied as belonging to either of two categories:
more developed or less developed. The less developed regions (also referred to as
developing countries in the report) include all countries in Africa, Asia (excluding Japan),
and Latin America and the Caribbean, as well as Oceania, excluding Australia and New
Zealand. The more developed regions (also referred to as developed countries in the
Report) comprise Europe and Northern America, plus Australia, Japan and New Zealand.
The group of least developed countries comprises 47 countries: Afghanistan, Angola,
Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African Republic,
Chad, Comoros, Democratic Republic of the Congo, Djibouti, Eritrea, Ethiopia, Gambia,
Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia,
Madagascar, Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda,
Sao Tome and Principe, Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan,
Sudan, Timor-Leste, Togo, Tuvalu, Uganda, United Republic of Tanzania, Vanuatu, Yemen
and Zambia. These countries are also included in the less developed regions.
INEQUALITY IN A RAPIDLY CHANGING WORLD
XIII
This report uses the following country groupings or sub groupings:
Sub-Saharan Africa, which comprises the following countries: Angola, Benin, Botswana,
Burkina Faso, Burundi, Cabo Verde, Cameroon, Central African Republic, Chad,
Comoros, Congo, Côte d’Ivoire, Democratic Republic of the Congo, Djibouti, Equatorial
Guinea, Eritrea, Eswatini, Ethiopia, Gabon, Gambia, Ghana, Guinea, Guinea-Bissau,
Kenya, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mauritius, Mayotte,
Mozambique, Namibia, Niger, Nigeria, Réunion, Rwanda, Saint Helena, Sao Tome and
Principe, Senegal, Seychelles, Sierra Leone, Somalia, South Africa, South Sudan, Togo,
Uganda, United Republic of Tanzania, Zambia and Zimbabwe.
Northern Africa, which comprises the following countries and areas: Algeria, Egypt,
Libya, Morocco, Sudan, Tunisia, Western Sahara.
Central Asia, which comprises the following countries: Kazakhstan, Kyrgyzstan,
Tajikistan, Turkmenistan, Uzbekistan.
Eastern Asia, which comprises the following countries and areas: China, Hong Kong
Special Administrative Region, China, Macao Special Administrative Region, China,
Democratic People’s Republic of Korea, Japan, Mongolia, Republic of Korea.
South-Eastern Asia, which comprises the following countries: Brunei Darussalam,
Cambodia, Indonesia, Lao People’s Democratic Republic, Malaysia, Myanmar,
Philippines, Singapore, Thailand, Timor-Leste, Viet Nam.
Southern Asia, which comprises the following countries: Afghanistan, Bangladesh,
Bhutan, India, Islamic Republic of Iran, Maldives, Nepal, Pakistan, Sri Lanka.
Western Asia, which comprises the following countries and areas: Armenia, Azerbaijan,
Bahrain, Cyprus, Georgia, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi
Arabia, State of Palestine, Syrian Arab Republic, Turkey, United Arab Emirates, Yemen.
Eastern Europe, which comprises the following countries and areas: Belarus, Bulgaria,
Czechia, Hungary, Poland, Republic of Moldova, Romania, Russian Federation,
Slovakia, Ukraine.
Northern Europe, which comprises the following countries and areas: Åland Islands,
Channel Islands, Denmark, Estonia, Faeroe Islands, Finland, Guernsey, Iceland, Ireland,
Isle of Man, Jersey, Latvia, Lithuania, Norway, Sark, Svalbard and Jan Mayen Islands,
Sweden, United Kingdom of Great Britain and Northern Ireland.
Southern Europe, which comprises the following countries and areas: Albania, Andorra,
Bosnia and Herzegovina, Croatia, Gibraltar, Greece, Holy See, Italy, Malta, Montenegro,
North Macedonia, Portugal, San Marino, Serbia, Slovenia, Spain.
Western Europe, which comprises the following countries and areas: Austria, Belgium,
France, Germany, Liechtenstein, Luxembourg, Monaco, Netherlands, Switzerland.
WORLD SOCIAL REPORT 2020
XIV
Northern America, which comprises the following countries and areas: Bermuda,
Canada, Greenland, Saint Pierre and Miquelon, United States.
Latin America and the Caribbean, which comprises the following countries and areas:
Anguilla, Antigua and Barbuda, Argentina, Aruba, Bahamas, Barbados, Belize, Bolivia
(Plurinational State of), Bonaire, Sint Eustatius and Saba, Brazil, British Virgin Islands,
Cayman Islands, Chile, Colombia, Costa Rica, Cuba, Curaçao, Dominica, Dominican
Republic, Ecuador, El Salvador, Falkland Islands (Malvinas), French Guiana, Grenada,
Guadeloupe, Guatemala, Guyana, Haiti, Honduras, Jamaica, Martinique, Mexico,
Montserrat, Nicaragua, Panama, Paraguay, Peru, Puerto Rico, Saint Barthélemy, Saint
Kitts and Nevis, Saint Lucia, Saint Martin (French part), Saint Vincent and the Grenadines,
Sint Maarten (Dutch part), Suriname, Trinidad and Tobago, Turks and Caicos Islands,
United States Virgin Islands, Uruguay, Venezuela (Bolivarian Republic of).
Oceania, which comprises the following countries and areas: Australia, American
Samoa, Cook Islands, Fiji, French Polynesia, Guam, Kiribati, Marshall Islands, Micronesia
(Federated States of), Nauru, New Caledonia, New Zealand, Niue, Northern Mariana
Islands, Palau, Papua New Guinea, Samoa, Solomon Islands, Tokelau, Tonga, Tuvalu,
Vanuatu, Wallis and Futuna Islands.
The group of small island developing States includes 58 countries or territories located
in the Caribbean (29), the Pacic (20), and the Atlantic, Indian Ocean, Mediterranean
and South China Sea (AIMS) (9). Further information is available at http://unohrlls.org/
about-sids/.
For the current 2020 scal year, low-income economies are dened as those with a
GNI per capita, calculated using the World Bank Atlas method, of $1,025 or less in
2018; lower middle-income economies are those with a GNI per capita between $1,026
and $3,995; upper middle-income economies are those with a GNI per capita between
$3,996 and $12,375; high-income economies are those with a GNI per capita of $12,376
or more:
Low-income economies: Afghanistan, Benin, Burkina Faso, Burundi, Central African
Republic, Chad, Democratic People’s Republic of Korea, Democratic Republic of the
Congo, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Liberia, Madagascar,
Malawi, Mali, Mozambique, Nepal, Niger, Rwanda, Sierra Leone, Somalia, South Sudan,
Syrian Arab Republic, Tajikistan, Togo, Uganda, United Republic of Tanzania, Yemen.
Lower-middle-income economies: Angola, Bangladesh, Bhutan, Bolivia (Plurinational
State of), Cabo Verde, Cambodia, Cameroon, Comoros, Congo, Côte d'Ivoire, Djibouti,
Egypt, El Salvador, Eswatini, Ghana, Honduras, India, Indonesia, Kenya, Kiribati,
Kyrgyzstan, Lao People's Democratic Republic, Lesotho, Mauritania, Micronesia
(Federated States of), Mongolia, Morocco, Myanmar, Nicaragua, Nigeria, Pakistan,
Papua New Guinea, Philippines, Republic of Moldova, São Tomé and Principe, Senegal,
Solomon Islands, State of Palestine, Sudan, Timor-Leste, Tunisia, Ukraine, Uzbekistan,
Vanuatu, Viet Nam, Zambia, Zimbabwe.
INEQUALITY IN A RAPIDLY CHANGING WORLD
XV
Upper-middle-income economies: Albania, Algeria, American Samoa, Argentina, Armenia,
Azerbaijan, Belarus, Belize, Bosnia and Herzegovina, Botswana, Brazil, Bulgaria, China,
Colombia, Costa Rica, Cuba, Dominica, Dominican Republic, Ecuador, Equatorial Guinea,
Fiji, Gabon, Georgia, Grenada, Guatemala, Guyana, Iran (Islamic Republic of), Iraq,
Jamaica, Jordan, Kazakhstan, Lebanon, Libya, Malaysia, Maldives, Marshall Islands,
Mauritius, Mexico, Montenegro, Namibia, Nauru, North Macedonia, Paraguay, Peru,
Romania, Russian Federation, Saint Lucia, Saint Vincent and the Grenadines, Samoa,
Serbia, Sri Lanka, South Africa, Suriname, Thailand, Tonga, Turkey, Turkmenistan, Tuvalu,
Venezuela (Bolivarian Republic of).
High-income economies: Andorra, Antigua and Barbuda, Aruba, Australia, Austria,
Bahamas, Bahrain, Barbados, Belgium, Bermuda, British Virgin Islands, Brunei
Darussalam, Canada, Cayman Islands, Channel Islands, Chile, Croatia, Curaçao,
Cyprus, Czechia, Denmark, Estonia, Faroe Islands, Finland, France, French Polynesia,
Germany, Gibraltar, Greece, Greenland, Guam, Hong Kong, SAR of China, Hungary,
Iceland, Ireland, Isle of Man, Israel, Italy, Japan, Kuwait, Latvia, Liechtenstein, Lithuania,
Luxembourg, Macao, SAR of China, Malta, Monaco, Netherlands, New Caledonia, New
Zealand, Northern Mariana Islands, Norway, Oman, Palau, Panama, Poland, Portugal,
Puerto Rico, Qatar, Republic of Korea, San Marino, Saudi Arabia, Seychelles, Singapore,
Sint Maarten (Dutch part), Slovakia, Slovenia, Spain, Saint Kitts and Nevis, Sweden,
Switzerland, Taiwan, Province of China, Trinidad and Tobago, Turks and Caicos Islands,
United Arab Emirates, United Kingdom of Great Britain and Northern Ireland, United
States of America, United States Virgin Islands, Uruguay.
Disclaimers for map in Figure 3.1:
The designations employed and the presentation of material on this map do not
imply the expression of any opinion whatsoever on the part of the Secretariat of the
United Nations concerning the legal status of any country, territory, city or area or of its
authorities, or concerning the delimitation of its frontiers or boundaries.
Dotted line represents approximately the Line of Control in Jammu and Kashmir agreed
upon by India and Pakistan. The nal status of Jammu and Kashmir has not yet been
agreed upon by the parties.
Final boundary between the Republic of Sudan and the Republic of South Sudan has not
yet been determined.
A dispute exists between the Governments of Argentina and the United Kingdom
of Great Britain and Northern Ireland concerning sovereignty over the Falkland
Islands (Malvinas).
WORLD SOCIAL REPORT 2020
XVI
QUOTE
1
INEQUALITY IN A RAPIDLY CHANGING WORLD
Fifteen years ago, the Report on the World Social Situation 2005 warned that growing
inequality could jeopardize the achievement of internationally agreed development
goals. The report noted that the world was at a crossroads. If the vision of a shared
future was to be carried forward, world leaders had to seize every opportunity to take
bold and decisive action to reduce inequality (United Nations, 2005).
Inequality has since moved to the forefront of the policy debate. “Leave no one behind”
is the rallying cry of the 2030 Agenda for Sustainable Development. Reducing inequality
within and among countries is Goal 10 of the Sustainable Development Goals (SDGs) –
with good reason. The extraordinary economic growth and widespread improvements
in well-being observed over the last several decades have failed to close the deep divides
within and across countries.
Powerful economic, social and environmental forces are affecting inequality. The
implications of these global forces – or megatrends – are broad and varied. Some can
help equalize opportunities, while others are exerting mounting pressure on income
inequality, mainly through their effect on labour markets.
This report examines the impact of four such megatrends on inequality: technological
innovation, climate change, urbanization and international migration. Technological
change can be an engine of economic growth, offering new possibilities in health care,
education, communication and productivity. But it can also exacerbate wage inequality
and displace workers. The accelerating impacts of climate change are being felt around
the world, but the poorest countries and groups are suffering most, especially those
trying to eke out a living in rural areas. Urbanization offers unmatched opportunities,
yet cities nd poverty and wealth in close proximity, making high and growing levels
of inequality all the more glaring. International migration allows millions of people to
seek new opportunities and can help reduce global disparities, but only if it occurs
EXECUTIVE
SUMMARY
WORLD SOCIAL REPORT 2020WORLD SOCIAL REPORT 2020
2
WHETHER THESE
MEGATRENDS
ARE HARNESSED
TO ENCOURAGE
A MORE EQUITABLE
AND SUSTAINABLE
WORLD, OR
ALLOWED TO
EXACERBATE
DISPARITIES
AND DIVISIONS,
WILL LARGELY
DETERMINE THE
SHAPE OF OUR
COMMON FUTURE
under orderly and safe conditions. While these megatrends and the policies aimed at
managing them interact with each other in multiple ways, the focus of this report is
exclusively on the direct effect of each megatrend on inequality.
Whether these megatrends are harnessed to encourage a more equitable and
sustainable world, or allowed to exacerbate disparities and divisions, will largely
determine the shape of our common future.
INEQUALITY: WHERE WE STAND TODAY
For the rst time within the context of internationally agreed development goals, the
2030 Agenda includes targets to reduce inequality based on income.
Income inequality has increased in most developed countries and in some middle-income
countries, including China and India, since 1990. Countries where inequality has grown
are home to more than two thirds (71 per cent) of the world population. Yet growing
inequality is not a universal trend. The Gini coecient of income inequality has declined
in most countries of Latin America and the Caribbean and in several African and Asian
countries over the last two decades.
Despite progress in some countries, income and wealth are increasingly concentrated
at the top. The share of income going to the richest 1 per cent of the population
increased in 59 out of 100 countries with data from 1990 to 2015.
1
Meanwhile,
the poorest 40 per cent earned less than 25 per cent of income in all 92 countries
with data (United Nations, 2019a).
While economic inequality has grown within many countries, inequality among countries
is declining in relative terms. Strong economic growth in China and other emerging
economies in Asia has been the main driver of this decline. However, this convergence
is not evenly distributed, and the differences among some countries and regions are
still considerable. The average income of people living in Northern America is 16 times
higher than that of people in sub-Saharan Africa, for example. Meeting the targets
and Goals of the 2030 Agenda “for all nations and peoples” requires reducing these
stark disparities.
The 2030 Agenda also calls for ensuring equal opportunity and draws attention to
attributes and circumstances that affect access to opportunity, namely age, sex,
Two thirds of the world’s population live
in countries where inequality has grown
1
World Inequality Database. Available at https://wid.world/data (accessed on 6 November 2019).
INEQUALITY IN A RAPIDLY CHANGING WORLD
3
disability, race, ethnicity, origin, religion and economic or other status. While high and
growing income inequality is fuelling polarized political debates around the globe, a
consensus has indeed emerged that all should enjoy equal access to opportunity – that
one’s chances to succeed in life should not be determined by circumstances beyond an
individual’s control.
Major progress in fullling basic needs – through improved child health and increased
completion of primary education, for example – has moderated inequalities among
some population groups. However, unless progress accelerates, children from those
groups that are furthest behind will remain behind by 2030. At the rate of progress
observed from the 1990s to the 2010s, it will take more than four decades to close the
stunting gap related to ethnicity, for instance.
Evidence suggests that gaps in more advanced accomplishments persist or are
widening. For example, disparities in secondary school attendance by ethnic group,
wealth quintile and educational level of the household head have increased since the
1990s in developing countries with data.
2
Gaps in learning outcomes are large and
persistent as well.
Such inequalities have historical roots, but often continue even after the conditions that
generated them change. Ethnic minorities, for instance, often remain disadvantaged
even in countries where special efforts are made to promote their inclusion. Members
of groups that suffered from discrimination in the past start off with fewer assets
and lower levels of social and human capital than other groups. While prejudice and
discrimination are decried around the globe, they remain pervasive obstacles to equal
opportunity – and to the achievement of the SDGs.
Highly unequal societies are less effective at reducing poverty than those with low
levels of inequality. They also grow more slowly and are less successful at sustaining
economic growth. Disparities in health and education make it challenging for people to
break out of the cycle of poverty, leading to the transmission of disadvantage from one
generation to the next.
2
Calculations based on Demographic and Health Survey (DHS) and Multiple Indicator Cluster Survey (MICS) data. For more
information, see chapter 1 of this report.
At the rate of progress observed from
the 1990s to the 2010s, it will take more
than four decades to close the stunting
gap between ethnic groups
WORLD SOCIAL REPORT 2020
4
Without appropriate policies and institutions in place, inequalities concentrate political
inuence among those who are already better off, which tends to preserve or even widen
opportunity gaps. Growing political inuence among the more fortunate erodes trust in
the ability of Governments to address the needs of the majority. This lack of trust, in
turn, can destabilize political systems and hinder the functioning of democracy. Today,
popular discontent is high even in countries that have fully recovered from the 2008
nancial and economic crisis and have beneted from steady growth in recent years.
Yet rising inequality is not inevitable. Inequality levels and trends differ among countries
that are at similar levels of development and equally exposed to trade, technological
innovation and even the effects of climate change. National policies and institutions
do matter.
THE TECHNOLOGICAL REVOLUTION:
WINNERS AND LOSERS
The world is in the midst of rapid, revolutionary and often disruptive technological
breakthroughs. Advances in biology and genetics, robotics and articial intelligence,
3D printing and other digital technologies are transforming economies and societies,
with unfolding and often unforeseen consequences.
For all its promise, technological change tends to create winners and losers. And
its current pace brings new and urgent policy challenges for navigating uncharted
territories. Much depends on how these policies play out, especially on the degree to
which Governments and international institutions address distributional effects and
maximize the benets and opportunities that new technologies can bring.
In the world of work, emphasis has focused largely on the potential implications of
technological change for job destruction. Yet technologies usually replace specic
tasks, rather than entire jobs. Often ignored is the fact that new technologies also
generate new jobs and tasks, including those necessary to use, test, supervise and
market new products and services.
At present, important differences are found across countries in how jobs are being
redesigned and tasks regrouped into new or existing jobs. Whether the automation of
tasks inevitably leads to the disappearance of jobs is as much a technological question
as it is an institutional one. Regulations and institutions inuence the protability of
regrouping tasks into new jobs and the ability of workers to upgrade their skills to take
on new responsibilities.
So far, highly skilled workers are beneting the most from new technologies.
Job disruption – and, at times, destruction – is affecting mainly low-skilled and
middle-skilled workers in routine manual and cognitive tasks. Moreover, in many
countries, the extraordinary gains brought about by new technologies are being
FOR ALL
ITS PROMISE,
TECHNOLOGICAL
CHANGE TENDS TO
CREATE WINNERS
AND LOSERS, AND
ITS CURRENT PACE
BRINGS NEW AND
URGENT POLICY
CHALLENGES
RISING INEQUALITY
IS NOT INEVITABLE.
NATIONAL POLICIES
AND INSTITUTIONS
DO MATTER
INEQUALITY IN A RAPIDLY CHANGING WORLD
5
captured by a small number of dominant companies. If these trends continue,
they will lead to even greater polarization of the labour force, with less demand for
middle-skilled workers. They will also intensify wage inequality.
Automation has led to a reduction in jobs in routine-intensive occupations and is
likely to continue affecting them. However, there is no solid evidence to suggest that
recent technological advances have led to massive increases in joblessness or that
they will make work obsolete. Where new technologies are pushing wage and income
inequality higher, they are doing so mainly through increasing workforce polarization
and non-standard working arrangements that often lack the benets and stability of
regular jobs.
Digital innovation and articial intelligence are opening up opportunities in sectors
such as education, health and banking, with far-reaching implications for equality.
The use of the Internet and mobile phones, for instance, is enabling more people
in developing countries to access nancial services. Open online courses can help
democratize access to education. Mobile health applications make health-care
delivery and monitoring systems available to underserved areas and populations.
Improvements in data availability brought about by new technologies can enhance
governance and facilitate participation, helping individuals and groups to voice their
opinions and organize on behalf of common causes.
The potential of new technologies to foster sustainable development can only be
realized, however, if everyone has access to them. Regrettably, new technologies are
reinforcing various forms of inequality and creating new “digital divides”. Close to 87
per cent of the population of developed countries have Internet access, compared to
19 per cent in the least developed countries.
3
Access to basic technologies such as
mobile phones has improved rapidly, but gaps in access to the Internet and computers
persist. The potential of new technologies is particularly strong for youth, but it can
also widen the divide between younger and older people.
The speed of diffusion is important. Given the comparative advantage that “rst
movers” enjoy in many sectors linked to new technologies, gaps in access can push
poorer countries and disadvantaged groups further behind. Many of the benets
3
ITU Statistics (International Telecommunication Union). Available at www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx.
Highly skilled workers
are beneting the most
from new technologies
WORLD SOCIAL REPORT 2020
6
UNADDRESSED,
CLIMATE CHANGE
WILL INCREASE
INEQUALITY
WITHIN COUNTRIES
AND MAY EVEN
REVERSE CURRENT
PROGRESS
IN REDUCING
INEQUALITY
AMONG COUNTRIES
from new technologies that developing countries could realize may not materialize if
Governments and leading rms, which are often located in developed countries, fail to
reduce barriers to the entry and diffusion of such technologies.
The deployment of new technologies can exacerbate inequalities instead of reducing
them, even in contexts of broad accessibility. Gaps in education can widen, for
instance, if new technologies primarily benet those pursuing tertiary education,
or if they disproportionately improve the learning outcomes of children in wealthier
households.
In sum, as in any process of rapid structural change, technological innovation can
be disruptive. But its effects are not set in stone. Proactive policies and supportive
institutions can help ensure that technological dividends are broadly shared.
Three key policy interventions are called for. First, invest in skills that enable workers
to perform new tasks over a lifetime of changing work environments. Once-and-for-all
education at a young age is no longer sucient. Second, support people through work
and life transitions, including through universal access to social protection. Third,
strengthen efforts to bridge technological divides within and among countries.
CLIMATE CHANGE: EXACERBATING POVERTY
AND INEQUALITY
Climate change is accelerating environmental degradation and increasing the
frequency and intensity of extreme weather events, among other impacts. The effects
of both gradual environmental degradation and sudden shocks, such as hurricanes
and oods, disproportionately affect vulnerable populations. Whether they impinge on
infrastructure, livelihoods, resources, health or even the loss of lives and homes, these
impacts are by no means uniform across countries or population groups.
Rising temperatures have adversely affected economic growth in countries located in
the tropics, which tend to be poorer than countries located in more temperate climate
zones. They have made the world’s poorest countries poorer. The ratio between the
income of the richest and poorest 10 per cent of the global population is 25 per cent
The ratio between the income of the
richest and poorest 10 per cent of the
global population is 25 per cent larger
than it would be in a world without
global warming
INEQUALITY IN A RAPIDLY CHANGING WORLD
7
larger than it would be in a world without global warming (Diffenbaugh and Burke, 2019).
Unaddressed, climate change may even reverse current progress in reducing inequality
among countries.
Within countries, people living in poverty and other disadvantaged groups – including
indigenous peoples and small landholders – are disproportionately exposed to climate
change. A majority of people in these groups live in rural areas and are highly dependent
on agricultural, shing and other ecosystem-related income. Their lives and livelihoods
are nely attuned to environmental conditions that are now changing rapidly. People
living in poverty are also more affected by infectious and respiratory diseases that
climate change will aggravate. Similarly, they are more susceptible to damage from
climate change than their richer counterparts living in the same regions. Finally, they
have fewer resources to help them cope with and recover from both sudden- and
slow-onset effects of climate change.
Climate change is affecting both the prevalence and depth of poverty, thereby
contributing to inequality. It is making it harder for people to escape poverty and is
increasing their vulnerability to falling into poverty, due to price shocks caused by
sudden changes in agricultural production, natural disasters and environmentally
triggered health problems. Estimates suggest that even under a low-impact scenario
where powerful mitigation and adaption strategies are successful, between 3 million
and 16 million people will fall into poverty by 2030 because of climate change. Under
a high-impact scenario, those gures could rise to between 35 million and 122 million
(Hallegatte and others, 2016).
Climate change is also having an impact on intergenerational inequality. The
disruptions caused by climate change are likely to reduce the livelihood opportunities
of future generations, especially in countries hardest hit, and exacerbate downward
intergenerational mobility.
Climate action and the transition to green economies bring opportunities to reduce
poverty and inequality. Economic restructuring brought about by the greening of
economies will result in the loss of lower-skilled jobs in carbon-intensive sectors.
However, with carefully designed adaptation strategies, it can result in the creation of
many new jobs worldwide and overall net gains.
A just, equality-enhancing transition towards green economies calls for the integration
of climate action with macroeconomic, labour and social policies aimed at job creation,
skills development and adequate support for those who will be harmed. Policies
aimed at reducing poverty and inequality, in turn, can help reduce the negative effects
of climate change and provide the means for low-income households to engage in
environmentally sustainable livelihoods.
WORLD SOCIAL REPORT 2020
8
THE CURRENT
SPEED OF
URBANIZATION
IN DEVELOPING
COUNTRIES AND
ITS EFFECTS
ON INEQUALITY
MAKES URBAN
GOVERNANCE
AND ADEQUATE
PLANNING
INCREASINGLY
URGENT
URBANIZATION: EXPANDING OPPORTUNITIES
BUT DEEPER DIVIDES
Geography matters. Where people are born and live has a lasting inuence on their
opportunities in life. Access to safe drinking water, electricity, health care, good
schools, decent work and other goals envisioned in the 2030 Agenda have a clear
spatial dimension. Regional inequalities within countries are often larger than
inequalities among countries.
Disparities between rural and urban areas stand out. The rural-urban divide is closing
in some countries but widening in others. The gap in levels of stunting among
children, for instance, has declined in 35 out of 53 developing countries with data –
and has increased in the remaining 18 – since the 1990s. The difference between the
percentage of urban and rural residents that have access to electricity has increased
in 23 out of 55 countries with data.
4
For the rst time in history, more people now live in urban than in rural areas. Over the
next three decades, all population growth is expected to occur in cities which will also
draw in rural populations through migration. This transformation has implications for
every aspect of sustainable development, including inequalities. Cities are catalysts
for economic growth, innovation and employment. However, urban areas are more
unequal than rural areas. In most cities and towns, areas characterized by high levels
of wealth and modern infrastructure coexist with pockets of severe deprivation, often
side by side.
The urban divide has economic, social and spatial dimensions. Economically, the Gini
coecient of income is larger in cities than in rural areas in most developed and
developing countries. Socially, rapid urbanization has led to growing concerns about
deteriorating health conditions. Even if maternal and child health are generally better
in urban than in rural areas, they are at times worse in urban slums and other poor
neighbourhoods of cities than in rural areas. Unregulated land and housing markets
as well as poor urban planning can concentrate disadvantages in specic locations
and lead to a vicious cycle of exclusion and marginalization. Slums are the most
visible symptom of exclusion in divided cities. In 2016, one in four urban residents, or
over one billion people, lived in slums.
4
Calculations based on DHS and MICS data. For more information, see chapter 4 of this report.
Income inequality is usually larger
in cities than in rural areas
INEQUALITY IN A RAPIDLY CHANGING WORLD
9
Yet levels of inequality and poverty vary greatly by city, even within a single country.
Although spatial segregation and exclusion, based on income, race, migratory status
or other factors, are common to many urban areas, cities are unique, with different
histories and patterns. Inequalities have increased in some as they have grown and
developed but have declined in others.
In an increasingly urban world, innovative planning and city management are essential
to reduce inequality and achieve all other development goals. Too often, Governments
merely react to urbanization once imbalances in the process have become blatant. The
current speed of urbanization, especially in poor countries, makes urban governance
and appropriate urban design and planning increasingly urgent.
Four components are found in successful policy approaches to reduce inequality
and promote inclusive cities. First, secure housing and land rights, with a focus on
meeting the needs of people living in poverty, and provide equitable public services.
Second, improve spatial connectivity and promote public transportation to facilitate
equal access to the opportunities and amenities that cities offer. Third, promote
access to decent work and formal employment. Fourth, strengthen the political and
administrative capacities of local governments to respond quickly to increasingly
complex challenges, including those related to climate change.
INTERNATIONAL MIGRATION: A FORCE FOR EQUALITY
UNDER THE RIGHT CONDITIONS
International migration is a powerful symbol of global inequality, whether in terms of
wages, opportunities or lifestyles. Millions of people move each year across countries
and continents to seek better job opportunities, study, marry, reunite with family
members or ee conict or natural disasters.
Migration does not arise only from inequality or failed development: middle-income
countries send more migrants abroad than low-income countries. In general,
migration takes off once countries have started to grow economically and develop.
Industrialization and urbanization have long been associated with massive
displacements of people, mostly from rural to urban areas, but also across countries. As
countries develop, more people have the economic means to migrate. Improvements
in education and access to ideas, information and affordable transportation often
increase the desire and opportunities to migrate.
International migration generally benets most migrants and their countries of origin
and destination. Yet its costs and benets are not shared evenly across countries
or within countries.
In countries of origin, benets accrue through remittances and other transfers by
migrant communities abroad. Remittances help to reduce the scale and severity of
WORLD SOCIAL REPORT 2020
10
poverty in these countries and even contribute to the reduction of inequality among
countries. Indeed, more than 75 per cent of ocially recorded remittances were
received by low- and middle-income countries in 2018 (World Bank, 2019a).
Findings on the impact of remittances within countries are less conclusive. Wealthier
and more skilled migrants send remittances less often than less skilled migrants, but
the amounts wealthier migrants send are larger. Households at the lower end of the
income distribution are disproportionately affected by the high transaction costs of
sending money. Countries that restrict the immigration of less-skilled workers reduce
the ow of remittances and their potential levelling effect.
The impact of migration on the labour markets of destination countries are at the
core of current public debate. Concerns have been voiced over the negative effects
of immigration on wages, based on the belief that migrants compete directly with
native-born workers. However, less-skilled migrant workers often accept jobs that
non-migrants are not willing to perform, including in agriculture, mining, construction
and domestic work. Where migrants compete with less-skilled natives, immigration
may indeed exert downward pressure on already low wages and push inequality
higher. On the other hand, where they offer skills that are in short supply and services
that non-migrants are not willing to provide, migrants may contribute to the smooth
functioning of the labour market and even have a positive effect on employment.
In developing regions, the emigration of skilled workers is a cause for concern. It
can lead to shortages of professionals with key skills, such as teachers, doctors
and nurses. It can hamper economic growth and essentially subsidize richer
countries with highly trained workers. But positive feedback effects are possible
as well. Migrants abroad and those who return can generate flows of knowledge,
foreign direct investment and trade. In China, India and the Republic of Korea, for
instance, migrants abroad and returnees have been a driving force in the growth
of the software industry and other high-tech manufacturing industries. Whether
the emigration of skilled workers constitutes a net loss or a net gain – including
through the flows of knowledge and investment it generates – depends on the
country of origin. However, it is safe to assume that countries of destination may
gain, even more than sending countries, from the inflow of skills. Skilled migration
may contribute to rising international inequality if high-income countries, typically
countries of destination, gain more than low-income countries.
The 2030 Agenda highlights the role that migration can play in reducing inequality.
Yet the equalizing effects of migration are far from guaranteed. To a large extent,
the degree to which developing countries – and migrants themselves – benefit from
migration, and whether migration reduces or exacerbates inequalities, depends on
the conditions under which migration takes place.
TO A LARGE
EXTENT, THE
BENEFITS FROM
MIGRATION
DEPEND ON
THE CONDITIONS
UNDER WHICH
IT TAKES PLACE
INEQUALITY IN A RAPIDLY CHANGING WORLD
11
Most destination countries in developed regions encourage the admission of highly
skilled migrants while offering few avenues for the legal entry of less-skilled or
educated migrants. Offering legal pathways for migration to less-educated workers
can benet both developed and developing countries. Moreover, actively promoting
their integration and that of their families, through access to health care, education
and other services, can benet society at large. Establishing mechanisms for the
formal recognition of educational credentials earned abroad would also help increase
migrants’ contributions. In order to ll specic job gaps, Governments in destination
countries may also consider funding training in countries of origin. Doing so would
equip migrants for success in destination countries and prevent shortages of skills in
their countries of origin.
The high cost of transferring money prevents people in poverty from fully reaping
the benets of migration. Meeting the SDG target of reducing the transaction costs
of migrant remittances to less than 3 per cent of the amount sent and eliminating
remittance corridors with costs higher than 5 per cent by 2030 can help workers and
their families keep more of their earnings.
PROMOTING EQUALITY AND SOCIAL JUSTICE
IN A CHANGING WORLD
The 2030 Agenda recognizes that major challenges are interrelated and require
integrated solutions. Without decisive action to manage megatrends in a
strategic and coordinated way, the world will see inequalities widen. Conversely,
addressing inequalities now will allow us to seize opportunities presented by these
transformative changes for the world as a whole and protect disadvantaged groups
from falling further behind.
Policymaking through an equality lens
The megatrends examined in this report are having an impact on the reduction
of inequalities and on the achievement of all other SDGs. However, their course
is not set. It is neither possible nor desirable to hold back technological change,
urbanization or migration, but their effects can be managed to encourage more
equitable and sustainable societies. Climate change cannot be turned around in the
short term and has already exacted significant and possibly irreversible changes.
Still, social considerations can be part of adaptation and mitigation policies as
countries transition to green economies.
The evidence summarized in this report shows that these megatrends can be
managed in ways that ensure their benefits are broadly shared and their negative
effects do not fall disproportionately on those who lack the resources to cope and
recover. Applying an equality lens to policymaking calls for policies and regulations
WORLD SOCIAL REPORT 2020
12
that leverage the potential of new technologies to reduce poverty and create jobs
while addressing existing technological divides. It requires policies that build
the resilience of people living in poverty to climate change. It means addressing
the spatial, economic and social divides within cities, making urbanization more
inclusive and ensuring that rural areas are not left behind. And it calls for facilitating
safe, orderly and regular migration and promoting its positive impacts.
Applying an equality lens also means that Governments should reconsider policies
that aggravate the harmful effects of these trends. While technological change
may have contributed to workforce polarization and increased wage inequality,
for instance, financial and labour market deregulation, declines in income tax
progressivity and weakened social protection have also exacerbated these trends
in some countries.
Finally, applying an equality lens means redoubling efforts to address the root causes
of inequality now.
Reducing inequality within countries: what experience can teach us
Mixed success in reducing inequalities within countries calls for a rethinking of
strategies. Clearly, no single set of policies is applicable to all countries and contexts.
Instead, this report highlights three building blocks of a coherent and integrated policy
strategy to reduce inequality in many of its dimensions.
Promote equal access to opportunities
Universal access to quality education, in particular, expands opportunities and
encourages a more equal distribution of capabilities. However, the educational system
has often served to reinforce inequalities rather than help to level the playing eld.
Supporting people in realizing their potential also requires the promotion of full
employment and decent work. Yet the contrast between looming and transformative
changes in the world of work and the preparedness of Governments and the international
community to manage them is stark. Governments can address these disconnects by
increasing investments in labour market institutions and policies and supporting new
forms of collective representation, ensuring that those who work under non-standard
employment contracts or outside the formal sector have a voice.
Institute a macroeconomic policy environment conducive to reducing inequality
Fiscal and monetary policies can encourage greater equity. In addition to their direct
impact on income distribution, they can also mobilize resources for social policies,
including social protection. The way in which taxes and expenditures are allocated is at
the heart of the social contract.
INEQUALITY IN A RAPIDLY CHANGING WORLD
13
Universal access to effective social protection goes a long way towards reducing
poverty and inequality, as substantiated by the evidence presented in this report. Social
protection systems that provide unemployment and disability benets, child benets,
old-age pensions and access to health care offer income security at all stages of
the life cycle and minimize the risk of falling into poverty. Despite the value of social
protection systems in building a more equitable society, comprehensive coverage
was enjoyed by only 29 per cent of the world population in 2017 (ILO, 2017a).
Tackle prejudice and discrimination and promote the participation of
disadvantaged groups in economic, social and political life
Social and economic policies will have limited impact on inequality if societies
continue to discriminate on the basis of ethnicity, race, gender or other characteristics
that should have no bearing on achievement or well-being.
Ending prejudice and discrimination is a long-term process. It requires reforming
institutions and inuencing social norms and behaviours. Constitutional changes,
revision of discriminatory laws and policies, and the passage of new laws to prevent
discrimination and promote the well-being of excluded groups can lay the groundwork
for greater fairness.
However, all of these measures tend to challenge the status quo, and thus are likely to
encounter resistance. In most cases, inaction is due not to the lack of sound technical
advice or even adequate capacity. Rather, mobilizing support for policy responses
that affect the balance of power can be most dicult. Understanding the political
constraints to reducing inequality and devising ways to overcome them is key to
breaking the current stalemate.
In general, policy frameworks grounded in universalism have enjoyed broader support
than those focused narrowly on addressing the symptoms of poverty or disadvantage.
While reducing inequalities may require measures targeted at specic groups to meet
their special needs, a universal policy framework is necessary to address the root
causes of inequality and ensure that policies enjoy sustained popular support.
Reducing inequality in an interconnected world
Governments and other national stakeholders are key players in creating more
equitable societies. But large gaps in well-being and opportunities within and among
countries are a national as well as a global problem, demanding integrated, multilateral
solutions. One country’s action on climate change or international migration – or lack
thereof – has costs and benets for other countries. The imbalance between top
greenhouse gas-emitting countries and those suffering the most from the impacts
of climate change is a well-documented injustice. None of these issues can be
addressed unilaterally. Concerted, coordinated and multilateral action is also needed
MOBILIZING
SUPPORT FOR
POLICY RESPONSES
TO INEQUALITY CAN
BE CHALLENGING
WORLD SOCIAL REPORT 2020
14
to address other challenges that affect inequality within and among countries, namely
tax evasion, cross-border nancial ows, transnational crime, international trade and
intellectual property rights.
At this critical juncture, however, multilateralism is under attack and trust in public
institutions is flagging. Although the multilateral system may need adjusting,
current global challenges call for strengthening it, rather than dismissing it altogether.
Among other things, restoring trust in international problem-solving requires
multilateral institutions that give adequate voice to regions and countries with growing
influence in the global economy as well as to those groups and communities that
are being left behind.
It is increasingly clear that reducing inequalities strengthens not only the social
fabric but also the economic and environmental dimensions of sustainable
development. However, this awareness has not yet been translated into the necessary
normative changes. Instead, growing inequalities and overreliance on the capacity
of markets to bring about social justice threaten the social contract in many countries.
Beyond the urgent need to accelerate action, realizing the vision of the 2030 Agenda
requires a reconsideration of the policy priorities that have perpetuated inequality
as well as insecurity.
LARGE GAPS IN
WELL-BEING AND
OPPORTUNITIES
WITHIN AND AMONG
COUNTRIES ARE
NATIONAL AS
WELL AS GLOBAL
PROBLEMS,
DEMANDING
INTEGRATED,
MULTILATERAL
SOLUTIONS
INEQUALITY IN A RAPIDLY CHANGING WORLD
15
The year 2020 marks the twenty-fth anniversary of the World Summit for Social
Development and the fth anniversary of the adoption of the 2030 Agenda for
Sustainable Development. The commitments made by world leaders, and the
ideals they represent, are milestones in the international pursuit of greater equity
and non-discrimination They are also a rearmation of the vision chartered with
the founding of the United Nations 75 years ago. It was a vision based on “faith in
fundamental human rights, in the dignity and worth of the human person, in the equal
rights of men and women and of nations large and small”.
5
Heads of State and Government gathered once again in September 2019 to take stock
of how far countries have come in realizing their commitments. The voluntary national
reviews presented in advance of the United Nations Summit on the Sustainable
Development Goals (SDGs) attest to the wide-ranging actions taken by Governments
and other stakeholders in responding to global challenges.
6
Yet, as the United Nations
General Assembly recognized in its declaration of the Summit, inequalities in wealth,
income and opportunities are increasing. Governments will need to do more and
faster in order to leave no one behind.
7
While the challenge is clear, there is far less consensus on what is fuelling these
trends and on what can be done to address them. Many of the factors driving
growing inequalities are specic to countries or regions based on their history,
geography, policies and institutions. At the same time, powerful economic, social
and environmental forces are also at play. The implications of these global forces –
or megatrends – are far-reaching and varied. While some are helping to equalize
INTRODUCTION
5
Preamble to the Charter of the United Nations (1945).
6
See: Note by the Secretariat: Compilation of main messages for the 2019 voluntary national reviews (E/HLPF/2019/5).
7
A/RES/74/4.
WORLD SOCIAL REPORT 2020WORLD SOCIAL REPORT 2020
16
opportunities, others are exacerbating income inequality. Some are taking a toll on
the poorest countries and groups while others are solidifying the advantages of those
already better off.
This report examines the impact of four megatrends on inequality: technological
innovation, climate change, urbanization and international migration. Technological
change is an engine of economic growth offering new possibilities in health care,
education, communications and productivity. Yet it can also raise wage inequality
and displace workers. Climate change is affecting all countries, but it is hitting
the poorest countries and population groups the hardest, affecting most directly
people seeking to eke out a living in rural areas. Urbanization offers unparalleled
opportunities for poverty reduction, while rural areas remain disadvantaged in terms
of services, jobs and income in both developing and developed countries. Yet urban
areas are more unequal than rural areas and inequalities are rising in cities and
megacities around the world. International migration allows millions of people to
seek new opportunities and can help reduce global disparities, but only if it occurs
under safe and orderly conditions.
The 2030 Agenda recognizes that critical challenges facing the world today require
integrated solutions. It explicitly states that eradicating poverty in all its forms,
combating inequality within and among countries, preserving the planet, creating
sustained, inclusive and sustainable economic growth, and fostering social
inclusion are interlinked and interdependent. Indeed, without decisive action to
manage each of these megatrends in a strategic and coordinated way, the world will
see inequalities widen. Conversely, addressing inequality now will help countries
seize the opportunities presented by these transformative changes, and protect
people living in poverty and other disadvantaged groups against their most
negative effects.
The report traces recent inequality trends. It discusses why inequality matters and
provides an overview of the impacts of each megatrend. In considering the effects
of technological innovation and of urbanization, the focus is on inequality within
countries. The report assesses the effects of climate change and of international
migration on inequality both among and within countries. These megatrends and
the policies aimed at managing them interact with each other in multiple ways.
Technological change, for instance, can help combat climate change. Unaddressed,
climate change will affect international migration trends. Even though these
multiple interactions require policy attention and analysis, the focus of this report is
exclusively on the direct effect of each megatrend on the distribution of resources
and opportunities.
INEQUALITY IN A RAPIDLY CHANGING WORLD
17
While these trends are global, how each of them affects specic countries, communities
and population groups, immediately and over time, depends on the institutions and
policies in place. A key message of the report is that the effects of new technologies,
urbanization, international migration and even climate change on the distribution of
resources and opportunities are not predetermined. Some countries have managed to
protect the most vulnerable from the negative impacts of these trends while ensuring
that their benets are broadly shared. Despite constraints, there is still ample scope
for independent national policymaking to help harness these global forces for the
good. Policies can and should rectify trends that are neither socially, environmentally
or politically sound nor morally acceptable.
At the same time, global challenges call for global solutions. Actions taken by one
country affect other countries. Coordination and collective decision-making are
needed to manage the global commons and the international movement of people.
The evidence presented in this report arms the critical role of multilateral action to
address the driving forces of inequality under the global social contract embodied in
the 2030 Agenda.
WORLD SOCIAL REPORT 2020
18
QUOTE
CHAPTER 1
INEQUALITY: WHERE
WE STAND TODAY
19
INEQUALITY IN A RAPIDLY CHANGING WORLD
KEY MESSAGES
• Inequality within countries is very high but it is not rising everywhere. Since 1990,
income inequality has increased in most developed countries. Inequality declined in
most Latin American countries from 1990 to the early 2010s but is increasing again
in some of them.
• Inequality trends differ across countries at even similar levels of development.
• Income inequality among countries has declined in relative terms but is still higher
than inequality within most countries. Absolute income differences between countries
continue to grow.
• The world is far from the goal of equal opportunity for all: circumstances beyond
an individual’s control, such as gender, race, ethnicity, migrant status and, for
children, the socioeconomic status of their parents, continue to affect one’s chances
of succeeding in life.
• Group-based inequalities are declining in some cases but still growing in many others.
Unless progress accelerates, leaving no one behind will remain a still distant goal
by 2030.
• High or growing inequality not only harms people living in poverty and other
disadvantaged groups. It affects the well-being of society at large.
• Highly unequal societies grow more slowly than those with low inequality and are less
successful at reducing poverty.
• Without appropriate policies and institutions, inequalities in outcomes create
or preserve unequal opportunities and perpetuate social divisions.
• Rising inequality has created discontent, deepened political divides and can lead
to violent conict.
CHAPTER 1
INEQUALITY:
WHERE WE STAND
TODAY
WORLD SOCIAL REPORT 2020
20
INTRODUCTION
As part of the 2030 Agenda’s aim to promote inclusion and leave no one behind, heads
of State and Government pledged to reduce inequality within and among countries.
The decision to tackle inequality within countries broke new ground. For the rst time
in the context of internationally agreed development goals, SDG 10 and its targets call
for action to reduce income-based inequality within countries.
8
They also highlight
concrete means to progressively achieve greater equality – namely scal, wage and
social protection policies (target 10.4).
In aspiring to promote the social, economic and political inclusion of all members
of society, Goal 10 also draws attention to attributes and circumstances that affect
the risk of exclusion and disadvantage, specically age, sex, disability, race, ethnicity,
origin, religion and economic status (target 10.2). Additionally, target 10.3 calls for
“ensuring equal opportunity and reducing inequalities in outcome” and points to the
role of discriminatory laws, policies and practices in preventing progress.
This chapter provides an overview of inequality trends in various dimensions of
well-being and discusses the impact of high and growing inequality. Following the
2030 Agenda’s framework, section A describes levels and recent trends in income and
wealth inequality. The availability of data and tools to analyse economic inequality has
improved rapidly over the last decade. This growing evidence base has helped ensure
consideration of income inequality as part of the international development agenda.
This section summarizes what is now a broad and burgeoning technical literature on
the topic. Considering that each indicator of economic inequality has strengths and
limitations, the analysis uses several indicators to assess progress – or lack thereof.
Section B illustrates how access to opportunities and resources continues to depend
on group attributes such as ethnicity and race, migrant origin, and socioeconomic and
disability status. The focus is on the dynamics of group-based inequality – that is, on
whether development is equalizing opportunities among groups or, rather, is leaving
some groups behind. Section C discusses why inequality matters, focusing on the
effect of high and growing inequality on economic growth, poverty, social mobility and
political stability.
A. Economic inequality
People’s opportunities in life and the future of their children are largely shaped by
their income and wealth. Now ve years into implementation, the 2030 Agenda has
focused the attention of the international community on the predicament of growing
economic inequality. Real and sustained progress in addressing it, however, has
eluded most countries.
The evidence presented in this section shows that economic inequality has been on
the rise in most high-income countries over the past 30 years but has declined in
several low- and middle-income countries. Where inequality has risen, increases have
8
Target 10.1 is to progressively achieve and sustain income growth of the bottom 40 per cent of the population at a rate
higher than the national average by 2030.
INEQUALITY IN A RAPIDLY CHANGING WORLD
21
been largely due to the rapid rise in top incomes. Even though economic inequality
among countries has declined, it is still more pronounced than that observed within
countries. Chances in life continue to depend on the country in which a person is born.
Beyond these broad ndings, inequality levels and trends vary greatly by country. They
are also sensitive to the indicator used to assess progress.
1. Income inequality across countries
In relative terms, income inequality among countries is declining. After a prolonged
period of rising international inequality, the relative gap in mean national incomes
is shrinking. The Gini coecient of international inequality, calculated using
population-weighted national incomes per capita, fell from close to 63 in 1980 to
53 in 2010 (Milanović, 2012; United Nations, 2013).
9
Strong economic growth in Asia
has been the main driver of this decline.
Despite this positive trend, absolute disparities among countries are still very large.
The average income of people living in the European Union is 11 times higher than that
of people in sub-Saharan Africa; the income of people in Northern America is 16 times
higher than that of sub-Saharan Africans.
10
While low-income countries are growing
faster than high-income countries, the absolute gap between the mean per capita
incomes of high- and low-income countries increased from about $27,600 in 1990 to
over $42,800 in 2018.
11
The distinction between relative and absolute inequality is not
merely of academic interest: perceptions that inequality is rising globally often refer
to absolute differences. People perceive and experience absolute inequalities in their
daily lives, in terms of living conditions and well-being. The aim to see the Goals and
targets of the 2030 Agenda met “for all nations and peoples” calls for a reduction of
these absolute gaps.
While inequalities between average national incomes are large, considerable
disparities are also found among people at the bottom and at the top of the income
distribution across and within countries.
Figure 1.1 shows the mean income of selected countries as well as the income levels
that separate the richest and poorest 10 per cent of the population from the rest of
the population of these countries, around 2015. The mean income of Bulgaria was
below the cut-off income of the poorest decile of all other developed countries shown.
Denmark’s poorest decile was ve times richer than Bulgaria’s and 20 times richer
9
Trends in income inequality among countries (or international inequality) differ depending on the indicator used, as
do trends in inequality within countries. See Annex 1 and box 1.1 for an overview of data and indicators on economic
inequality. For a more detailed description of the methods used to estimate international and global income inequality, see
United Nations (2013).
10
Calculations are based on gross national income (GNI) per capita, calculated using purchasing power parity (PPP)
exchange rates at constant 2011 international dollars from the World Bank World Development Indicators database,
available at: http://databank.worldbank.org/data/source/world-development-indicators. Accessed on 19 September
2019. Using non-PPP GNI at constant 2010 US$, incomes in the European Union are 25 times higher and incomes
in the United States are 33 times higher than those in sub-Saharan Africa.
11
High-income countries are those with a GNI per capita of $12,376 or more in 2018 while low-income countries are those
with a GNI per capita of $1,025 or less, according to World Bank country classications.
INTERNATIONAL
INCOME INEQUALITY
IS DECLINING,
BUT ABSOLUTE
DISPARITIES AMONG
COUNTRIES ARE
STILL VERY LARGE
WORLD SOCIAL REPORT 2020
22
than South Africa’s. People at the bottom of the income distribution may be poorer in
countries with higher income per capita. For instance, the bottom decile (the poorest
10 per cent) was poorer in the United States than in Sweden, despite higher income
per capita in the former. While differences among top earners across countries are
also very large, growing evidence shows that household surveys underreport top
incomes. That is, inequality within countries as well as differences across countries
may be even greater than what is shown in gure 1.1. Box 1.1 discusses the pros and
cons of different data sources used to measure income inequality.
FIGURE 1.1
Mean incomes, top and bottom income deciles of selected countries in 2015
Bottom decile Mean income Top decile
Africa
Annual income
Asia Latin America
and the
Caribbean
Developed countries
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
United
States
United
Kingdom
Sweden
Denmark
Bulgaria
Brazil
Bolivia (Plurina-
tional State of)
Argentina
Turkey
Thailand
India
China
Bangladesh
South Africa
Egypt
Democratic Republic
of the Congo
Source: World Bank PovcalNet database, unpublished tabulations (based on data from household surveys).
Note: The top and bottom of each bar represent the (annual) income level that separates the richest 10 per cent
and the poorest 10 per cent from the rest of the population of each country, respectively; the marker in between
represents each country’s annual mean income, estimated on the basis of household survey data. All estimates are
adjusted for purchasing power parity (PPP). The estimates should be interpreted with caution for two reasons. First,
household surveys underreport top incomes. Second, for the African and Asian countries shown, the estimates are
based on consumption rather than income data. See Annex 1 for an overview of inequality data and indicators.
The countries chosen are only meant to provide an illustrative example of disparities within and across countries.
All estimates are for 2015 or later except those of the Democratic Republic of the Congo (2012) and India (2011).
INEQUALITY IN A RAPIDLY CHANGING WORLD
23
Estimates of global income inequality go beyond the mean incomes of each country –
used in the previous paragraphs to measure international inequality – and account for
the distribution of income within countries as well. That is, they consider inequality
among all the world’s people, across and within borders. Combining data from national
household surveys, the World Bank (2016a) found that global inequality as measured
by the Gini coecient changed little between 1988 and 2008 (from 69.7 to 66.9) and
then declined faster, reaching 62.5 in 2013.
14
Such levels of inequality are larger than
those found within almost any country, as discussed in the next section.
Despite stagnation of the global Gini, important changes have been observed in the
income growth and regional composition of bottom, middle and top shares of the
income distribution. Namely, income growth has been rapid in the middle and top of
the global income distribution, but slow at the bottom and among those in the 80
th
and 90
th
percentiles (the global “upper middle class”) (see box 1.2).
12
See Annex 1 for a more comprehensive overview of data and indicators of economic inequality.
13
See the World Inequality Database website (https://wid.world) for additional information on the methodology and
assumptions used.
14
These estimates are based on data from household surveys. Growing evidence suggests that very high incomes are
underreported in household surveys (World Inequality Lab, 2017; Atkinson and Piketty, eds., 2010). Using national accounts
consumption data to correct for such underreporting, Lakner and Milanović (2016) estimate that the Gini coecients of
global inequality are higher and only declined from 76.3 in 1988 to 75.9 in 2008. Using a different survey dataset and different
methods to make datasets comparable across countries, Bourguignon (2015) estimates that the global Gini declined from
70 in 1990 to 64 in 2008 and 62 in 2010.
BOX 1.1
Improved data sources to measure income inequality
12
The last decade has seen major advances in the availability, quality and comparability of data on income and wealth inequality.
As a result, several cross-national databases containing summary inequality statistics are now available.
These databases differ considerably in purpose, data sources and coverage. In terms of sources, assessments of income
inequality have traditionally relied on data from household surveys. While surveys are the most comprehensive source of
information on income dynamics, they do not capture very high or very low incomes accurately. The wealthy, in particular, are
routinely under-sampled and are often reluctant to report all their income. Recently, sources of information other than surveys
have been used to help improve the quality of data on income, wealth and consumption at the top of the distribution.
Among available databases, the World Bank’s PovcalNet contains the most non-imputed statistics for the largest number of
countries (164). Its estimates, based on microdata from household surveys, are used for the international monitoring of SDG
target 10.1. Another source – the World Inequality Lab’s Database (WID) initiative – relies on data from national accounts,
surveys, tax records and wealth rankings in order to track changes at the top of the income and wealth distributions more
precisely. In some cases, WID combines data from some or all of these sources based on a series of assumptions.
13
In other
cases, the estimates are based on tax data only. However, the availability of such data remains limited in developing countries.
WID estimates are available for 70 countries, of which only three countries are in Africa.
Different indicators shed light on different aspects of income inequality. Considering that each has strengths and limitations,
as do the sources used to compute them, the analysis in this report relies on more than one indicator. Estimates of the Gini
coecient are based primarily on PovcalNet as provided through a secondary source – the World Income Inequality Database
(WIID), maintained by the United Nations University World Institute for Development Economics Research (UNU-WIDER). These
data are complemented by estimates of income shares, where available, from the WID. It is important to bear in mind that these
sources and the indicators they provide are obtained using different methodologies.
WORLD SOCIAL REPORT 2020
24
15
Findings from the World Inequality Lab are based on income inequality data for 70 countries. Included among these are only
three countries in Africa and three in Latin America.
BOX 1.2
Trends in global income distribution
During the last two decades, growth in per capita income has been slow globally among people at the bottom 10 per cent of the
income distribution. The number of people living in poverty has declined rapidly, but the average income of the poorest has not
increased signicantly (Ravallion, 2014). The regional composition of the bottom 10 per cent has shifted dramatically, however.
In 1988, about 40 per cent of all people in the bottom 10 per cent lived in China (Lakner and Milanović, 2016). By 2008, practically
all individuals in this group lived in sub-Saharan Africa and India.
Per capita income growth has been very high among the population in the world’s 40
th
to 60
th
income percentiles. China’s growth,
which has helped lift a large portion of its population from poverty into the global middle class, explains most of the observed
improvements at the centre of the global income distribution. The global top 1 per cent of the income distribution has also
fared well. Based on the data available, the top 1 per cent captured 27 per cent of all income growth from 1980 to 2016 (World
Inequality Lab, 2017). The share of income earned by the top 1 per cent rose from about 16 per cent in 1980 to more than 22 per
cent on the eve of the economic and nancial crisis in 2007, before declining slightly (to 20 per cent) in 2016. At the same time,
the income share of the bottom 50 per cent remained close to 9 per cent throughout this period. Based on these income-share
measures, where available, global inequality has increased in recent decades, mainly because top income earners have gained
more than the rest.
15
The situation of the global upper middle class (those in the 80
th
to 90
th
percentile of the global distribution) barely improved
from 1988 to 2008. Most of the population in developed countries – except high income earners – belong to these percentiles.
On the one hand, income growth has stagnated among the non-rich in many of these countries. On the other hand, the country
composition of the population in these percentiles has changed. Some people in middle-income countries such as China and
the Russian Federation reached the 80
th
and 90
th
percentiles of the global income distribution during this period. While China
has grown rapidly, the income of the better-off segments of the Chinese population in 2008 was lower than that of most of the
population in richer countries in 1988.
Overall, relative changes in the global income distribution by decile from 1988 to 2008 yield what has been termed the “elephant
chart” by academia and the press (see gure B.1.1). The “elephant” shape is explained by rapid income growth in the middle and
top of the distribution.
FIGURE B.1.1
Global growth incidence curve, 1988 to 2008
Percentile of global income distribution
Cumulative growth rate (percentage) of real income
0
20
40
60
80
1009995908580757065605550454035302520151050
Source: Lakner and Milanović (2016). Data available
at: https://sites.google.com/site/christophlakner/
publications.
Note: The vertical axis displays the growth rate
of the fractile average income (in 2005 PPP
dollars) weighted by population. Growth incidence
evaluated at ventile groups (the bottom 5 per
cent); top ventile split into top 1 per cent and 4 per
cent between P95 and P99.
INEQUALITY IN A RAPIDLY CHANGING WORLD
25
The World Inequality Lab (2017) presents basic projections of global inequality
based on different scenarios.
16
Under a scenario where inequality trends within
countries observed since 1980 continue, the income share of the top 1 per cent
would rise from 20 per cent in 2016 to 24 per cent in 2050, while the share of the
bottom 50 per cent would remain unchanged (ibid., p. 252). That is, global inequality
would increase further. The income share of the global top 1 per cent would decline
only if growth in within-country inequality slowed down considerably.
In sum, inequality among per capita national incomes has declined in relative terms
in recent decades, although it is still very high. Global inequality, which accounts
for inequality within and among countries, has remained stable and high, according
to some measures, and has increased based on others. Since inequality among
countries has declined, inequality within countries makes up a growing share of
global inequality. Estimates by Bourguignon (2015) indicate that the contribution
of inequality within countries to total global inequality increased from 30 per cent
in 1990 to about 40 per cent in 2010. However, there are substantial differences in
inequality trends within countries and regions, as the next section shows.
2. Trends in economic inequality within countries
a. Regional trends
Inequality in income distribution has grown in most developed countries and in several
middle-income countries over the last three decades, but trends differ markedly
among countries, by period and depending on the indicator used.
Between 1990 and 2016, income inequality as measured by the Gini coecient
increased in 49 out of 119 countries for which data are available and declined in 58
of them, as shown in table 1.1. Inequality has grown in the world’s most populous
countries – China and India – in particular. Overall, countries where inequality has
grown are home to more than two thirds (71 per cent) of the world population.
In general, countries and regions that enjoyed relatively low levels of inequality
in 1990 have experienced rises in the Gini coefficient, and many countries that
still suffer from high inequality have seen the Gini decline. The Nordic countries,
Germany and many Eastern European countries, for instance, have experienced an
upsurge in income inequality. Some large middle-income countries have also seen
the Gini increase since 1990. Most notable among them is China, where the Gini
increased in urban areas (from about 23 in 1990 to 37 in 2013) as well as in rural
areas (from 30 to 40).
17
16
As with any projections, the aim is not to predict the future but simply to extrapolate trends in order to observe the role
played by key determinants.
17
While inequality increased in China over the full period (from 1990 to 2016), the data available show declines starting in the
late 2010s, as described in the following paragraphs.
COUNTRIES
WHERE INCOME
INEQUALITY HAS
GROWN SINCE
1990 ARE HOME TO
OVER 70 PER CENT
OF THE WORLD
POPULATION
WORLD SOCIAL REPORT 2020
26
Even though Latin America remains the region with the highest levels of income
inequality, together with Africa, the coecient has declined in 17 out of the 19 Latin
American countries with sucient available data. Included among them is Brazil, which
has traditionally endured extremely high levels of inequality (see box 1.3).
Disparities in income declined in several African countries as well, according to the
information available, including very unequal countries such as Eswatini and Lesotho.
They continued to increase in South Africa during the post-apartheid period until at
least the mid-2000s, despite sustained economic growth and the expansion of social
TABLE 1.1
Trends in income distribution by region, 1990 to 2016
a
Number of countries by type of trend in the Gini coefficient
Africa Asia
Latin
America
and the
Caribbean
Europe,
Northern
America,
Oceania
and Japan Total
Percentage
of countries
Percentage
of total
population
c
Rising inequality
1990-2016
13 9 1 26 49 41.2 71.0
1990-1999
b
n.a. 7 12 4 23
2000-2007 n.a. 7 2 13 22
2008-2016 n.a. 4 1 14 19
Falling inequality
1990-2016
16 12 17 13 58 48.7 20.8
1990-1999 n.a. 2 4 4 10
2000-2007 n.a. 8 13 13 34
2008-2016 n.a. 13 13 14 40
No trend
d
1990-2016
2 3 1 6 12 10.1 8.2
1990-1999 n.a. 3 2 4 9
2000-2007 n.a. 0 3 9 12
2008-2016 n.a. 0 4 14 18
Total
31 24 19 45 119
Source: Calculations based on data from UNU-WIDER’s World Income Inequality Database, version 4, released in December 2018. Available online at: www.
wider.unu.edu/database/world-income-inequality-database-wiid4. Accessed between January and March 2019.
Notes:
a. Or latest year available, if 2008 or later.
b. Includes countries where inequality has remained relatively constant as well as countries where inequality has uctuated, but where there is no clear
upward or downward trend during the period.
c. Percentage of the total population of the 119 countries with data. These 119 countries accounted for 91 per cent of the world’s population in 2016.
d. The number of countries with detailed information for each of the subperiods (1990-1999, 2000-2007, 2008-2016) is below the total number of countries
with enough information to assess trends over the full period (1990-2016).
INEQUALITY IN A RAPIDLY CHANGING WORLD
27
18
World Bank World Development Indicators database, available at: http://databank.worldbank.org/data/source/world-development-indicators. Last accessed on
31 October 2019.
19
The two social pensions have been further augmented by minimum wage raises throughout the two decades, which have consistently kept the minimum age ahead
of ination (Paiva, 2016).
20
The Gini coecient increased from 51.3 in 2015 to 53.2 in 2017, according to estimates from the Socio-economic Database for Latin America and the Caribbean
(SEDLAC), as reported in UNU-WIDER’s World Income Inequality Database (WIID) version 4. SEDLAC, prepared by the Centre for Distributive, Labour and Social
Studies (CEDLAS) in collaboration with the World Bank, is available from www.cedlas.econo.unlp.edu.ar/wp/en/estadisticas/sedlac/estadisticas/ .
BOX 1.3
Brazil: the decline of income inequality and the uncertain road ahead
Starting in the mid-1990s, Brazil experienced two decades of unprecedented reductions in income inequality: its Gini coecient
fell from 60 in 1995 to 51 in 2015.
18
This reduction is explained mainly by declining disparities in labour earnings. Rising levels of
education, increases in minimum salaries, a drive towards transitioning workers from informal to formal employment, together
with solid economic growth and falling dependency ratios due to declining fertility, pushed down wage disparities (Neri, 2018;
Paiva, 2016). Beyond these factors, social policies played an important role during this period, with scal redistribution estimated
to account for up to half of the decline in net income inequality (Ferreira, Firpo and Messina, 2014). Included among the social
protection programmes implemented in Brazil are:
• Previdência Social Rural, introduced in 1992, provides older rural residents who have worked in mining, agriculture and shing
with a monthly pension equivalent to the minimum wage. As a scheme designed to cover those with a low capacity or inability
to participate in contributory pensions, these transfers contributed considerably to a reduction in poverty. In 2008, the number of
rural Brazilians living in extreme poverty was estimated at 4 million people lower than it would have been without such transfers
(Barrientos, Debowicz and Woolard, 2014). Children living in the same household as those receiving pensions also beneted
from the scheme.
• Rolled out in 1996, Benefício de Prestação Continuada targets older persons and persons with disabilities living in households
earning a per capita income of not more than a quarter of the minimum wage. Beneciaries, who numbered 3.7 million in 2010,
receive monthly payments equivalent to the minimum wage. As with Previdência Social Rural, some share them with household
members, and co-residence was also found to be linked to a reduction of child labour (ibid.).
19
• Through the conditional cash transfer programme Bolsa Familia, launched in 2003, recipient households are required to ensure
children’s school attendance, complete a full immunization schedule, and participate in prenatal monitoring for pregnant mothers
and development monitoring for children. The scheme reached 14 million households in 2013 (ibid.).
Collectively, these programmes have managed to bolster the incomes of millions of Brazilians while costing less than 3 per cent
of gross domestic product (GDP) per year (ibid.). Despite this impact, inequality remains high, and there is scope to expand social
protection. Changing economic and political circumstances in recent years, however, put future prospects for inequality reduction
in Brazil into question.
After robust growth over the previous two decades, Brazil suffered a strong recession from mid-2014 until the end of 2016. The
Government subsequently put in place austerity measures, including a freezing of federal government spending. The information
available indicates that the Gini coecient stopped declining in 2015.
20
Poverty has also been on the rise.
Following general elections in 2018, the future of social protection and other social policies in Brazil is uncertain. Of the three
programmes described above, entitlement to Benefício de Prestação Continuada is established in the Constitution, and President
Jair Bolsonaro announced plans to enhance Bolsa Familia during his election campaign. Given sustained pressure to cut public
spending and reduce the scal decit, however, the new administration has proposed a reform of the welfare system, which will
decrease overall spending on social programmes (Loyens, 2019). It remains to be seen what the impact of such policy changes
will be for the population and for inequality in that country.
WORLD SOCIAL REPORT 2020
28
protection, particularly social assistance programmes. In 2015, South Africa had
the world’s highest Gini coecient, at 63.
21
Persistently high unemployment, strong
polarization of the labour force and high wage gaps are the main reasons for the
country’s very high income inequality (World Bank, 2018a; Hundenborn, Liebbrandt
and Woolard, 2018).
Rather than moving continuously in one direction, inequality in all regions has gone
through periods of expansion and decline, when measured by the Gini coecient. In
most countries of Latin America and the Caribbean, income inequality rose during
the 1990s – a decade of strong economic instability and widening wage disparities –
but has declined since 2000. Inequality stopped declining or has even increased in
Argentina (since 2014), in Brazil (since 2015) and in Mexico (since 2010). Inequality
rose in China in the 1990s and early 2000s but has fallen since 2008, as policies
aimed at addressing poverty and inequality have started to take effect and regional
inequalities have subsided (Jain-Chandra and others, 2018). On average, the Gini
coecient has also levelled off in developed countries since 2008, after rising in the
decades prior. These declines have been small – of less than one point in most of the
countries that have beneted from them.
The Gini coecient does not provide information on whether rising or falling inequality
is caused by changes at the bottom, middle or top of the income distribution.
Additional indicators show that income is increasingly concentrated at the top of the
income ladder, including in some countries that have seen the Gini coecient decline.
The share of income earned by the richest 1 per cent of the population increased in
59 out of 100 countries or areas with data from 1990 to 2015 (see gure 1.2). In 2015,
the top 1 per cent earned more than 20 per cent of all income in 18 countries with
data, including Brazil, Chile, India, the Russian Federation, Thailand, Turkey, the United
Arab Emirates and the United States. While Brazil has seen the Gini coecient decline
rapidly, the income share of the top 1 per cent before taxes and transfers increased –
from 26.2 per cent in 2001 to 28.3 per cent in 2015.
22
At the other end of the income distribution, the relative situation of those at the
bottom has improved in many, but not all, countries. Between 2011 and 2016 alone,
the incomes of the poorest 40 per cent of the population grew faster than those of the
total population in 50 out of 92 countries with data. In other words, 50 countries made
progress towards target 10.1 of the SDGs (United Nations, 2019a). The remaining 42
countries saw the bottom 40 per cent fall further behind the average. For example,
average incomes grew faster in the United States than in France in 2011-2016.
However, the incomes of the bottom 40 per cent grew more slowly than average in
21
Gini coecient of consumption expenditure from PovcalNet (https://databank.worldbank.org/data/source/world-devel-
opment-indicators) based on data from the Living Conditions Survey 2014/2015. Hundenborn, Liebbrandt and Woolard
(2018) estimate the Gini coecient of disposable income – income after taxes and transfers – at 66 in 2014. In contrast,
the Gini ranged from 25 to 30 in most Northern and Western European countries. For an overview of data and indicators
on income inequality, see Annex 1. Section 1.B discusses the role that inter-racial and intra-racial inequalities have played
in explaining these trends.
22
It is important to note that scal policy became increasingly redistributive in Brazil starting in the 1990s, as described in
box 1.3. It is possible that estimates based on disposable income do not show the same increase.
INEQUALITY
HAS STOPPED
DECLINING OR HAS
EVEN INCREASED
IN MAJOR LATIN
AMERICAN
COUNTRIES IN
RECENT YEARS
INEQUALITY IN A RAPIDLY CHANGING WORLD
29
the United States but faster than average in France.
23
Based on this indicator, France
made progress towards reducing inequality and leaving no one behind while the
United States did not.
24
After the onset of the 2008 economic and financial crisis, the income shares of the
top 1 per cent and the top 10 per cent fell in most high-income countries (World
Inequality Lab, 2017). Wealth-income ratios fell in all of them. At the same time, the
23
Income growth rates (national averages and those of the bottom 40 per cent) from the World Bank World Development
Indicators database, available at: http://databank.worldbank.org/data/source/world-development-indicators. Accessed on
18 January 2019.
24
Fukuda-Parr and Smaavik Hegstad (2018) question the adequacy of target 10.1 to measure the distribution of income. In
its report, Poverty and Shared Prosperity 2016: Taking on Inequality, the World Bank notes that the indicator “possesses an
inequality dimension even though it is not an inequality indicator” (World Bank, 2016a, p. 26). Specically, the indicator does
not track changes at the apex of the income distribution. The indicator will show progress if the incomes of both bottom
and top earners grow while incomes of the middle of the income distribution shrink, for instance. Complementary metrics
are necessary to assess inequality trends.
FIGURE 1.2
Share of income earned by the top 1 per cent, 1990 and 2015
a
0
5
10
15
20
25
30
35
40
0 5 10 15 20 25 30 35 40
1990
Percentage
2015-2016
Percentage
INDIA
UNITED
STATES
RUSSIAN
FEDERATION
BRAZIL
Source: World Inequality Database. Available from: https://wid.world/data/.
Notes: Estimates based on pre-tax national income, which is the sum of personal income ows from labour and capital before taxes and all
transfers except pensions.
a. Or earliest/latest year available. The estimates cover only part of the full period in Argentina (1997-2004), Brazil (2001-2015), Colombia
(1993-2010), Japan (1990-2010), Republic of Korea (1995-2015), Malaysia (1993-2012) and Thailand (2001-2015).
WORLD SOCIAL REPORT 2020
30
income share earned by the bottom 10 per cent of the distribution has experienced
a sustained decline in over one third of developed countries with data since 2009.
25
Included among them are countries that suffered the greatest labour-income losses
during the crisis – Greece, Ireland and Spain.
It is too soon to assert whether the levelling of inequality observed in some
countries is a temporary change or the start of a long-term trend. It is possible that
some countries have reached their “inequality possibility frontier” – the maximum
levels of inequality that are socially possible or acceptable (Milanović, Lindert and
Williamson, 2007). However, recent trends in labour income and wealth inequality
suggest that economic inequality may continue growing in the years to come.
b. Labour and capital
The distribution of household wealth – which comprises ownership of capital,
including physical assets (housing, land) and financial assets, excluding debts – is
typically more unequal than the distribution of income. The following findings have
been widely publicized: while the bottom half of the global population owned less
than 1 per cent of all wealth in 2018, the richest decile (top 10 per cent) owned 85
per cent of all wealth and the top 1 per cent alone held almost half of it (Shorrocks,
Davies and Lluberas, 2018). The existing evidence also suggests that, where income
inequality has grown, wealth inequality has grown even faster since at least 2008
(Davies and Shorrocks, 2018). While these estimates suggest extreme wealth
inequality, they should be interpreted with caution, as measuring levels of wealth is
particularly challenging.
26
In addition, the distribution of income between capital and labour has undergone
major changes. The share of wages in total GDP declined in a majority of countries
(91 out of 133 with data) from 1995 to 2014 (ILO, 2016). Improvements in labour
productivity have not translated into better labour compensation. Wage stagnation
is likely to disproportionately harm workers in the middle and at the bottom of the
income distribution, since they rely mostly on labour income.
The forces pushing the labour-income share downwards are unlikely to disappear,
as the discussion in chapter 2 suggests. Piketty (2013) argues that the growing
capital share of income is likely to endure – mainly because economic growth will
slow down and the rate of return to capital will exceed overall growth – unless
Governments make a concerted effort to increase wages and tax wealth effectively.
25
The income share held by the lowest 10 per cent of the income distribution has declined in 10 of 26 countries with sucient
data, based on the World Bank World Development Indicators database, available at: http://databank.worldbank.org/data/
source/world-development-indicators. Accessed on 23 January 2019.
26
Although estimates by Shorrocks, Davies and Llubera (2018) are the most recent and comprehensive to date, estimates
of wealth inequality are less often available and less comparable than estimates of income inequality. The data sources
available make it impossible to properly estimate the level and evolution of the global distribution of wealth (World
Inequality Lab, 2017). The diverse sources of data needed to estimate all the components of household wealth, along with
underreporting, affect data quality and their comparability. Wealth is particularly challenging to estimate in poor countries
and for people that have negative wealth (debt and mortgages, for example). Therefore, assertions such as Oxfam’s – that,
in 2018, the 26 wealthiest people worldwide had the same wealth as the bottom half of the world’s population, which is
about 3.8 billion people (Oxfam, 2019) – should be interpreted with caution.
INEQUALITY IN A RAPIDLY CHANGING WORLD
31
In addition to general declines in worker compensation, the wage gap between top
and bottom earners has increased considerably in most developed countries and in
several developing countries with data (ILO, 2016; OECD, 2015a). On the one hand,
the incidence of non-standard forms of employment – temporary and part-time
jobs, own-account work and informal employment – has increased. Workers under
non-standard contracts earn less than workers under standard contracts; they also
bear the brunt of employment losses during recessions and are not afforded the
same protection as other employees. Workers have also become more vulnerable
due to a decline in the share of waged workers in the traditional “middle” of the
workforce – that is, workers with middle-level skills that usually perform routine
jobs, ranging from administrative jobs to sales-related occupations, as discussed
in chapter 2.
On the other hand, top salaries have risen dramatically. A sizable proportion of the
observed gains in top income shares are due to increases in top wages (Atkinson,
Piketty and Saez, 2011).
27
The rise in pay of top executives has attracted considerable
attention in the past decade in developed countries, particularly in the United States.
In 2016, compensation of chief executive officers – including salary and bonuses –
of the top 350 companies in the United States was 224 times higher than the average
employee’s pay (Economic Policy Institute, 2018).
The recent experience of many developing countries shows that rising wage
disparities are not inevitable. Declining income inequality in Latin America, for
instance, is due mainly to the reduction of wage gaps that were made possible by
the spread of secondary education, a drive towards reducing informal employment,
higher minimum salaries, a decline in returns to labour market experience and
increases in social spending. These and other policy options are discussed in
chapter 6.
c. The impact of policy
Growing inequality is often assumed to be an inevitable cost of the development
process. Decades ago, Kuznets (1955) posited that inequality is low at the initial
stages of development, when societies are mostly agricultural, and as industry
develops, countries urbanize and economies grow faster, and inequalities increase.
As countries develop further, increased wealth should enable the introduction of
broad-based education and social protection. The growing political power of the
urban lower-income groups would lead to protective and supporting legislation,
much of it aimed at counteracting the worst effects of rapid industrialization and
urbanization. As a result, inequality would follow the shape of an inverted “U” curve
as societies develop.
THE SHARE OF
WAGES IN TOTAL
INCOME HAS
DECLINED AND
THE WAGE GAP
BETWEEN TOP AND
BOTTOM EARNERS
HAS GROWN
IN A MAJORITY
OF COUNTRIES
27
In the United States, about 60 per cent of the income of the top 1 per cent came from labour in 2010 (Solow, 2017).
WORLD SOCIAL REPORT 2020
32
Regional and time trends in economic inequality suggest no clear relationship
between inequality and development. Levels of inequality vary considerably even
among countries with similar levels of per capita income (United Nations, 2013).
Trends within individual countries have also been different from those that Kuznets
predicted. Income inequality has increased in many countries and has declined
in some others as countries have developed and grown over the last 30 years. In
addition, many developed countries have seen inequalities rise.
Global economic, social and environmental forces are certainly affecting the
evolution of inequality within countries, as the next chapters will show. But national
income dynamics are also shaped by national policies and institutions. Education,
health care and labour market policies, for instance, affect the distribution of human
capital, skills and wages, and thereby the distribution of market (gross) income.
Disparities in disposable (net) income depend on the distribution of market income
but are also explained by the redistributive impact of social transfers and taxes.
The magnitude of the impact of taxes and transfers depends on how progressive the
tax system is (direct income and property taxes are usually progressive while indirect
taxes, such as sales taxes, are regressive), and on the degree to which people living
in poverty benet from social protection transfers and public services. The negative
effects of indirect taxes on the incomes of people living in poverty can be stronger
than the positive effects of public transfers and services (Lustig, 2017).
Taxes and transfers are much larger in developed than in developing countries,
even though the magnitude of their impact differs considerably by country.
In Belgium, Denmark, Finland, Ireland and Slovenia, taxes and transfers
reduce inequality – as measured by the Gini coefficient – by more than 35
per cent (Causa and Hermansen, 2017).
28
In contrast, fiscal policy reduces
inequality by less than 20 per cent in Japan and Switzerland (ibid.). Reductions
in inequality are even smaller in developing countries with data (United
Nations, 2018a). The level of redistribution varies even among countries at
similar levels of inequality: while the Gini coefficient of market income stood
at 38 in both Japan and Norway in 2014, the Gini of disposable income was
around 26 in Norway compared to 32 in Japan (Causa and Hermansen, 2017).
Over the last two decades, however, the redistributive effect of transfers and taxes has
failed to correct the trend towards rising income and wealth inequality in developed
countries. On average, the effect of fiscal policy on inequality declined from 32 per
cent in 1995 to 27 per cent in 2007 in member countries of the Organisation for
Economic Co-operation and Development (OECD) with data (Causa and Hermansen,
2017). Declines in progressive taxation are apparent beyond developed countries.
REGIONAL AND
TIME TRENDS
IN ECONOMIC
INEQUALITY
SUGGEST NO CLEAR
RELATIONSHIP
BETWEEN
INEQUALITY AND
DEVELOPMENT
28
The studies cited use the difference between the Gini values of market and disposable incomes (proxies of income before
and after taxes and transfers, respectively) as a measure of the overall redistributive impact of taxes and transfers.
INEQUALITY IN A RAPIDLY CHANGING WORLD
33
Using a complete set of national income tax data for 189 countries, Sabirianova,
Buttrick and Duncan (2009) found that top income tax rates declined, on average,
from 1981 to 2005, making tax systems less progressive. While the 2008 economic
and financial crisis temporarily led to increased redistribution in developed countries,
reflecting fiscal discretionary measures, the effect of taxes and transfers declined
again after 2009 (Causa and Hermansen, 2017).
To be clear, inequality in disposable incomes has increased mainly because inequality
in market incomes – before taxes and transfers – rose in the rst place. But, with
important exceptions, policies have not become increasingly redistributive (Immervoll
and Richardson, 2011; Causa and Hermansen, 2017).
These trends have prompted debate about the role that global economic integration
and other transformations – from technological innovation (discussed in chapter 2) to
changes in policy (discussed in chapter 6) – may have played in driving inequality trends.
Bourguignon (2015) highlights the role played by the expansion of trade in developing
countries and by capital mobility, together with technological innovation, to explain the
decline in inequality among countries – and its increase within countries. Other authors
question the pre-eminence of globalization as the main driver of global inequality, noting
that inequality trends differ across countries at similar levels of development and that
are equally exposed to trade (Ravallion, 2018; Corlett, 2016). Ravallion (2018) stresses
the vital role that national policies and institutions continue to play in dening inequality
levels and trends.
In sum, the assumption that economic inequality should decline as societies develop
and should remain low in developed countries has not held up in practice. Evidence
shows that the reduction of inequality is not a systematic outcome of economic growth
and development.
B. Inequality of opportunity
While high and growing inequality are fuelling polarizing political debates around the
globe, a consensus has emerged that all should enjoy equal access to opportunity –
that one’s chances to succeed in life should not be determined by circumstances
beyond an individual’s control. However, the world is far from giving all people and
groups the same opportunity to live a healthy and prosperous life. This is critical in the
case of young children, who bear little responsibility for the opportunities afforded to
them, but whose early life experiences have a major inuence on their health, well-being
and even productivity throughout their lifetimes. The 2030 Agenda draws attention to
the fact that inequalities based on age, sex, disability, race, ethnicity, origin, religion, and
economic and other status are common in developed and developing countries alike.
OVER THE LAST
TWO DECADES, THE
REDISTRIBUTIVE
EFFECT OF
TRANSFERS AND
TAXES HAS FAILED
TO CORRECT THE
TREND TOWARDS
RISING INCOME
AND WEALTH
INEQUALITY
IN DEVELOPED
COUNTRIES
WORLD SOCIAL REPORT 2020
34
The economic inequalities described in section A are in part the result of inequalities
among different population groups – also referred to as horizontal inequality. The
persistence of disadvantages based on characteristics such as those described above
are hard to justify in our modern and interconnected world.
This section examines group-based disparities in several markers of well-being,
including poverty, health, education and employment. Since data limitations preclude a
comprehensive analysis of all the circumstances affecting a person’s access to services
and resources, the section does not attempt to quantify inequality of opportunity in one
single indicator (see box 1.4). Rather, it examines the impact of concrete characteristics
BOX 1.4
Group-based disadvantages: measuring inequality of opportunity
In the 2030 Agenda, Governments envisage “a world of equal opportunity permitting the full realization of human potential
and contributing to shared prosperity” (A/RES/70/1, para. 8). A growing literature has attempted to quantify the broad concept
of equality of opportunity for policy purposes. The basic proposition of this literature is that inequality results from two sets
of factors: those that are in some way assumed to be under an individual’s control, such as effort or personal responsibility,
and those that are not. A person’s circumstances, such as place of birth, parental socioeconomic status and other attributes
highlighted in the 2030 Agenda, including gender, ethnicity and race, and disability status, are beyond one’s control. These and
other circumstances affect access to education, health, income and other resources as well as participation in social and
political life. Inequalities based on circumstances – also referred to as group-based inequality or horizontal inequality – are
therefore used to measure inequality of opportunity.
Most attempts at measuring inequality of opportunity use a decomposable measure of inequality (often the dissimilarity index or
Theil-L index) to quantify the extent of inequality that can be explained by measurable circumstances and the extent that cannot
(see, for instance, Ferreira and Gignoux, 2011; UN-ESCAP, 2018). Inequality that is not explained by measurable circumstances is
attributed to differences in effort and/or skill.
The literature on inequality of opportunity is not without its shortcomings. Conceptually, the distinction between circumstances
and effort or skill is not clear-cut. Kanbur and Wagstaff (2014) note that, in early childhood, it is the effort of the parent, not the child,
that shapes outcomes. A young child’s effort does not determine whether she is enrolled in school or not, for instance.
In terms of measurement, the extent of inequality of opportunity reported depends on the data available to assess the effect
of a person’s circumstances. Analytical studies often take into consideration a person’s gender, age, race or ethnicity, place of
birth and parental education, occupation and income. Arguably, there are other factors beyond an individual’s control that affect
the outcomes of her or his efforts. As data improve, country-specic studies are taking into account additional characteristics
(see, for instance, Hufe and others, 2017). Estimates from cross-country studies, however, are particularly limited by lack of data
comparability and availability.
While a comprehensive assessment of all relevant circumstances is not yet feasible, most of the empirical literature on inequality
of opportunity qualies inequality that is not explained by measurable traits as “fair” or legitimate.
29
Thus, the measurement
shortcomings of this approach have policy implications. Specically, the extent of inequality assumed to be fair, legitimate or due
to personal choices depends on the amount and quality of data available. The more information is used, the stronger the estimated
contribution of a person’s circumstances to total inequality. Because of this, estimates of inequality of opportunity are usually
considered the lower-bound of actual levels (Ferreira and Gignoux, 2011).
29
Recent studies, including Ferreira and Gignoux’s (2011), are careful to note that estimates of inequality of opportunity are
a lower bound of actual inequality of opportunity (because some circumstances are not adequately measured).
INEQUALITY IN A RAPIDLY CHANGING WORLD
35
separately, both to illustrate inequality of opportunity and to highlight the disadvantages
faced by some social groups. In line with target 10.2 of the 2030 Agenda, the focus
is on inequalities based on gender, race, ethnicity, disability status, migrant origin and
parental socioeconomic status. Considering the 2030 Agenda’s pledge to leave no one
behind, the section places a strong focus on trends in group-based inequality over time.
BOX 1.5
South Africa: promoting inclusion amidst record high inequality
South Africa is one of the most unequal countries in the world. While the end of apartheid in 1994 brought forth dramatic social
and economic changes, inequality has remained at record highs. However, inequality between racial groups has decreased, as
important strides were made in social development and poverty reduction over the last two decades.
The decline in interracial inequality has been driven largely by faster income growth in non-white lower-income households
and by a growing percentage of non-white, middle- and upper-income households (Hino and others, 2018). Opportunities
have gradually opened up in the civil service, business and education to black South Africans, who made up 6 per cent of top
management and company executives in 2001 and 14 per cent in 2017 (Republic of South Africa, 2018).
Efforts to reverse the effects of decades of segregation have been underpinned by anti-discriminatory legislation and by a
Constitution establishing citizens’ rights to food, water, social security and social assistance. Through a system of progressive
taxation and social programmes, the Government has expanded provision of basic public services, achieved near-universal
access to primary education, and implemented cash transfer programmes for older persons, families with children, and
persons with disabilities (World Bank, 2018a). Primary health care is free, while public hospital services are relatively low-cost
or free for disadvantaged/vulnerable persons.
These measures have contributed to reducing both absolute and multidimensional poverty. Workers are becoming more
educated, female labour market participation has risen, and the share of the population with access to electricity, improved
sanitation and improved water sources has increased (Finn and Leibbrandt, 2018; Leibbrandt, Finn and Woolard, 2012). On
the whole, households in the bottom half of the income distribution receive much more in public transfers and services than
they pay in taxes (Inchauste and others, 2017).
Social protection transfers form a significant portion of the income of poorer households. It is estimated that the Gini index
in 2014-2015 would have been 10.5 per cent higher in the absence of public transfers (World Bank, 2018a).
Despite this progress, substantial challenges remain. South Africans continue to experience high levels of poverty and
unemployment, while inequality within racial groups has worsened. With social spending constituting more than half the
Government’s budget allocations in 2019, solutions will have to go beyond the mere fiscal expansion of current programmes
to focus on the quality and sustainability of outcomes.
WORLD SOCIAL REPORT 2020
36
1. Group-based disadvantage, poverty and income inequality
A sizeable part of observed income inequality can be attributed to inequality among
social groups, although large differences are found across countries. For instance,
inequality among racial groups accounted for an estimated 50 to 70 per cent of total
inequality in South Africa in the mid-2000s, 30 to 50 per cent of the total in Guatemala,
Panama and Paraguay, but less than 15 per cent of the total in developed countries
(Liebbrandt, Finn and Woolard, 2012; Elbers and others, 2005 and 2008).
Trends in these two key components of inequality – across groups and within groups –
do not always go hand in hand. South Africa, for instance, has seen the Gini coecient
of income inequality increase rapidly since the end of apartheid while racial inequality
has declined (see box 1.5). In contrast, research from Mexico suggests that, despite
declining income inequality at the national level from the mid-1990s to 2010, income
growth has been slower for indigenous than for non-indigenous populations, and
differences in the incidence of poverty have increased (Servan-Mori and others, 2014).
These examples illustrate that, even where Governments have made conscious efforts
to promote social inclusion, overall income inequality can remain unaffected or even
grow. Conversely, declining income inequality does not automatically translate into
improved welfare outcomes for all disadvantaged individuals or groups.
The uneven progress observed in reducing poverty across different groups further
substantiates this point. Extreme poverty has dropped rapidly since 1990. The number
of people living on less than $1.90 a day declined from 36 per cent in 1990 (1.9 billion
people) to 12 per cent in 2015 (727 million).
30
Yet pockets of extreme poverty persist.
Not only are some groups more likely to live in poverty, but they experience deeper
poverty than the rest of the population. The examples shown in gure 1.3 indicate that
the multidimensional poverty index is higher than average among the ethnic minorities
selected (gure 1.3 A), and that these minorities experience a deeper intensity of
deprivation than the national average (gure 1.3 B). That is, they are more likely to
experience deprivations across more of the 10 indicators related to health, education
and basic services that comprise the index.
Additional research shows that members of ethnic minorities and other disadvantaged
groups are also more likely to remain in poverty over the long term. Caste, ethnicity,
religious aliation and class heighten the risk of chronic poverty and of transmitting
poverty to the next generation (Dang and Lanjouw, 2015 and 2018; Sumner, 2013;
Reddy, 2015). In India, according to Dang and Lanjouw (2018), members of Scheduled
Castes and Scheduled Tribes are both less likely to escape poverty than other groups
and more likely to experience downward mobility and fall into poverty.
DECLINING INCOME
INEQUALITY
DOES NOT
ALWAYS RESULT
IN IMPROVED
OPPORTUNITIES OR
OUTCOMES FOR ALL
DISADVANTAGED
INDIVIDUALS
AND GROUPS
30
World Bank, PovcalNet database. Available at http://iresearch.worldbank.org/PovcalNet/home.aspx (accessed on
31 October 2019).
INEQUALITY IN A RAPIDLY CHANGING WORLD
37
Members of these groups often suffer from multiple disadvantages that deepen
their exclusion. In many developing countries, for instance, ethnic minorities live
predominantly in rural areas with low access to quality schooling or health centres. Not
only do children in rural areas fare worse than those in urban areas in terms of health
and education, but the ethnic minority “penalty” in terms of educational attainment
is often larger in rural than in urban areas. For instance, in Belize, the percentage of
Mestizo youth who completed lower secondary school was two thirds that of Creole
children in rural areas, and nearly 90 per cent that of Creole children in urban areas
(United Nations, 2016a). Research has also shown that gender and ethnicity interact
to the detriment of women, including in the labour market (United Nations, 2016a;
FIGURE 1.3
Multidimensional poverty by ethnicity in selected countries around 2010
A. Share of the population in multidimensional poverty
Country
Ethnic minority group National average
Ethnic minority group National average
0 10 20 30 40 50 60 70 80 90
Viet Nam
Suriname
Republic of Moldova
North Macedonia
Nigeria
Mongolia
Guyana
Côte d'Ivoire
Central African Republic
Belize
B. Intensity of deprivation
Country
0 10 20 30 40 50 60 70 80 90
Viet Nam
Suriname
Republic of Moldova
North Macedonia
Nigeria
Mongolia
Guyana
Côte d'Ivoire
Central African Republic
Belize
Percentage
Percentage
Source: Calculations by the Oxford Poverty & Human Development Initiative (OPHI), based on data from Multiple Indicator Cluster Surveys (MICS).
Note: The gure represents data for 10 countries where the last two rounds of MICS collected and published information on ethnic identication. Ethnic groups
represented are: Maya (Belize), Hausa (Central African Republic), Gur (Côte d’Ivoire), Amerindian (Guyana), non-Macedonian or Albanian (North Macedonia),
Roma (Republic of Moldova), Kazakh (Mongolia), Hausa (Nigeria), Indigenous/Amerindian (Suriname) and non-Kinh (Viet Nam).
WORLD SOCIAL REPORT 2020
38
Kabeer, 2010; World Bank, 2013a). In Bolivia, Brazil, Guatemala and Peru, for example,
indigenous women and those of African descent are more likely to earn $1 an hour or
less than men from their ethnic group or men and women in the rest of the population
(Kabeer, 2010).
Clearly, conclusions about inequalities within and among social groups are limited by
data availability (see box 1.6). The fact that income and consumption data are gathered
mostly at the household level, for instance, challenges proper assessments of the
gender and age dimensions of inequality. The existing evidence, while incomplete,
indicates that resources are not distributed evenly within households. Boys benet
more than girls from investments in health care, private education and childcare, for
instance (United Nations, 2015). A study of 30 countries in sub-Saharan Africa shows
that women in this region are more likely to be undernourished than men, and that
half of undernourished women and children are found in non-poor households (Brown,
Ravallion and van de Walle, 2017). Globally, women do three times as much unpaid care
and domestic work as men (UN Women, 2019).
BOX 1.6
The challenge of measuring who is being left behind
Adequately measuring who is being left behind requires data from a variety of sources that are different in scope and purpose.
National population censuses and some internationally standardized surveys are available for a large number of countries and
are fairly comparable across countries. However, none of them alone allows for a comprehensive international assessment of
disadvantage or social exclusion. Assessing changes over time presents additional challenges, since some data sources are
available for only one point in time and comparability issues arise even between censuses or surveys of the same type.
Ideally, empirical analyses should determine which individual characteristics or combinations of characteristics increase the risk
of disadvantage. However, most studies, including this one, pre-select some criteria that have been proven, empirically, to affect
inequality – typically age, sex, ethnic background, income, nationality and place of birth. Analyses based on these traditional
criteria run the risk of overlooking new forms of inequality.
An additional challenge to measuring who is being left behind is that groups at high risk of poverty and exclusion are often
statistically “invisible”. Household surveys inevitably omit homeless persons, people in institutions, including prisons and refugee
camps, and mobile and nomadic populations. In practice, they also tend to underrepresent populations in urban slums, those
in insecure and isolated areas and atypical households. While population censuses do not omit any of these groups by design,
they often under-enumerate them. In addition, the denitions used to classify a population by nationality or by migrant, ethnic or
disability status, vary across countries.
While statistical groups are useful analytical categories, it is important to note that they are not necessarily entities with common
agency or even common purposes. Some groups of people have shared beliefs and values and act in collective ways (such as
religious and many ethnic groups). Other groups are dened on the basis of some shared characteristics (such as migrant
status), but in reality have little in common, aside from the discrimination they often face.
INEQUALITY IN A RAPIDLY CHANGING WORLD
39
People are left behind in many domains of life – social, economic, political. Translating
the disadvantages they experience in each of these domains into a limited set of
indicators and nding data to measure them presents considerable obstacles. The
effects of social exclusion on a person’s dignity and their agency, for example, are dicult
to measure, but can undermine one’s sense of well-being (United Nations, 2016a).
31
2. Trends in group-based inequality
Leaving no one behind calls for reductions in group-based inequalities. The empirical
literature shows positive trends: from a reduction of inequalities in access to primary
education to the broader representation of disadvantaged groups in political processes
(United Nations, 2016a). Yet the examples shown in this section indicate that countries
are off track in terms of ensuring equal opportunity for all by 2030.
Major progress in fullling basic needs, such as improved child health and completion
of primary education, has helped reduce gaps. Figure 1.4 shows that disparities in
child stunting based on household wealth and the educational level and ethnicity
of the household head have also declined, somewhat, based on a large sample of
developing countries. However, differences in the average annual change among
the different groups are small. At the rate of progress observed from the 1990s to
the 2010s, it will take more than four decades to close the stunting gap related to
ethnicity, for instance. Under a business-as-usual scenario, those children that are
furthest behind in terms of stunting will remain behind by 2030.
Access to good-quality education can help level the playing eld or reinforce existing
inequalities, depending on how it is distributed. With the notable success achieved at
the global level in the provision of primary education, gaps in secondary education
have received increasing attention, including in the 2030 Agenda. The percentage
of adolescents attending secondary school is growing across developing regions
(gure 1.5), but this increase is not enough to close existing gaps. On average,
progress in secondary school attendance is slower among children from households
in the lowest wealth quintile and among those that belong to the most disadvantaged
ethnic group in the countries shown.
Clearly, disadvantages in different domains reinforce one another. Children must
be heathy in order to attend school and benet from the education they receive.
Improvements in both health and education come about, in large part, due to
improvements in basic infrastructure. Investments in improved water supply,
sanitation, electricity and broadband help prevent malnutrition and disease and
ultimately promote productivity. Unfortunately, across the board, gaps in access
to infrastructure (specically, electricity and improved sanitation) remain wide (see
Annex 2, gures A.1.1 and A.1.2).
32
THE EFFECTS OF
SOCIAL EXCLUSION
ON DIGNITY AND
AGENCY ARE
DIFFICULT TO
MEASURE, BUT
CAN UNDERMINE
PEOPLE’S SENSE OF
WELL-BEING
UNDER A BUSINESS-
AS-USUAL
SCENARIO, THOSE
CHILDREN THAT
ARE FURTHEST
BEHIND WILL
REMAIN BEHIND
BY 2030
31
Chapter 4 of the Report on the World Social Situation 2016 (United Nations, 2016a) contains a discussion of challenges in
measuring discrimination, agency and stigma.
32
Disparities in access to broadband are examined in chapter 2.
WORLD SOCIAL REPORT 2020
40
FIGURE 1.4
Recent trends in the proportion of stunted children by socioeconomic status and ethnic
group,
a
1990s to 2010s
b
FIGURE 1.5
Recent trends in secondary school attendance by socioeconomic status and ethnic
group,
a
2000s to 2010s
c
Stunting
33.2
28.5
20.9
34.3
15.1
34.2
20.5
39.8
36.8
26.2
41.9
21.7
42.0
26.9
-0.4
-0.6
-0.4
-0.5
-0.4
-0.5
-0.4
No education
Primary completed
Secondary and higher completed
Poorest quintile
Richest quintile
Worst-off ethnic group
Best-off ethnic group
Annual
percentage
change
Household
head characteristics
Secondary
school attendance
0.6
0.8
0.7
0.9
1.1
0.8
0.9
No education
Primary completed
Secondary and higher completed
Poorest quintile
Richest quintile
Worst-off ethnic group
Best-off ethnic group
Annual
percentage
change
Household
head characteristics
23.7
33.5
52.9
19.0
52.2
28.3
50.0
33.3
45.8
64.0
32.6
68.7
36.4
59.0
Source: Calculations based on data obtained from MICS and Demographic and Health Surveys (DHS).
Notes:
a. Ethnic groups are selected and classied as “worst-off” and “best-off” based exclusively on the prevalence
of stunting and secondary school enrolment in the starting year.
b. A child is considered stunted if she or he is below minus two standard deviations from the median height-
for-age of the World Health Organization Child Growth Standards. Stunting estimates by household wealth are
based on data for 54 countries and stunting estimates by education of the household head are based on data
for 51 countries. Estimates by ethnic group are based on data for 23 countries, including 17 in Africa, 3 in Latin
America and the Caribbean, 2 in Asia and 1 in Europe. Data collection ranges from 1993 to 1999 for the earliest
survey, and from 2010 to 2017 for the most recent survey. Household wealth as measured by DHS is based on
a household's ownership of selected assets, materials used for housing construction and access to water and
sanitation facilities.
c. Secondary school attendance estimates by household wealth are based on data for 51 countries and by education
of the household head for 50 countries. Estimates by ethnic group are based on data for 26 countries, including
16 in Africa, 5 in Latin American and the Caribbean, 4 in Asia and 1 in Europe. Data collection ranges from 2000
to 2017.
INEQUALITY IN A RAPIDLY CHANGING WORLD
41
Beyond school attendance and completion, the effective acquisition of relevant
knowledge and skills – that is, learning outcomes – is a key determinant of future
opportunities. Information from the Programme for International Student Assessment
(PISA), indicates that students from an immigrant background – both those born abroad,
that is, rst-generation immigrants, and those born in the country to foreign-born parents,
or second generation – score, on average, lower on mathematics, reading and science
tests than students without immigrant parents (see gure 1.6).
33
Differences in socioeconomic status affect learning outcomes as well. Better-off families
have more resources – both time and money – to invest in their children’s schooling.
Across PISA-participating countries and areas in 2018, students from socioeconomically
disadvantaged backgrounds were nearly three times less likely than socioeconomically
advantaged students to attain the minimum level of prociency in reading (OECD,
2019a). Using PISA data from 2006, Ferreira and Gignoux (2013) found that differences
in gender and family background account for up to 35 per cent of differences in scores.
The educational achievement gap between immigrant and non-immigrant students
is still signicant when controlling for their families’ socioeconomic status and the
socioeconomic composition of their schools, although it declined from an observed
average of 41 score points, in the case of reading in 2018, to 24 points (OECD, 2019a).
34
33
PISA is an ongoing OECD programme that helps assess 15-year-old students’ acquisition of knowledge and skills in
mathematics, science and reading across high- and middle-income countries. In the 2018 round of PISA, 79 countries
and areas participated in the assessments, including OECD member countries and partner countries and areas in Asia,
Eastern Europe and Latin America. Scores are reported on a range from 0 to 1,000. About two thirds of students from OECD
countries score between 400 and 600.
34
In the context of PISA assessments, OECD measures socioeconomic status (social, economic and cultural status) on the
basis of indicators of parental education and occupation, the number and type of home possessions that are considered
proxies for wealth and of possessions related to “classical” culture in the family home.
FIGURE 1.6
Prociency scores in mathematics, reading and science literacy, by origin of student, 2009 to 2018
Score
420
430
440
450
460
470
480
490
2018201520122009 2018201520122009 2018201520122009
Mathematics
Reading literacy Science literacy
Native First-generation Second-generation
Source: Calculations based on PISA data. Available at http://pisadataexplorer.oecd.org/ide/idepisa/. (accessed December 2019).
Note: Data shown for 49 PISA-participating countries or areas with scores reported for all three categories across all four waves. First-generation immigrant
children are those born abroad. Second-generation children are born in the country of residence of foreign parents.
WORLD SOCIAL REPORT 2020
42
The evidence in gure 1.6 suggests little progress in ensuring equity in learning outcomes.
For instance, the gap between native and second-generation students in math scores
slightly increased from 30 points in 2009 to 32 points in 2018 in the countries and areas
covered by PISA. The difference in student performance in reading by socioeconomic
status remained largely unchanged in most participating countries and areas during the
same period (OECD, 2019a).
Improvements in health or education do not always translate into reductions in other
dimensions of inequality, such as employment, income or wages. Educational attainment
is often higher among women than men, for instance, particularly in developed countries.
Yet women have not seen this improvement translate into reduced inequality in
employment and wages.
Similarly, the proportion of persons with disabilities with secondary education or higher
has increased since the 1990s in a sample of 17 countries from developing and developed
regions, yet their labour force participation has remained constant over the last decade
(gures 1.7 and 1.8). The educational and labour force participation gaps between
persons with disabilities and those without disabilities have not changed.
FIGURE 1.7
Percentage of adults who completed secondary or higher education by disability status,
1990s to 2010s
FIGURE 1.8
Labour force participation rates by disability status, 1990s to 2010s
Percentage
0
10
20
30
40
50
2010s2000s1990s
10
21
29
Persons without disabilities
Persons with disabilities
Percentage-point difference
Percentage
0
10
20
30
40
50
60
70
80
2010s2000s1990s
38
48
49
Persons without disabilities
Persons with disabilities
Percentage-point difference
Source: Calculations based on census data from the Integrated Public Use Microdata Series (IPUMS) International:
Version 7.1 (Minnesota Population Center, 2018).
Notes: Calculations based on data for the following 17 countries: Benin, Botswana, Brazil, Costa Rica, Dominican
Republic, Ecuador, Ireland, Panama, Philippines, Poland, Rwanda, South Africa, United Republic of Tanzania, Trinidad
and Tobago, United States, Uruguay and Zambia, as collected by national statistical oces and available from the
IPUMS repository at the Minnesota Population Center.
INEQUALITY IN A RAPIDLY CHANGING WORLD
43
Evidence suggests that the ability of persons with disabilities to full their potential has
been largely stymied. Persons with disabilities face physical barriers in accessing the
workplace as well as education, especially in their daily travel. Moreover, misconceptions
persist about their ability to study or work and about their potential productivity, in
addition to open discrimination. Unaddressed, the lower labour force participation of
persons with disabilities perpetuates the myth that they are unable to contribute to
society or in the workplace, and results in higher poverty levels among persons with
disabilities and their families.
BOX 1.7
Socioeconomic status and the intergenerational transmission of disadvantage
Socioeconomic status remains a major determinant of lifelong opportunities across countries and cultures. Several recent
large-scale studies provide a global picture of how socioeconomic status – as measured by levels of education, income and
occupation – is transmitted from parents to children (Narayan and others, 2018; OECD, 2018a).
Intergenerational mobility in social status has historically been lower in developing than developed regions, but it is increasing in
middle-income countries such as Brazil, Egypt, India and Indonesia. In some countries, such as China and Nigeria, children can
expect to complete more years of education than their parents. However, their rank in educational distribution is increasingly tied
to that of their parents (Narayan and others, 2018).
Mobility from the bottom half of the educational or income distribution to the top quartile is low in both developed and developing
countries. That is, a person whose parents have low levels of education is unlikely to complete higher education regardless of
the country’s development level (a phenomenon known as “sticky oors”). On average, it would take ve generations for the
descendants of a low-income family in OECD countries to reach their country’s average income level (OECD, 2018a). At the
same time, downward mobility in education, income or occupation is rare among those at the top of the socioeconomic ladder
(referred to as “sticky ceilings”).
Infant and early childhood contexts are crucial to understanding the persistence of advantage or disadvantage across the life
course and across generations. Language development, for instance – a key precursor to literacy prociency at older ages – is
signicantly lower among children from households of low socioeconomic status (Pace and others, 2016). Parents with more
economic and social resources are better positioned to access better schools. The positive sorting between families and schools
explains a signicant share of inequality in learning outcomes above and beyond a student’s family background (Anand and
others, 2019). The socioeconomic composition of schools has a signicant effect on differences in learning outcomes among
foreign-born and native-born children, for instance. Parents can also transmit cultural knowledge, or “the rules of the game” in
terms of how institutions work.
Across countries, there is a strong link between rising inequality and declining social mobility, as section 1.C illustrates. The
experience of some countries, such as those in Northern Europe, that benet from high intergenerational mobility and low
inequality, signal the role that policy and institutions can have in mediating the inuence of parents’ characteristics on their
children’s future success, particularly through public funding for education, as discussed in chapter 6.
WORLD SOCIAL REPORT 2020
44
In sum, gaps in opportunity are widespread and not closing fast enough. Children’s
chances in life continue to depend on who their parents are, where they live and what
they own (see box 1.7). Disparities are declining in some basic achievements such
as reductions in the prevalence of stunting, but they are growing in more advanced
determinants of well-being – such as access to secondary education. Unless progress
accelerates, leaving no one behind will remain an unmet challenge.
C. The price of inequality
High inequality is an ethical and moral concern across cultures around the world.
Promoting equality is a common ideal, a principle that should be upheld and actively
pursued. However, there are instrumental reasons for tackling the issue as well, since
high and growing inequality has a range of negative impacts on well-being. This section
examines some of those economic, social and political impacts.
1. Slower economic growth and poverty reduction
While the relationship between inequality and economic growth is not clear-cut, recent
research shows that countries with high and rising inequalities generally experience
slower growth than those with lower inequality (Ostry, Berg and Tsangarides, 2014).
Inequality hurts the economy in different ways. First, greater inequality in income and
wealth can result in greater disparities in access to credit or productive assets, such as
land, since poorer households are unable to offer collateral or other guarantees against
default. This makes it harder for lower-income households to invest in businesses
or education. Forgone demand, productivity and innovation affect economic growth
negatively. When those at the bottom of the income distribution are at high risk of not
living up to their potential, the economy pays a price – not only through weaker demand
today, but also through lower growth in the future.
35
In contexts of high inequality, the rich may opt out of publicly funded education and
health and choose private equivalents of better quality (Ferreira, 2001; van der Weide
and Milanović, 2018). The choice of private services by the wealthy can affect political
support and therefore the funding of public services, making it even harder for
lower-income households – who depend more on these public services – to access
good-quality education and health care, further squandering potential for growth.
Unequal access to education and health services has also been recognized as a
barrier to productivity growth and a key contributor to economic inequality, namely
in Latin America (UN-ECLAC, 2018). Low human-capital accumulation among poorer
households has similarly been identied as a key factor in explaining the negative
impact of inequality on economic growth (OECD, 2015a).
In addition to inhibiting economic growth, inequality can generate economic instability
and market volatility. Growth spells tend to be shorter when income inequality is high
(Berg and Ostry, 2011). This result holds also when other factors that affect economic
35
Additionally, high income earners typically spend a lower share of their income than do other income groups (see for
example Pigou, 1920; Auclert and Rognlie, 2018).
INEQUALITY IN A RAPIDLY CHANGING WORLD
45
stability, such as external shocks and macroeconomic conditions, are taken into
account. The global economic and nancial crisis of 2008 provided some evidence
of this effect. Its onset has been linked to a combination of rising inequality, wage
stagnation and nancial deregulation.
36
Most empirical evidence on the relationship between inequality and economic growth,
including the studies cited, focuses on growth in average incomes. Disaggregating
the impact of inequality among different percentiles of the income distribution, van
der Weide and Milanović (2018) nd that, in the United States, rising inequality in net
incomes has been particularly detrimental to income growth rates among the lower
income percentiles, while proving benecial to those in higher percentiles. Thus, even if
inequality were found to affect overall growth positively, it is probable that such positive
effects would accrue mainly to the wealthy. Indeed, across countries, high and growing
levels of inequality have been associated with slower poverty reduction at given levels
of economic growth (Besley and Burgess 2003; Ravallion, 2007a; Fosu, 2011).
2. Limited upward mobility
The ability to move up the socioeconomic ladder denes people’s aspirations and
their sense of well-being. Perceived or actual barriers to upward mobility create social
tensions and put the social contract under threat.
Recent research has shown that more unequal societies tend to be less socially mobile
across generations. For instance, Narayan and others (2018) nd that higher inequality is
associated with lower relative intergenerational mobility across a range of 75 countries
in all regions.
37
Their results echo earlier research by Corak (2013), who named the
strong association between the lack of intergenerational income mobility and inequality
the “Great Gatsby Curve”. That is, people’s ability to do well depends more strongly on
their parents’ fortunes and resources in contexts of higher inequality. The relationship
goes both ways: higher inequality is associated with lower relative mobility and lower
mobility results in inequality of outcomes and opportunities across generations.
While Narayan and others (2018) nd that the negative association between inequality
and mobility is stronger in developing than in developed countries, recent ndings
from OECD countries indicate that social mobility across generations has declined
in developed countries in recent decades (OECD, 2018a). However, mobility patterns
vary considerably across countries. In countries that have experienced periods of rapid
growth in recent decades – including Brazil, China, Indonesia and South Africa – high
relative mobility and high inequality coexist. In these middle-income countries, there
is greater mobility at the top and, especially, at the bottom of the income distribution
HIGH AND GROWING
INEQUALITIES
INHIBIT ECONOMIC
GROWTH, CREATE
ECONOMIC
INSTABILITY AND
HINDER PROGRESS
TOWARDS POVERTY
ERADICATION
36
See Bourguignon (2015) for a more detailed discussion of the link between inequality and the 2008 economic and
financial crisis.
37
Relative intergenerational mobility reects the extent to which one does better – or worse – than one’s peers, in terms
of income, education, occupation or other, across generations. A person whose income is at the 75
th
percentile of the
distribution while her or his parents’ income was at the 50
th
percentile at a comparable point in their lives has experienced
upward relative mobility. Absolute intergenerational mobility measures the absolute overall progress across generations.
Most countries have seen positive upward mobility in absolute terms in recent decades.
WORLD SOCIAL REPORT 2020
46
than in other countries (OECD, 2018a). Periods of rapid economic growth, particularly
in urban areas, offer greater opportunities for mobility to all, even in contexts of high
inequality. These opportunities may, however, dry up if growth slows but inequality
remains high. The case of China is discussed in depth in box 1.8.
38
UNU-WIDER, World Income Inequality Database. Last accessed 2 October 2019.
39
UN Global SDG Indicators Database. Available from https://unstats.un.org/sdgs/indicators/database/. Accessed on
19 September 2019.
BOX 1.8
China: rising inequality alongside greater social mobility
Over the past several decades, China has made rapid advances in economic development. At the same time, its Gini coefficient
increased from 35 in 1990 to a peak of 49 in 2008.
38
Despite this dramatic rise in inequality, social mobility has also risen,
particularly in rural areas where both relative income mobility and income inequality are higher than in urban areas (Chen and
Cowell, 2015).
Strong social mobility has to do with the nature of the country’s inequality – the result of the much faster income growth
of higher-income households and urban areas, rather than a deterioration of incomes for rural or lower-income households.
More than 800 million people have pulled themselves out of extreme poverty in China since 1990 (World Bank, 2018b). The
expenditure growth of the bottom 40 per cent of the population is above the national average.
39
Government policies, especially those targeted at aiding people living in poverty and expanding public access to services
and opportunities, have played a role in facilitating social mobility in China (while having limited impact on overall inequality).
Strategic efforts have also been undertaken to improve the infrastructure and development of the rural and inner regions of
China, to reduce the gap with richer, coastal provinces. Some of these regions have also benefited from rapid urbanization,
which has opened employment opportunities for previously rural and/or lower-income households.
A series of pro-farmer policies have been rolled out since 2000, providing farmer subsidies, abolishing the agricultural tax,
and enhancing social protection (Jain-Chandra and others, 2018). Reforms increased public health insurance coverage of
rural households from less than 15 per cent before 2000 to over 90 per cent in 2009 (OECD, 2018a). Other measures include
expanding social assistance, increasing the minimum wage, and loosening the household registration system that allows for
increased migration of rural residents to small and medium-sized cities.
The Government has also instituted policies to abolish tuition fees at the primary and lower-secondary levels and provide
schooling subsidies and expand access to education across all levels (Chen and others, 2015). As a result, secondary and
tertiary enrolment have increased drastically since the 1980s, and today almost 50 per cent of children in China attain higher
levels of education than their parents (Jain-Chandra and others, 2018; OECD, 2018a). This high educational mobility can be
considered an aspect of, and lead to increased, social mobility. In general, highly unequal societies provide fewer opportunities
for children at the bottom of the income distribution to do better than their parents. If poorer households cannot afford to
invest in more schooling for their children, despite high returns to education, opportunities for upward mobility will be limited.
High inequality can also create the perception that returns to education are low if people see that, no matter how hard they try,
they cannot get the same opportunities as children from wealthier backgrounds – that is, if they perceive the system as being
fundamentally unfair. Perceptions of unfairness may offset the potential “aspirational” effect of the higher wage premiums
available in highly unequal societies (Kerney and Levine, 2016).
INEQUALITY IN A RAPIDLY CHANGING WORLD
47
Rising inequality in income is also associated with growing spatial disparities and can
lead to the concentration of poverty in certain areas, which is associated with lower
relative mobility. At state or provincial levels, Narayan and others (2018) nd that
countries with higher educational mobility enjoy greater spatial equity in education
outcomes. At the neighbourhood level, the availability and quality of public services,
including schools, is lower in poorer neighbourhoods that also suffer from higher
crime rates, limiting prospects for mobility (Chetty and others, 2014; Durlauf and
Seshadri, 2017).
Inequality can also hurt social mobility if those at the top of the income distribution
ensure that advantages are passed from parents to children. In highly unequal societies,
elite groups are more effective at inuencing policymakers, creating an environment
that favours their interests and shielding their children from downward mobility. Political
parties become more dependent on the support of the wealthy as well (Bartels, 2008).
The capturing of opportunities for upward mobility by those already advantaged may
result in a vicious cycle of lack of mobility and growing inequality (see box 1.9).
Even though there is a strong association between inequality and a lack of
intergenerational mobility, cross-country studies have not successfully established
direct causal links. It is likely that the causal mechanisms and their relative importance
vary signicantly by country. Moreover, mobility itself can be measured in different
ways – from income mobility to educational mobility or occupational mobility – yielding
different results in cross-country analyses. For example, measured by income mobility,
Denmark is a more mobile society than the United States, but not when measured by
educational mobility (Landersø and Heckman, 2017). Even when the focus is solely on
income mobility, ndings can differ depending on the measure of income used (ibid.).
The quality and comparability of the underlying data used to measure intergenerational
mobility also put ndings into question, particularly for developing countries (Krishna
and Nolan, 2019).
3. Captured political processes, mistrust of institutions and growing unrest
In principle, rising inequality should become a rallying cry for greater redistribution
through progressive taxation and more comprehensive public service provision.
However, this is often not the case. People in positions of power tend to capture political
processes, particularly in contexts of high and growing inequality. Without strict checks
and balances to prevent it, big corporations and the wealthy may use their position and
resources to lobby in support of their interests, raise legal challenges to progressive
tax legislation, or promote communications and media campaigns to inuence, for
example, public perceptions of redistribution.
A strong middle class can act as a counterbalance to the interests of wealthier
groups by demanding better and more accessible public services, infrastructure and
social protection. Where the middle class is small or shrinking, it exerts insucient
political pressure. Additionally, if high-income households opt out of public services,
SOCIAL
MOBILITY ACROSS
GENERATIONS
HAS DECLINED
IN DEVELOPED
COUNTRIES
IN HIGHLY UNEQUAL
SOCIETIES, THE
ELITES CREATE
A POLITICAL,
ECONOMIC
AND SOCIAL
ENVIRONMENT
THAT FAVOURS
THEIR INTERESTS
AND SHIELDS
THEIR CHILDREN
FROM DOWNWARD
MOBILITY
WORLD SOCIAL REPORT 2020
48
BOX 1.9
The United States: opportunity “hoarding” among
high-income households
Social mobility is lower in the United States than in many other countries. Relative mobility
has been stagnant for decades and absolute mobility has decreased substantially for
those born in 1980 or after. Close to four in 10 children born to parents in the top quintile
of the income distribution remain in the top quintile. This is roughly twice the probability
that a child of middle-quintile parents will rise to the top quintile (Chetty and others, 2017).
A contributing factor to the decline in mobility is opportunity hoarding by people in the top
quintile. Through their economic and political inuence, the wealthy can preserve access
to important opportunities for their children, while effectively preventing less-advantaged
groups from competing for them.
One channel through which high-income households hoard opportunities is zoning
practices. Exclusionary zoning is particularly prevalent in urban areas. It restricts population
density in auent neighbourhoods and increases property values. Research has shown that
social mobility is lower in urban areas with high levels of economic segregation (Sharkey
and Graham, 2013; Orentlicher, 2016). In making some areas unaffordable for most of the
population, zoning laws can effectively block access by lower-income families to high-quality
public schools and other services. Moreover, since public schools are often funded locally,
through property taxes, wealthy areas generate better-funded schools. Even where schools
are predominantly state-funded, auent families can lobby for additional funding for their
school districts more effectively than less auent groups and contribute a signicant
amount of their own resources to their children’s schools.
Opportunity hoarding also factors into university admissions processes. While tertiary
education is critical for upward mobility, its cost is higher in the United States than
anywhere else in the world. Students from high-income households are far more likely
to have a family member pay than students from low-income households, who require
loans (Douglas-Gabriel, 2017). In recent years, the number of for-prot universities has
increased rapidly. Most of these universities target low-income communities, even
though tuition is higher in for-prot schools than in public universities. Yet students
in these establishments have worse labour market outcomes and are more likely to
default on their loans (Armona, Chakrabarti and Lovenheim, 2018). Many of the top
universities in the United States also continue the tradition of legacy admissions –
that is, they give preference to certain applicants based on their familial ties to alumni from
that university – in what has been termed “armative action for the rich” (Kahlenberg, 2010).
In the labour market, social networks help people with more resources to access better jobs,
including through the granting of internships. Approximately half of the students selected for
internships are offered employment straight out of college. Unpaid internships, in particular,
favour those who have the nancial means to work for free.
INEQUALITY IN A RAPIDLY CHANGING WORLD
49
they can become more resistant to taxation for services they do not use, leading to a
growing sense of “social separatism” (Milanović, 2016). On the one hand, middle- and
lower-income groups who feel the system is unfairly beneting the rich can become
politically discouraged, making redistributive policies even less likely. Evidence from
Europe and the United States also suggests that people who live in highly unequal
societies can become less sensitive to the unequal distribution of incomes and exert
less pressure for redistribution (Roth and Wohlfart, 2018). Alternatively, unfairness
can lead to political turmoil. The social movements against austerity measures in
the European Union in the aftermath of the 2008 crisis and the “Occupy Wall Street”
protests in the United States were all, in some way, a reaction against the combination
of rising inequality and the “elite capture” of politics.
Overall, the increasing concentration of wealth and income affects trust in the role of
politics and public institutions to address the needs of the majority (Kuziemko and
others, 2015; Larsen, 2013). Lack of trust destabilizes political systems and hinders
the functioning of democracy. It threatens prosperity through its effect on the climate
for investment and economic growth. It also threatens the underlying fabric that holds
societies together. While trust in institutions is necessary to address social issues,
and to provide and distribute public goods collectively, it can be undermined if policy
decisions are perceived to be grossly unfair.
Evidence demonstrates that rising inequality substantially lowers an individual’s trust
in others as well, likely through its impact on people’s perception of their position in
society relative to others. In the United States, the increase in inequality between 1980
and 2000 explains almost half of the observed decline in trust in others, with a similar
impact on trust in Government (Gould and Hijzen, 2016). Even faith in institutions
such as property rights may be affected by perceptions of unfairness. Levels of
commitment to property rights and contract enforcement, for instance, are lower in
countries with higher shares of billionaires whose wealth comes from sectors prone
to rent-seeking (World Bank, 2017a).
40
Rising inequality creates discontent, political dysfunction and can lead to violent
conict. In particular, a positive relationship is found between group-based inequality
and violent conict. Real or perceived inequality among social groups in access to
economic resources, public services, political processes and power, along with other
aspects of civic and cultural life, has been closely associated with intense grievances
that, in turn, have often been mobilized to fuel violent conict. Research suggests
that when the distribution of income and wealth clearly falls along distinct ethnic
or religious lines, it can be particularly harmful to social cohesion, inspiring hatred,
envy and a sense of unfairness (Alesina, Michalopoulos and Papaioannou, 2016). The
recent resurgence of populism in some countries has also been presented as a direct
consequence of rising inequality (see box 1.10).
40
Including those sectors that are heavily dependent on government concessions, such as nance, real estate and natural
resources.
THE CONCENTRATION
OF WEALTH AND
INCOME AFFECTS
TRUST IN POLITICS
AND PUBLIC
INSTITUTIONS.
LACK OF TRUST
DESTABILIZES
POLITICAL SYSTEMS
AND HINDERS THE
FUNCTIONING OF
DEMOCRACY
WORLD SOCIAL REPORT 2020
50
BOX 1.10
Inequality and the rise of populism
Populism inspires a wide range of definitions. Common to most is the notion of populism
as combining anti-establishment sentiments with authoritarianism and nativism. The
central message of populist movements has historically been that the common people
are being exploited by a privileged elite, and that radical institutional change is required to
avoid such exploitation. In recent years, populist movements across the political spectrum
have seen electoral success, including in the United States, several European countries
and Brazil.
Scholars have provided two main explanations for the electoral success of populist
movements. The first explanation highlights the role of increased economic insecurity.
Increases in unemployment during the 2008 economic and financial crisis, for instance,
have been identified as a driver of the rise of populism in Europe (Algan and others,
2017). In the United Kingdom, regions characterized by increasing income inequality, but
also declining shares of manufacturing employment and lower real wage growth, voted
systematically to leave the European Union (Becker, Fetzer and Novy, 2017).
The second explanation prioritizes cultural factors. Inglehart and Norris (2016), for
example, find that the recent rise in populism in the United States and Europe has been
driven more by cultural backlash – a reaction by once-dominant social groups to social
and demographic changes – than by economic insecurity. Indeed, support for populist
parties has grown in countries that have not seen a rise in inequality (France and Austria),
as well as in countries where income growth has been relatively robust (Poland).
A backlash against globalization has been a key component of recent populist rhetoric
in developed countries. It is likely that inequality, together with labour market insecurity
and other economic considerations, along with cultural and demographic factors,
have all played a role in the rising of populism. Milanović (2016) sees a declining
middle class in a range of developed countries contributing to a sense of “social
separatism”, eroding broad-based support for public services and infrastructure and
giving ammunition to populist parties and individuals. Similarly, it is possible that
the pursuit of a free-trade agenda in the 2000s – supported by high-income groups –
left low- and middle-income groups feeling unrepresented by traditional political parties
(Piketty, 2018). In the United States, for instance, counties with greater global trade
exposure shifted towards the conservative Republican Party – and its populist candidate,
Donald Trump – in the 2016 presidential election (Autor and others, 2016). In the United
Kingdom, greater exposure to trade with China resulted in regions voting more strongly
in favour of leaving the European Union (Colantone and Stanig, 2018). In both countries,
however, the most consistent single predictor of how people voted were educational
levels (Becker, Fetzer and Novy, 2017; Picketty, 2018). In this context, tackling inequality
is only one of several social and economic policy imperatives to ensure fairer, more
sustainable globalization.
INEQUALITY IN A RAPIDLY CHANGING WORLD
51
D. Conclusions
High and rising inequality hinders progress towards the Sustainable Development Goals.
Highly unequal societies grow more slowly than those with low income inequalities
and are less successful in sustaining economic growth. They also are less effective
at reducing poverty. Without appropriate policies and institutions, inequalities lead
to a concentration of political inuence among those who are already better off, and
therefore tend to create or preserve unequal opportunities.
Yet growing inequality is not inevitable. Although economic inequalities have generally
increased in most developed countries since 1990, they have declined in many countries
of Latin America and in several countries of Africa and Asia, albeit from very high levels.
Differences are found in the timing, direction and intensity of distributional changes
across countries, even within regions. Inequality among countries has declined in
relative terms but remains very high.
Similarly, some countries have seen increases in group-based inequality but, once
again, trends vary by country and depending on the indicator used to assess progress.
The data presented in this chapter indicate, for instance, that average gaps in children’s
stunting are declining, yet disparities in secondary education are not. The educational
attainment of persons with disabilities is increasing rapidly, yet their employment
opportunities are not.
Major global trends, including those examined in the next chapters, are undoubtedly
affecting the distribution of opportunities and resources. Some megatrends may help
equalize opportunities while others may exacerbate income inequality, mainly through
their effect on labour markets. Yet their impact is not predetermined. Inequality levels
and trends differ even among countries at similar levels of development and that are
equally exposed to trade, technological innovation and even the effects of climate
change. Success stories in reducing inequality illustrate the importance of national
policies and local institutions.
WORLD SOCIAL REPORT 2020
52
ANNEX 1: MEASURING ECONOMIC INEQUALITY
There are different ways to measure and summarize the distribution of income,
consumption or wealth, and the levels of economic inequality among individuals and
households. Each of the available indicators has strengths and limitations.
The most widely used indicator of inequality is the Gini coecient, which ranges from
0 (perfect equality) to 100 or 1 (complete inequality, in the sense that one person has
all the income – or consumption – while others have none). The closer the coecient
is to 100 (or 1, depending on the scale used), the more unequal the distribution. The
Gini coecient of within-country inequality measures the distribution of income (or
consumption) among individuals or households in each country. In contrast, the Gini
coecient of international inequality is obtained by taking each country’s income per
capita as one observation or data point. That is, it calculates income inequality among
average persons in each of the world’s countries. A variant of this coecient weighs
each national income per capita by each country’s population to account for the
fact that China’s income and its economic growth, for instance, affect more people
than the income and growth of smaller countries. The international income inequality
trends described in section A.1. are based on the weighted Gini coecient. The Gini
of global inequality – also presented in section A.1. and discussed in box 1.2 – goes
beyond the mean incomes of each country to account for inequality both among and
within countries.
The Gini has important advantages over other indicators as well as several limitations.
Namely, it has a clear graphic representation. As any summary measure, it allows for
general conclusions regarding inequality trends. At the same time, it does not identify
whether rises or falls in inequality are triggered by changes at the bottom, middle or top
of the distribution. The Gini itself is more responsive to changes in the middle of the
distribution than other indices and less responsive to changes at the very bottom and
at the very top.
A detailed analysis of distributional changes calls for additional indicators. The shares
of income, consumption or wealth at the top or the bottom of the distribution – that is,
the share of the bottom or top 10 per cent or 1 per cent of the population – are better
indicators of income concentration at these extremes. Each measure focuses on one
part of the full distribution and therefore does not provide full information. Combining
different shares (for example, relating the share of the top 10 per cent to that of the
bottom 40 per cent, as the “Palma ratio” does, or that of the top 1 per cent to the bottom
50 per cent) allows for broader conclusions, but the results may be ambivalent. For
instance, the share of income going to both the top 1 per cent and the bottom 50 per
cent has increased in many countries in recent decades.
INEQUALITY IN A RAPIDLY CHANGING WORLD
53
Income and wealth shares have not been used as broadly as the Gini coecient until
recently because their quality is often questionable, as described in box 1.1. Recently,
the use of sources of information other than surveys has helped to improve the quality
of data on income, wealth and consumption at the top of the distribution. The World
Income Lab’s Database initiative, in particular, combines data from national accounts,
surveys, tax records and wealth rankings in order to track changes at the top more
precisely. WID estimates are available for 70 countries, but only three in Africa. In
developing countries where tax data are available, data quality may be questionable
given the absence of broad income taxes in many of them and the incomplete taxation
of capital incomes.
It is, however, important to note that household surveys contain abundant information
that is not available in any other of the sources listed. With the necessary corrections
from administrative or other data, they are likely to remain the primary source of
information on various dimensions of inequality.
Considering that each indicator of economic inequality has strengths and limitations,
the analysis in this report relies on more than one indicator. The authors note that
cross-country analyses are still affected by data consistency and comparability.
In general, there are trade-offs between coverage and comparability.
One of the main reasons for the lack of comparability among data sources is that
some surveys collect information on income as the main indicator of economic
well-being, while others use consumption expenditure. Developed countries and
those in Latin America tend to use income surveys, while surveys in Africa and many
Asian countries record consumption. Non-harmonized cross-country series of the
Gini coecient often rely on a mix of consumption and income data.
Given the fact that richer households tend to consume a smaller share of their
incomes than poorer households (and save more), estimates of inequality based
on consumption are generally lower than estimates based on income. That is,
consumption data tend to understate the level of inequality if they are compared to
estimates based on income data. For example, in Egypt, the Gini of consumption
inequality was estimated at 31.5 in 2011 by the World Bank while the Gini of (net)
income inequality was estimated at 53.9 in 2012 by the Luxembourg Income Study.
41
Given the different welfare aggregates used, comparisons across countries and
especially among regions – namely Africa and Latin America – must be done carefully.
It is reassuring that time trends are similar irrespective of the indicator used (World
Bank, 2016a).
41
Data from UNU-WIDER’s World Income Inequality Database (WIID), version 4. Available online at: www.wider.unu.edu/
project/wiid-world-income-inequality-database. For a broader comparison of income and consumption-based Ginis, see
World Bank (2016a).
WORLD SOCIAL REPORT 2020
54
Among countries that use household income, some datasets report income before
taxes and transfers (market or gross income), others report disposable or net income
(after taxes and transfers), and still others report income after taxes but before transfers.
In order to increase coverage and comparability, some income inequality databases
make assumptions to impute values where data are missing. The authors of this report
have tried to minimize the use of imputed values. Among the databases examined, the
World Bank’s PovcalNet has the most non-imputed estimates for the largest number
of countries. It is also the data source used for the international monitoring of SDG
target 10.1. Section 1.1 of this report relies mostly on PovcalNet’s estimates of the Gini
coecient provided through UNU-WIDER’s World Income Inequality Database. When
possible, estimates from various sources are compared to ensure consistency. In
addition, estimates of the Gini coecient of income inequality are complemented with
estimates of income shares, where available, as well as estimates of wealth inequality.
INEQUALITY IN A RAPIDLY CHANGING WORLD
55
ANNEX 2: GROUP-BASED
a
DISPARITIES IN ACCESS TO
ELECTRICITY AND SANITATION
FIGURE A.1.1
Recent trends in the proportion of households with access to electricity, by household
head characteristics, 1990s to 2010s
b
FIGURE A.1.2
Recent trends in the proportion of households with access to improved sanitation,
c
by
household head characteristics, 1990s to 2010s
Household access
to electricity
33.4
43.5
65.8
30.9
56.8
46.7
56.1
76.5
41.9
67.4
0.9
0.8
0.7
0.7
0.7
No education
Primary completed
Secondary and higher completed
Worst-off ethnic group
Best-off ethnic group
Annual
percentage
change
Household
head characteristics
Household access to
improved sanitation facilities
29.1
36.8
49.2
32.3
54.8
49.1
59.7
77.4
49.7
72.7
1.3
1.5
1.9
1.2
1.2
No education
Primary completed
Secondary and higher completed
Worst-off ethnic group
Best-off ethnic group
Annual
percentage
change
Household
head characteristics
Source: Calculations based on data obtained from DHS and MICS.
Notes:
a. Ethnic groups are selected and classied as “worst-off” or “best-off” based exclusively on their access to electricity
and improved sanitation in the starting year.
b. Access to electricity estimates by education of the household head are based on data for 55 countries. Estimates
by ethnic group are based on data for 27 countries.
c. Improved sanitation is measured by the type of toilet facilities used by a household, and where the contents of the
facility eventually end up (if this information is available). An improved sanitation facility is one that hygienically
separates human excreta from human contact. Access to improved sanitation estimates by education of the
household head are based on data for 54 countries. Estimates by ethnic group are based on data for 26 countries.
WORLD SOCIAL REPORT 2020
56
QUOTE
CHAPTER 2
THE TECHNOLOGICAL
REVOLUTION: WINNERS
AND LOSERS
57
INEQUALITY IN A RAPIDLY CHANGING WORLD
KEY MESSAGES
• Highly skilled workers are beneting the most from new technologies. Moreover,
in many countries, productivity gains brought about by such technologies are largely
being captured by a small number of dominant companies.
• Technological progress displaces workers, mainly through automation, but it
also creates demand for new jobs. Job disruption – and, at times, destruction –
is affecting mainly low-skilled and middle-skilled workers, contributing to job
polarization and wage inequality.
• Technological innovations in sectors such as health and banking have far-reaching
implications for equality. The potential of new technologies to foster sustainable
development can only be realized, however, if everyone has access to and
uses them.
• Proactive policies and supportive institutions can help ensure that technological
dividends are broadly shared.
CHAPTER 2
THE TECHNOLOGICAL
REVOLUTION:
WINNERS AND
LOSERS
WORLD SOCIAL REPORT 2020
58
INTRODUCTION
The world is in the midst of rapid, revolutionary and often disruptive technological
breakthroughs. Advances in biology and genetics, robotics and articial intelligence,
3D printing and other digital technologies, including information and communication
technologies (ICTs), are transforming economies and societies. These new
technologies bring new opportunities, greater eciency and can contribute to the
achievement of the SDGs. They can help improve health and longevity, end hunger
and enhance the quality of life.
However, the rapid speed of current technological change brings new and urgent policy
challenges for managing its impacts. While technology brings productivity gains, for
instance, it can also erect hurdles for individuals and societies transitioning to new
types of employment. For all its promise, technological innovation is already creating
winners and losers. Highly skilled workers are beneting more from new technologies
than other workers, resulting in greater income and wage inequality.
Digital and communication technologies have also changed the nature of work: they
allow workers more exibility – not only in terms of the locations they can work from
but in achieving better work-family balance. This agility extends to a wider choice
of employers. More people now work part-time, as contractors or freelancers. Such
non-standard work arrangements offer greater exibility. However, they also leave
workers in insecure employment and income situations, with weaker bargaining power
compared to traditional workers belonging to labour unions. New technologies have
also weakened unions and other labour market institutions. Skill-biased technologies
have reduced the share of middle-skilled workers – once the backbone of labour
unions – in the overall workforce. All of these factors affect wage inequality.
At the same time, digital innovation is opening opportunities in sectors such as health
and nance. Advances in mobile technologies have eliminated the need for costly
landlines and provided remote areas with access to communication networks and
the Internet through mobile phones. This has made it possible for applications of
digital technologies in health care and mobile banking to extend their reach to remote
underserved areas as well as other poor communities.
These technologies can help drive development and create more inclusive societies.
However, in order to harness their potential, Governments need to introduce policies
and strategies to make new technologies accessible to all, particularly disadvantaged
segments of society. If everyone had access and the capacity to use them, new
technologies could help reduce inequality.
This chapter analyses the impact of new technologies on income and wage
inequality. It argues that proactive policies and supportive institutions can help
ensure that the dividends of technological change are broadly shared. Section A
examines the impact of technological innovation on labour markets and income and
FOR ALL ITS
PROMISE,
TECHNOLOGICAL
INNOVATION IS
CREATING WINNERS
AND LOSERS
INEQUALITY IN A RAPIDLY CHANGING WORLD
59
wage inequality. Section B describes the extent of the technological divide and the
opportunities that new technologies bring to sectors such as health and banking, with
far-reaching implications for inclusion. The chapter concludes by considering the role
of Governments in managing technological change and harnessing its potential for
greater equality.
Technological change brings additional concerns for inequality, namely those
associated with potential biases brought about by the use of algorithms in articial
intelligence. The increasing use of decision-making systems based on articial
intelligence in job recruitment and justice, for instance, can discriminate against certain
population groups, including ethnic minorities, when based on biased historical data.
These issues are explored in a recent United Nations report (United Nations, 2018b)
and will not be examined in this chapter.
A. Technology, employment and inequality
Technological progress has been a primary driver of economic growth over the last
two centuries. The past three industrial revolutions increased productivity per worker
and per capita income, even though their full impact became visible only decades
later (Bruckner and others, 2017). Industrial revolutions not only made the production
of existing products more ecient, but they also created new products and services.
This broadened the range of choices for consumers and producers. Higher incomes
and more consumer choices have contributed to a higher quality of life in many parts
of the world.
At the same time, technological progress prompted changes in sectoral employment.
Specically, the rst industrial revolution encouraged shifts from the agricultural
sector to manufacturing and, later, to the service sector. Developed countries
completed the structural transformation away from agriculture early on, and many
developing countries underwent a similar process later – often at a faster pace.
Many least developed countries have not yet experienced this type of structural
transformation, particularly those in sub-Saharan Africa, where most of the labour
force is still employed in the agricultural sector. Ongoing technological innovation,
however, will undoubtedly change the development paradigm, with implications
for trade and global value chains in these countries. The traditional transition from
agriculture to manufacturing may not be realized, and labour may move directly from
agriculture to services.
The widespread use of machines and automatic devices has contributed to a decline
in the share of workers employed in the agricultural sector at the global level. From
1991 to 2018, the share of agriculture in total employment declined by 16 percentage
points at the global level, while remaining relatively unchanged in sub-Saharan Africa
(see gure 2.1). On the other hand, the service sector gained importance in employment
over the same period, now accounting for about 50 per cent of global employment.
Rapid advances in digital technologies, particularly ICTs, have contributed to increases
in the share of the service sector.
WORLD SOCIAL REPORT 2020
60
In the second half of the twentieth century, technological progress also changed
the kinds of jobs demanded in developed countries. This progress intensied skill
bias, and repetitive tasks previously carried out by low-skilled workers were replaced
by machines and a smaller number of low- or high-skilled workers. This shift also
contributed to increases in the college wage premium – that is, the wages of college
graduates relative to the wages of high school graduates.
1. Labour-saving and skill-biased technologies
The emergence of new technologies is changing the nature of work. High-speed
Internet (“broadband”) offers workers and employers more exibility and eciency
in the use of resources. On the other hand, the International Labour Organization
argues that the same technologies could also erode workers’ bargaining power
and work-related benets (Berg and others, 2018). Technological progress could
also prompt the disappearance of certain jobs through automation and increase
income inequality. This section assesses whether recent technological progress has
contributed to widening income inequality by examining the impact of three related
FIGURE 2.1
Total employment shares by sector and by region, 1991 and 2018 (percentage)
1991
World
Percentage
High-
income
countries
Eastern
Asia
Southern
Asia
Latin
America
and the
Caribbean
Sub-
Saharan
Africa
2018
0
20
40
60
80
Services
Industry
Agriculture
Services
Industry
Agriculture
Services
Industry
Agriculture
Services
Industry
Agriculture
Services
Industry
Agriculture
Services
Industry
Agriculture
44
28
49
34
47
23
28
23
33
23
24
16
23
14
23
21
34
27
75
63
65
54
61
43
63
55
23
22
30
22
53
25
6
3
11
10
Source: Calculations based on data from ILOSTAT (November 2018).
Note: Regional averages are based on all countries in the region, including low-, middle- and high-income economies.
INEQUALITY IN A RAPIDLY CHANGING WORLD
61
issues: (1) the types of technological progress that are increasing income and wage
disparities, (2) labour-saving technological progress and the share of labour in national
income, and (3) skill-biased technology and relative demand for high- and low-skilled
workers.
Many factors other than technology have contributed to income and wage inequalities.
Advances in communication and transportation have made it possible for rms to
establish and expand global value chains. Globalization, in turn, has inuenced the
choice of technologies, prioritizing those that are more protable. The prot motive
provides further incentive for rms to introduce more skill-biased or labour-saving
technologies. This suggests that globalization and technological progress are
reinforcing one another, widening income inequality in many countries – both
developed and developing (Acemoğlu, 2003; Bruckner and others, 2017).
Changes in labour market institutions and liberal economic policies have also
exacerbated inequality. Moreover, increased demand for goods and services that are
produced using skill-biased or labour-saving technologies can explain a signicant
part of the growth of wage inequality since the second half of the twentieth century.
A consensus on the specic dynamics of these factors, including technology,
remains elusive.
The technologies that are most relevant to the current debate about labour-market
outcomes are skill-biased and labour-saving technologies. Skill-biased technologies
increase the productivity and demand of high-skilled labour more than low-skilled
labour. Labour-saving technologies, on the other hand, allow employers to produce
the same amount of output with less labour. Today, progress in both skill-biased and
labour-saving technologies typically involve digital technologies, which include ICTs,
automation (which embodies articial intelligence and machine learning technologies)
as well as new service networks, organizations and management.
The use of labour-saving technologies affects the share of national income that goes
to workers. Skill-biased technologies affect the composition of the labour force as
well as the income that goes to workers with different skills. Skill bias comes into play
with the technologies invented and diffused after World War II in developed countries,
and their use has accelerated over the last three decades.
42
Technological change in developed countries has been identied as skill biased. The
wages of highly skilled workers – relative to those of low-skilled workers – have indeed
been rising in the last decades, even while the supply of highly skilled (educated)
workers has increased. All other things being equal, overall increases in education
should reduce the impact of the “skill premium”. Technological change has been
recognized as an important factor in the rising skill premium (see gure 2.2).
THE EMERGENCE
OF NEW
TECHNOLOGIES
IS CHANGING THE
NATURE OF WORK
42
Historically, technologies have not been always skill biased. For example, interchangeable parts, a major technological
advance in the nineteenth century in the United Kingdom, were designed to replace skilled workers (artisans) with weaving,
spinning and threshing machines. The technologies were considered unskill biased (see Acemoğlu, 2003).
WORLD SOCIAL REPORT 2020
62
2. Share of labour in national income: impacts of labour-saving technology
Labour-saving technologies have been identied as one of the drivers of the declining
income share of labour in both developed and developing countries (IMF, 2017a).
Chapter 1 shows that the share of national income that goes to labour has declined in
both developing and developed regions. Karabarbounis and Neiman (2013) estimate
that the emergence of new technologies, particularly those related to ICTs, accounted
for about half of the decline in the global labour share of income for 1975-2012.
Technological progress, proxied by a rapid decline in the price of investment goods
relative to other goods, has contributed to and encouraged the shift away from
labour and towards capital in production, particularly in developed countries.
43
The
accelerated advance in ICTs, in general, and automation, in particular, underpins this
decline. Lower prices of investment goods incentivize the employer to substitute
capital – that is, the use of labour-saving technologies – for labour. If the production
method, which includes not only technologies but also management and organizational
arrangements, is exible enough,
44
more capital is used to produce a unit of product,
at the expense of labour. This reasoning is consistent with the experience of many
developed countries.
Technological progress has also contributed to the emergence of one or two
dominant rms in several industries. Autor and others (2017a) point out the role of
rms such as Google, Apple, Facebook and Amazon in their respective industries in
43
According to Karabarbounis and Neiman (2013), the relative price of investment goods declined by about 25 per cent from
1950 and 2010 in developed countries.
44
In this case, the elasticity of substitution between labour and capital is said to be greater than one. Lawrence (2015) refutes
the claim that elasticity is greater than one in the economy of the United States. He instead claims that elasticity is less
than one and that technological progress is augmenting labour.
FIGURE 2.2
Wages by workers’ level of education relative to workers with no degree, United States
of America, 1980-2015
a
No degree High school diploma Some college College only (4-year)
Graduate degree Master's degree
b
Professional
c
Doctoral degree
0
1
2
3
4
20152010200019901980
Ratio
Source: Calculations based on Valletta (2016), table 1.
Notes:
a. Wage premium is measured by the average hourly wage of workers in each educational group relative to
workers with less than 12 years of education, labelled as “no degree”.
b. Includes Master of Business Administration (MBA) and other master’s degrees.
c. Includes Juris Doctor (JD), Doctor of Medicine (MD) and related degrees.
INEQUALITY IN A RAPIDLY CHANGING WORLD
63
the declining labour share. The presence of these so-called superstar rms leads
to a “winner-take-most” market concentration and increases the price markup over
marginal cost, lowering the labour share of value-added in the industry. In fact, in
the United States, market concentration has increased in some industries, and the
industries with higher concentration have decreased their labour share (see also
Autor and others, 2017b). Other possible factors that could explain the decline in
labour share include increases in markups by monopolistic or oligopolistic rms and
the share of economic prots (Karabarbounis and Neiman, 2013).
In developing countries, the share of labour in total income has declined for different
reasons than in developed countries, even though new technologies still play a
role. In conventional economic theory, developing countries are considered to
have a comparative advantage in producing more labour-intensive products, while
globalization would provide them with the opportunity to expand the production of
such products, which would lead to a higher labour share in national income. Empirical
evidence, however, suggests otherwise. Such evidence shows that it is dicult for
developing countries to substitute capital with labour because of low elasticity, even
when there is higher demand for labour. Moreover, advances in information technology
and innovation in the transportation industry have geographically expanded global
value (or supply) chains and deepened the supply and communication relations
between headquarters oces and their suppliers and among suppliers in the value
chains. Global value chains, in turn, have facilitated the off-shoring of capital-intensive
production to developing from developed countries.
45
In general, off-shore tasks using
new technologies are more capital-intensive than the average intensity in these host
countries, contributing to a decline in the labour share.
46,47
It should be noted that the declines in labour share are largely due to intrasectoral (or
within-industry) changes rather than to changes in the sectoral composition of the
economy (or structural changes) (Karabarbounis and Neiman, 2013). If the changes
were structural, the declining labour share would be attributed to shifts of workers
from industries with higher labour-income shares (for example, nance and services)
to those with lower shares (such as mining, transportation and manufacturing). This
within-industry decline of the labour share, on the other hand, supports the role of
labour-saving technology in the shrinking share of labour income at the national level.
Karabarbounis and Neiman (2013) nd that, with a few exceptions – namely, the
economies of Puerto Rico and the Republic of Korea – by and large, changes in the
within-industry labour share accounted for a signicant portion of changes in the total
labour share.
TECHNOLOGICAL
PROGRESS HAS
CONTRIBUTED TO
THE SHIFT FROM
LABOUR TO CAPITAL
IN PRODUCTION –
IMPLYING WORKERS
ARE GETTING A
SMALLER SHARE OF
THE ECONOMIC PIE
45
According to the International Labour Organization, about 19 per cent of total employment in seven large developing
countries (Brazil, China, India, Indonesia, Mexico, the Russian Federation and Turkey) involved jobs in global supply
chains in 2013. See Kizu and others (2016).
46
It should be noted that advances in ICT and transportation have also made it possible to expand global value chains
in many parts of the world.
47
More recently, increasing automation is argued to have led to reshoring (or on-shoring) of production – that is, the
process of returning the production of goods back to the enterprise’s home country. In theory, reshoring will force the
host country to exploit its comparative advantage in labour-intensive production, thus leading to a higher labour share
in national income. Yet it will take several years before any impacts of reshoring on labour share can be discerned.
WORLD SOCIAL REPORT 2020
64
3. Wage divergence: impacts of skill-biased technology
Widening wage inequality is a key contributor to the rise of income inequality. There are
two possible channels through which recent technological progress has affected wage
inequality, though they are not mutually exclusive. The rst is the emergence of superstar
managers, who innovate and capture a large share of the market, earning astronomical
wages. The second channel is the so-called race between skills and technology: if the
rate of technological progress is faster than increases in education, then the growing
demand for highly skilled workers may result in higher wages for them (see Rotman,
2014). In fact, compensation paid to superstar managers and highly skilled workers has
increased while that of middle- and low-skilled workers has stagnated or even declined,
resulting in widening wage inequality, as explained in chapter 1.
48
The term “superstars” originated in the television and motion picture industries;
superstars signicantly expanded the audiences for those in show business and sports,
and their wages rose commensurately (Rosen, 1981). At present, chief executives of
large corporations receive hefty compensation in the form of salaries, bonuses and,
most importantly, stock options. According to the American Federation of Labor and
Congress of Industrial Organizations (AFL-CIO), the chief executive ocers of S&P 500
companies received an average of $14.5 million in 2018, while the average production
and non-supervisory worker earned about $40,000 that year.
49
The current era of new
technologies is characterized by a small group of successful individuals and the
enterprises they manage (see Brynjolfsson and McAfee (2014) and Autor and others
(2017a)). The nature of the technology itself draws attention to their accomplishments
and dramatically increases their rewards. The biggest economic winners are “those
with the ideas behind new products and successful business models”, not the
conventional capital owners (Rotman, 2014, p. 10). In 2017, ve technology and two
nancial companies were ranked among the 10 largest publicly traded companies in
the United States. In 1967, only one technology company was among the top 10; the
rest comprised oil and gas, lm, automobile and telephone companies, all of which are
capital intensive and tend to employ heavy machinery.
As described in the previous section, labour-saving technologies – particularly
the automation of routine tasks – reduced the need for many production, sales,
administrative and clerical jobs. The automation process began with advances in digital
technologies in the 1980s. Now, articial intelligence, machine-learning and robotics are
the main drivers of technological progress that is expanding to a new domain of tasks
and offers opportunities for automation in both manual and cognitive work.
There has indeed been a long-term reduction in jobs that are routine intensive. As
shown in gure 2.3, the share of middle-skilled occupations – often administrative and
sales-related –declined since the 1990s in almost all high-income countries and even in
many low-income countries.
48
Chapters 1 and 6 also point out that policy changes have contributed to the growing wage gap.
49
AFL-CIO, “Highest-Paid CEOs”, available from https://acio.org/paywatch/highest-paid-ceos.
INEQUALITY IN A RAPIDLY CHANGING WORLD
65
FIGURE 2.3
Polarization of labour markets: changes in employment shares by skill level in high- and
low-income countries, around 1995 and around 2015
High-skilled occupations Middle-skilled occupations Low-skilled occupations
High-skilled occupations Middle-skilled occupations Low-skilled occupations
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Argentina
Barbados
Slovakia
Uruguay
Czechia
Russian Federation
Chile
Hungary
United States
Portugal
Netherlands
Australia
Italy
Canada
New Zealand
Croatia
Germany
Denmark
Finland
Norway
Ireland
Estonia
Switzerland
Republic of Korea
Israel
Sweden
United Kingdom
Poland
Austria
Lithuania
Iceland
Spain
France
Slovenia
Greece
Luxembourg
Percentage-point change
High-income countries
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
China
Ethiopia
Botswana
Nicaragua
Peru
Pakistan
Ghana
Mongolia
Namibia
Kazakhstan
Costa Rica
Bhutan
Egypt
Sri Lanka
Jamaica
India
Thailand
El Salvador
Bolivia (Plurinational State of)
Serbia
Uganda
Ukraine
United Republic of Tanzania
Mauritius
Dominican Republic
Honduras
Malaysia
South Africa
Philippines
Turkey
Guatemala
Panama
North Macedonia
Percentage-point change
Low-income countries
Source: Calculations based on World Bank (2016b).
Note: High-skilled occupations include legislators, senior ocials and managers, professionals, technicians and
associate professionals. Middle-skilled occupations comprise clerks, craft and related trades workers, plant and
machine operators and assemblers. Low-skilled occupations refer to service and sales workers and elementary
occupations.
WORLD SOCIAL REPORT 2020
66
As a result of these trends, labour markets are becoming increasingly polarized.
Skill-biased technologies that favour high-skilled workers and reduce the demand
for middle-skilled workers are a key determinant of this polarization. Thus, on the
one hand, automation has led to a direct substitution of jobs and tasks currently
performed by workers (in what is often called the displacement effect). On the other
hand, increases in productivity (and thus income) for some (mostly high-skilled)
workers generate larger demand for goods and services (known as the productivity
effect). High-skill-biased technology has increased the demand for low-skilled workers
as a second-round effect of its increased demand for high-skill workers. So, while
skill-biased technologies have affected the skill composition of the labour market,
there is little evidence to suggest that they have reduced the total number of job
opportunities signicantly (OECD, 2019c).
The hollowing out of middle-skilled occupations has been well documented in the
United States and European countries, but the same phenomenon is now spreading
to developing countries, except China and Ethiopia. In China, mechanization in the
agricultural sector increased the share of routine employment between 2000 and 2010,
while in Ethiopia the share of employment in manual occupations increased from
around 1995 to around 2012. Some commodity-exporting countries did not experience
this polarization since the commodity price boom beneted low-skilled workers (World
Bank, 2016b).
One type of skill-biased technology that has contributed to the hollowing out of
middle-skilled jobs is routine-biased technology. Together with the off-shoring of tasks
from developed to developing countries (which is also partially affected by technological
change), new technology has polarized the labour market. Both factors decreased the
demand for middle-skilled workers relative to high- and low-skilled workers (Goos and
others, 2014).
50
As a result of the emergence of routine-biased technology, middle-skilled
workers earned about three quarters of the wages of their college-educated counterparts
in 1980; in the United States, middle-skilled workers earned only about half as much
as their more educated counterparts. It may not be surprising that the wages of
middle-skilled workers declined relative to those of high-skilled workers, since demand
for the former group decreased. But the wages of low-skilled workers also declined
relative to those of the highly skilled, despite the increased demand for low-skilled
workers. In the majority of developed countries, wage disparity as measured by the
ratio between wages at the ninth and the rst deciles of the wage distribution – called
the 90:10 ratio – is higher today than 40 years ago. In the United States, where wage
disparity is higher than in other developed countries, the 90:10 ratio rose from 3.66 in
1973 to 5.07 in 2017 (OECD, 2019b).
Earnings inequality and job polarization have also increased in Europe. Bussolo,
Torre and Winkler (2018) examine three factors that have affected the distribution
of earnings among workers in Germany, Poland and Spain: changes in occupational
SO FAR, HIGHLY
SKILLED WORKERS
HAVE BENEFITTED
THE MOST FROM
NEW TECHNOLOGIES
50
It should be noted that a general consensus has not yet formed. Some economists argue that skill-biased technological
change does not adequately account for rising wage inequality over the last three decades. See, for example, Schmitt,
Shierholz and Mishel (2013).
INEQUALITY IN A RAPIDLY CHANGING WORLD
67
structure (that is, polarization), returns to education, and labour market characteristics,
such as age and gender composition. The study concludes that job polarization can
account for a signicant share of the observed increases in inequality, while the two
other factors played only minor roles in explaining wage inequality. Of particular interest
in this analysis is the strong power of occupational structure to explain the increasing
90:10 and 50:10 ratios, more than the increasing returns to education.
51
Most of
the displaced middle-skilled workers are likely to move down to jobs categorized as
low-skilled, exercising downward pressure on wages for low-skilled workers, explaining
the widening wage gaps.
Autor (2019) points out that urban workers who are not college educated have
been most adversely affected by routine-biased technology. He also says that job
polarization and wage inequalities among different skill or educational groups have
been most noticeable in urban areas of the United States since 1980. Urban workers
that are not college educated and that enjoy (relatively) high-paying middle-skill jobs in
large, high-wage cities have been steadily losing these jobs and shunted into low-wage
occupations. These workers now perform substantially less skilled work than decades
earlier (Autor, 2019, p. 31). He concludes that technological progress in recent decades
has been less benecial and more disruptive to workers without a college education.
More recently, a debate has emerged on whether wage gaps among workers with a
college or higher degree and those with a high-school diploma are decreasing in the
United States and some European countries (Valletta, 2016) (see box 2.1). At this
moment, it is too soon to tell how this would affect wage distribution at the national
level and thus income distribution.
Many attempts have been made to estimate the extent to which jobs could be
automated and replaced by machines. As Figure 2.4 shows, all estimates suggest
that many jobs are at risk of disappearing due to automation. The share of jobs at
risk is especially high in developing countries (the upper part of the gure), where the
proportion of manufacturing jobs, including tasks that are intensive in routine skills, is
high. Estimates on the impact of automation on developed countries (the lower part of
the gure) are wide-ranging, depending on the methodologies applied – for example,
occupational versus task-based approaches. Task-based approaches recognize that
automation may replace specic tasks instead of entire jobs. Acemoğlu and Restrepo
(2018) suggest that what matters for the future labour market is the task content
of production methods and the skills acquired by the future labour force. Therefore,
estimates using the occupation-based approach to gauge the impact of automation on
jobs are likely to be higher. Despite disagreements, most studies and estimates suggest
that, in developed countries, middle-skilled jobs that are intensive in routine tasks face
a higher risk of disappearing.
51
The 50:10 ratio refers to the ratio between wages at the fth and rst deciles of the wage distribution.
WORLD SOCIAL REPORT 2020
68
BOX 2.1
United States of America: higher-education wage premiums atten
Figure 2.2 shows widening higher-education wage premiums in the United States since
1980. The graph, however, also indicates that the wage premium for college-educated
workers rose only marginally between 2000 and 2010. Moreover, from 2010 to 2015, the
wage premium for college-educated workers as well as those with post-graduate degrees
declined slightly relative to those with a high school diploma or no educational degree.
Valletta (2016) argues that the slow growth of the wage premium – followed by a decline
– represents a departure from the long-term trend in widening higher-education wage
premiums due to technological changes, as argued in the text.
He suggests two reasons for the recent flattening of the wage premium: job polarization
and skill downgrading. Job polarization, which contributed to a widening higher-education
wage premium, can now account for the flattening of the college wage premium through
a shift of college graduates towards jobs that are being displaced by automation and
outsourcing. At the same time, increasing demand for non-routine cognitive skills
possessed by post-graduate degree holders may contribute to expanding their relative
wage advantage against those with a four-year college degree.
Skill downgrading is the process by which weaker demand for cognitive skills “cascades
down the skill distribution as highly skilled workers…increasingly compete with and
replace low-skilled workers in occupations that rely less heavily on advanced cognitive
skills” (Valletta, 2016, p. 3). Weak demand for cognitive skills reflects a maturation of
information technology and consequent slowdown in investment in this field (Beaudry and
others, 2016).
The higher-education wage premium in 2015 was still larger than in 1980, and higher
education is expected to continue to yield positive net returns for many people who
complete college or higher education. But the most recent data suggest that the wage
premium is likely to show significant variations among individuals with the same
educational attainment. Technological progress that encouraged skill upgrading and job
polarization is now considered to be a factor in the flattening of the wage premium once
progress slows.
It will take some time to see the impacts of wage premium flattening on overall wage
and income distributions. Policymakers need to carefully monitor how the slowdown
in information technology investment affects wage gaps among workers with different
education and skill levels.
INEQUALITY IN A RAPIDLY CHANGING WORLD
69
A few studies examine the direct and more specic impact of robots – the most
advanced form of automation – on wages in different education groups. The results
are sometimes conicting and, at other times, draw similar conclusions. A study by
Acemoğlu and Restrepo (2017) looks at the impact of robots in the United States. The
negative wage effects of robots are found to be stronger on workers with less than a
high-school education, with a small (though marginally signicant) negative effect on
workers with more than a college degree. At the national level, the introduction of robots
has been estimated to have a negative effect on the wages of all groups of workers (one
more robot per thousand workers reduces wages by 0.25-0.50 per cent), and robots
could further widen wage inequality if the educational distribution of workers remains
FIGURE 2.4
Estimates of the share of jobs at risk of being lost to automation as a result of articial
intelligence and advanced technologies, by study
Ethiopia
Cambodia
China
Bangladesh
Angola
Thailand
Viet Nam
India
Romania
Costa Rica
Malaysia
South Africa
Nigeria
Argentina
Croatia
Uruguay
Bulgaria
Germany
Portugal
Latvia
Greece
Poland
Lithuania
Italy
Indonesia
Japan
Spain
Slovakia
Austria
Estonia
Czechia
Peru
Colombia
Republic of Korea
Mexico
Finland
Belgium
Brazil
Denmark
Netherlands
France
Philippines
Ireland
United Kingdom
United States
Canada
Sweden
Australia
Singapore
Norway
0 10 20 30 40 50 60 70 80 90 100
Allen Ng (2017)
Arntz, Gregory and Zierahn (2016)
Bowles (2014)
Brzeski and Burk (2015)
Chang and Huynh (2016)
Committee for Economic
Development of Australia (2015)
David (2017)
Frey and Osborne (2013)
McKinsey Global Institute (2017)
Pajarinen and Rouvinen (2014)
Berriman and Hawksworth (2017)
World Bank (2016)
Study
Percentage
Source: Calculations based on various studies.
Note: In the key, (T) refers to studies that estimate the effect on jobs using a task methodology. All others rely on a
survey that ranks entire jobs at high, middle or low risk of being automated. See Arntz, Gregory and Zierahn (2016) for
further explanation.
WORLD SOCIAL REPORT 2020
70
unchanged. Conversely, based on a similar study of six European countries (Finland,
France, Germany, Italy, Spain and Sweden), Chiacchio and others (2018) do not nd any
statistically signicant effects of robots on wages in various educational groups.
B. Current technological divides and opportunities for inclusion
The previous section argued that digital technologies in general and automation
in particular have been introduced primarily to enhance productive eciency and,
more often than not, showed adverse effects on income and wage inequalities. The
evidence reviewed in this section suggests that Governments can shift the impact of
technologies from enhancing inequality to enhancing equality, without affecting the
speed of technological progress. The keys for success are the declining prices of goods
or services that embody new technologies, and the ability of Government to make new
technologies more readily accessible and usable by everyone.
The use of new technologies in the public sector is widespread among developed
countries, and is increasing in developing countries. For example, Government-issued
digital identication (ID) allows a holder to access various public services and
government benets. The system makes it possible to build a digital “Government” in
which the provision of public services becomes more ecient, effective and inclusive. In
India, advances in mobile technologies have become the foundation for reliable digital
networks and sophisticated image recognition technologies that allow ID holders to
be readily identied, facilitating their access to various public and nancial services.
China has demonstrated a signicant capacity to develop technological advances in
telecommunications, health and education. Healthy China 2030, for example, is an
example of how technology is being used to provide health services in remote areas,
illustrating how Governments can intervene to encourage a more inclusive use of new
technologies.
The cases examined below show that, when the right policies are deployed in a
coordinated manner, these technologies can drive development and make it possible
to create more inclusive societies. Conversely, without an integrated framework of
deliberate public policies, the same technologies could make societies more unequal.
1. Technological divides and unequal access to basic services
The rate of electrication has been accelerating in recent years (see gure 2.5). Still,
in 2018, an estimated 850 million people were without this essential service. Within
low- and lower-middle-income countries, including the least developed countries, there
are typically gaps in access between people living in urban and rural areas, and within
urban and rural areas, as discussed in chapter 4. In contrast, most populations living in
high-income and upper-middle-income countries have universal access to electricity.
A signicant disparity is also found in access to the Internet among different income
groups (see gure 2.6). Less than 20 per cent of the population of least developed
countries have access to the Internet, compared to over 85 per cent of those in
developed countries.
MANY OF THE
BENEFITS FROM
NEW TECHNOLOGIES
FOR DEVELOPMENT
MAY NOT
MATERIALIZE
WITHOUT
DELIBERATE
GOVERNMENT
ACTION
LESS THAN 20
PER CENT OF THE
POPULATION OF
LEAST DEVELOPED
COUNTRIES
HAVE ACCESS TO
THE INTERNET,
COMPARED TO
OVER 85 PER
CENT OF THOSE
IN DEVELOPED
COUNTRIES
INEQUALITY IN A RAPIDLY CHANGING WORLD
71
One of the reasons for low Internet coverage is the high annual cost of access.
Fixed-broadband Internet in 2016 cost, on average, more than 30 per cent of GNI
per capita in least developed countries, but less than 3 per cent in developed countries
(ITU, 2017). Among all regions, prices are the highest in Africa. In an extreme case, the
annual cost of xed-broadband Internet access was over 1,700 per cent of GNI per
capita in the Central African Republic in 2016, compared to less than 0.8 per cent in the
United States.
Price is not the sole reason for the technological divide. Sometimes it reects existing
disparities not only in telecommunications infrastructure, but also educational
attainment and general human capital levels among households and regions in a
country. A case study in Indonesia (Sujarwoto and Tampubolon, 2016) found that
inequality in Internet access was widening among different age, gender, income and
education groups, due to the above-mentioned factors.
Technological divides hinder inclusion, since articial intelligence, machine learning,
biotechnology, satellite technologies and their applications in health, education,
transportation, agriculture and manufacturing are directly and indirectly affected by
the use of the Internet and, in particular, broadband access. Internet divides are likely
to prompt schisms in other areas, partly because the Internet is a basic platform
for progress in and wider dissemination of several other technologies. For example,
Kudasheva and others (2015) show that inequality in access to ICTs is associated
FIGURE 2.5
Levels and trends of people worldwide without access to electricity, by selected countries and regions, 2000-2018
Million
Million
Sub-Saharan Africa India Southeast Asia Other developing countries in Asia Other
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
20182015201020052000
20182015201020052000
0
100
200
300
400
500
600
700
Source: International Energy Agency (2019). World Energy Outlook 2019.
Note: The group “Other developing countries in Asia” includes Bangladesh, Democratic People’s Republic of Korea, Mongolia, Nepal, Pakistan and Sri Lanka.
The group “Other” includes Algeria, Argentina, Bahrain, Bolivia (Plurinational State of), Brazil, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, Egypt,
El Salvador, Guatemala, Haiti, Honduras, Iran (Islamic Republic of), Iraq, Jamaica, Jordan, Kuwait, Lebanon, Libya, Morocco, Nicaragua, Oman, Panama,
Paraguay, Peru, Qatar, Saudi Arabia, Syrian Arab Republic, Trinidad and Tobago, Tunisia, United Arab Emirates, Uruguay, Venezuela (Bolivarian Republic of)
and Yemen.
WORLD SOCIAL REPORT 2020
72
with and may have led to higher income inequality in Kazakhstan, where wealthier
households can afford higher-quality Internet services while low-income households
can afford only lesser quality service with slow, blurry images and unstable streaming.
Furthermore, a large gap is found between urban and rural areas in access to
broadband in many developing countries. For example, while broadband use in the
capital cities of India, Kyrgyzstan and the Republic of Moldova is as high as that in
OECD countries, broadband access in rural areas of those three countries is among
the lowest in the world (World Bank, n.d.).
2. New technologies and nancial inclusion
Lack of access to electricity, mobile phones and the Internet limits the potential
benets of modern conveniences and services that people living in higher-income
countries take for granted. Having an account with a nancial institution is one such
convenience. A bank account provides a person or family with an easy and safe means
of saving and helps smooth out personal consumption over time. It can help people
accumulate assets and provides nancial buffers in case of economic hardship,
such as job losses or crop failures. Yet in 2017, about 1.7 billion adults worldwide
were without an account at a nancial institution. A combination of new and existing
technologies, together with appropriate government intervention, can facilitate the
use of new technologies by less advantaged people, and reduce disparities in access
to nancial accounts.
FIGURE 2.6
Percentage of the global population with access to the Internet by country groupings,
2005-2017
Developed
Developing
World
Least developed
countries
Percentage
0
20
40
60
80
100
201920182017201620152014201320122011201020092008200720062005
Source: International Telecommunication Union (2019). Key ICT indicators for developed and developing countries
and the world (totals and penetration rates). Available from www.itu.int/en/ITU-D/Statistics/Pages/stat/default.aspx.
Accessed on 17 December 2019.
INEQUALITY IN A RAPIDLY CHANGING WORLD
73
Table 2.1 shows shares of account ownership at nancial institutions, such as banks,
micronance lenders and other types of regulated institutions in the global adult
population and disparities based on education, income and gender. The table shows that
high-income countries achieved near universal ownership of nancial accounts in 2017.
In these countries, the income and gender gaps were small, and educational disparities,
while larger, shrank over time.
In low- and middle-income countries, the shares of nancial account ownership in
the total adult population are lower and disparities higher compared to high-income
countries. However, the shares of account ownership have increased consistently over
time in all country groupings and in all categories. Increased access to electricity and
digital technologies is thought to have contributed to this positive trend (Demirgüç-Kunt
and others 2018). Mobile money services, through which users can store and transfer
funds through wireless transmissions, has been one contributing factor. Some 350
million adults worldwide opened their rst nancial account between 2014 and 2017.
52
As of 2017, 9 per cent of adults, or 13 per cent of account owners, had opened their
rst nancial account for the purpose of receiving private sector wages, government
payments or proceeds from the sale of agricultural products (ibid.).
The widespread use of mobile phones and the Internet has been a major contributor to
greater nancial inclusion. At the same time, digital technologies have encouraged the
52
Calculation based on data from the Global Findex Database 2017 (https://globalndex.worldbank.org/)
and the World Population Prospects 2019 (https://population.un.org/wpp/).
TABLE 2.1
Disparities in nancial account ownership by region, education, income and gender, 2011-2017 (percentage)
Country
group/year Account
a
Account,
primary
education
or less
a
Account,
secondary
education
or more
a
Gap by
education
Account,
income,
poorest 40%
a
Account,
income,
richest 60%
a
Gap by
income
Account,
female
a
Account,
male
a
Gender
gap
Low-income countries
2011 13 8 23 15 7 17 10 11 16 5
2017 35 29 50 21 26 41 16 30 40 10
Lower-middle-income countries
2011 29 23 40 17 20 35 15 23 34 11
2017 58 50 66 17 51 63 12 53 63 10
Upper-middle-income countries
2011 57 51 65 13 42 67 25 23 4 23
2017 73 66 80 15 62 80 18 19 14 19
High-income countries
2011 88 71 92 20 85 91 6 86 90 4
2017 94 84 95 11 90 96 6 93 95 2
Source: Based on Demirgüç-Kunt and others (2018).
Note:
a. Among persons 15 and older.
WORLD SOCIAL REPORT 2020
74
emergence of new entrepreneurs and nancial technologies. Mobile networks provide an
incentive for private companies to enter the electricity market, even in rural areas, where
cost recovery on investments and the illegal use of electricity have traditionally been
problematic. The networks allow users of decentralized systems to remotely pay bills via
smartphones. Using the same networks, the electricity producer can collect usage data,
disable a device if the customer misses a payment, and turn the device back on when the
payment is made. In fact, providers of mini- and off-grid electricity systems have entered
the market in many parts of Africa where mobile networks are available (IEA, 2017).
53
Despite overall increases in nancial account ownership, disparities among groups
within countries are pervasive. Overall, gender gaps as well as income and educational
disparities did not diminish between 2011 and 2017 despite the widespread use of mobile
phones and the Internet.
The experience of India suggests that mobile digital technologies need to be complemented
by other technologies to reduce inequality in access to nancial services (see box 2.2).
India managed to achieve more equal access to nancial accounts by complementing
mobile technologies with a national system of digital IDs and an affordable electricity
system that provides an uninterrupted supply of stable current. At present, many
developing countries have digital ID systems (McKinsey Global Institute, 2019), and
some countries are on track to achieve universal access to modern energy during the
2020s (IEA, 2018). The experience of India is likely to be replicated in other countries in
the near future.
54
3. New technologies in other sectors
New technologies have been introduced in other areas as well. For example, mobile
technologies can provide small-scale farmers with better access to critical information
about markets for their products, help them obtain fair prices, and improve production
planning and commercialization.
55
Unmanned aerial vehicles (“drones”), which rely
on the global positioning system or are remotely controlled, also have potential
for increasing the productivity of farmers in less technologically advanced areas by
providing up-to-date information. Teaching and learning processes have improved in
schools that have integrated ICTs into their curricula compared to schools that have not
(Sangrà and González-Sanmamed, 2010), and open online courses can also become a
major equalizer in terms of universal access to education. The United Nations (2019b)
has examined actual and potential applications of new technologies in the areas of the
agriculture, education, health and housing.
53
The most popular combination of mobile payments and decentralized systems is the pay-as-you-go system, which uses a
solar-powered module with a battery and small appliances. See Runyon (2016) and Wogan (2013).
54
China is another country that has managed to increase its share of adults with bank accounts. The share in 2017 stood at
80 per cent, compared to 64 per cent in 2011. The share of adults with an account among rural dwellers jumped from 58
per cent in 2011 to 77 per cent in 2014 (Demirgüç-Kunt and others, 2018).
55
In fact, the World Bank (2009) found that “with 10 per cent increase in high-speed Internet connections, economic
growth [in agriculture] increases by 1-3 per cent.” Chavula (2014) shows that the use of the Internet and mobile phones
has played a signicant role in enhancing the agricultural production of small farmers more than large farmers in
34 countries in Africa. The study warns, however, that higher education levels and skills are required for more effective
adoption and utilization of new technologies.
INEQUALITY IN A RAPIDLY CHANGING WORLD
75
BOX 2.2
India: Harnessing the potential of digital technologies for more
inclusive development
India has successfully managed to use digital technologies to reduce disparities among
population groups. A combination of new public infrastructure and government action was
behind the success of a new identification system that is increasing ownership of financial
accounts and making public services more effective.
The Unique Identification Authority of India was set up in 2008 and introduced
demographic and biometric identification cards (using fingerprints and iris scans) with
unique ID numbers, known as the Aadhaar (“foundation” or “base” in the Hindi language).
The numbers can be used to open financial accounts at banks or other businesses.
56
In
2014, the Government of India instructed banks to provide accounts to people without
them, using their Aadhaar numbers or other sources of information about their identities
and addresses. The number of people without bank accounts declined by more than half,
from 557 million in 2011 to 233 million in 2015. By 2017, 80 per cent of adult Indians
had at least one bank account, which is significantly higher than the average share in
developing countries (63 per cent). The biometric ID helped reduce gender-, income- and
education-based gaps in access. In fact, the system has also been used to enhance the
effectiveness of social protection, health and voting programmes.
Before the introduction of Aadhaar numbers, those who were less advantaged were unlikely
to have an official registered ID, which was necessary to open an account.
57
Improvements
in electricity access have facilitated the opening of financial accounts and their use.
Electrification has reached 82 per cent of the country’s population, and the International
Energy Agency predicts that India will achieve universal access in the early 2020s.
Despite this success, 48 per cent of bank accounts in India were reported as inactive in
2018 (Demirgüç-Kunt and others, 2018). This suggests that the government programme
to promote account ownership, launched in 2014, is still in its infancy. However, more
accounts are expected to become active as a greater number of people acquire mobile
phones.Two thirds of inactive account holders now have mobile phones, and this share
is increasing.
56
See https://uidai.gov.in, the ocial site of the Unique Identication Authority of India.
57
There is a controversy surrounding the Aadhaar with regard to the privacy or, more generally, dual use of technologies,
which is beyond the scope of this report. For details, see Bhabha and Bhatia (2016) and McKinsey Global Institute (2019).
58
For medical innovations and their impacts on health inequality, see Weiss and others (2018), Chang and Lauderdale (2009)
and Goldmann and Lakdawalla (2005).
Among these sectors, advances in medical technologies are most notable. Recent
scientific breakthroughs in biology and genetics and applications of robotics and
artificial intelligence to medical treatments and diagnostics have possibilities
we have yet to imagine. At the same time, these advances are likely to benefit
the rich more than people in poverty, thus widening health inequalities among
different socioeconomic groups.
58
That said, new technologies have the potential
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to significantly improve the health status of humanity and to reduce socioeconomic
inequalities in health. Two groups of technologies are considered here – mobile
health (mHealth) technologies and the Internet.
The practice of medicine and public health supported by mobile devices is known as
mHealth. Its applications improve health-care delivery and monitoring systems, which
can enhance the quality of life for underserved populations and reduce inequalities
in access to high-quality and affordable health care. The technologies can be used
to respond promptly and effectively to both communicable and non-communicable
diseases. Currently, the most common uses of mHealth are text-messaging and cell
reminders to follow up on appointments and health behaviours, which have reduced
the treatment time of diseases, no-show appointment rates and phone call costs
(Beloev, 2016).
Reaching all population groups with the positive benefits of health technologies will
take time. Policymakers can accelerate this process, thereby reducing inequalities,
by facilitating access to and adoption of relevant technologies. Applications of
mHealth include the direct provision of care via mobile telemedicine as well as
the training of and collaboration with health workers. These applications have the
potential to remove physical barriers to wider and better care and service delivery to
people in poverty by increasing their access to care, strengthening health systems
management, and enhancing the reliability of supply systems and communication.
They can also help overcome infrastructure and hospital resource constraints by
reaching people residing in remote areas and reducing the impact of an inadequate
number of health-care workers – whose services are often difficult to retain in
rural areas. Expansion of telemedicine’s infrastructure throughout health systems
is needed, particularly in rural areas, in order to overcome health staff shortages
(Nouhi and others, 2012).
The Internet is fundamental to the use of ICTs in health care (known as eHealth).
The Internet enables medical information to be communicated more broadly
and promptly, facilitating the sharing of best practices, and helps doctors in the
diagnosis of diseases and injuries. Similarly, web-based learning offers continuing
education to health-care workers, tailored to their needs, skill levels and availability.
The use of web-based data entry and storage means that large databases are
available online, which can foster wider and more effective disease surveillance.
For example, access to disease reports by health officials can help to ensure timely
identification and control of outbreaks as well as efficient long-term surveillance of
endemic conditions (Nouhi and others, 2012).
Access to health technologies can make health-care provision more inclusive.
However, this will not necessarily lead to a reduction in digital inequalities without
differentiated policies on technology adoption. Neter and Brainin (2012) show that
the Internet can, in fact, increase inequalities since a clear association has been
found between eHealth literacy and different social background attributes.
INEQUALITY IN A RAPIDLY CHANGING WORLD
77
C. Policy considerations
Technological change is driving wage and income inequality upwards. Even well-intended
policies to bring the advantages of technology to everyone have often beneted most
those groups that are already better off. Those with the most resources, be they human
or nancial, are best positioned to take advantage of the development of innovative
technologies. So, not surprisingly, technological change has greatly favoured highly
skilled workers.
The fourth industrial revolution has improved productivity in large segments of the
economy, but wages have not grown in tandem. In addition, job polarization triggered
by technological change has contributed to the rise of wage inequality in many parts
of the world.
These adverse consequences of recent technological progress are not inevitable,
however. As illustrated in this chapter, proactive policies and supportive institutions
can help ensure that technological dividends are widely shared. While doing so may
require a broad range of strategies, three key policy interventions are fundamental:
Building forward-looking and inclusive education systems. Rapid technological progress
requires a continual upgrading of workforce skills. Once-and-for-all education at a young
age is no longer sucient. It is therefore important to invest in skills and knowledge
that enable workers to perform new tasks over a lifetime of changing work environments,
making sure that education systems are inclusive so that opportunities are
equitably shared.
Supporting people through life and work transitions. This includes expanding social
protection systems and tailoring them to the fourth industrial revolution. In general,
existing social protection systems have failed to properly address the consequences
of rapid technological progress on workers and households. Such systems will have
to cover, for instance, a growing number of people under non-standard working
arrangements, as chapter 6 describes.
Strengthening efforts to bridge the technological divide within and among countries,
including by investing in infrastructure. To harness technological progress for a more
equal world, it is critically important that access to new technologies is universal
and that all know how to use them. An enabling infrastructure requires investment in
connectivity, especially in historically marginalized communities.
In the labour market, new technologies are taking over jobs and tasks currently
performed by workers. However, technological change also creates the need for
new jobs and tasks, including those that are necessary to use, test, supervise and
THE ADVERSE
CONSEQUENCES
OF RECENT
TECHNOLOGICAL
PROGRESS ARE
NOT INEVITABLE
WORLD SOCIAL REPORT 2020
78
market new products and services. Differences are found across both companies
and countries in the extent to which jobs are either being cut or redesigned based
on changing requirements. Strong, forward-looking education systems and adequate
support can enable countries to train workers and align their workows in response
to automation.
Strengthened redistribution is needed to counterbalance widening inequality.
At the same time, as more workers become more highly skilled, and as the share of
medium-skilled workers consolidates and the relative size of the low-skilled workforce
declines, the need for redistribution will diminish.
Not only are highly skilled workers beneting the most from new technologies in
many countries, but productivity gains brought about by such technologies are being
captured by a small number of dominant companies. The presence of monopolistic or
oligopolistic companies have distorted market competition and hindered the diffusion
of new technologies within and among countries. Anti-trust policies may need to be
adjusted to prevent rst-movers from establishing dominance and to maintain fair
competition in the digital economy.
Considerable policy intervention is needed at national, regional and global
levels to make sure that technologies do not widen existing divides within and
among countries and leave marginalized groups and many developing countries
behind. Many of the less technologically advanced countries, including the least
developed countries, will need international support for their national policy
efforts in strengthening innovation capacities, including facilitation of technology
transfer, access, adoption and development. At the global level, it is important for
the international community to agree on a more flexible approach to intellectual
property rights that can provide adequate patent protection, while also enabling and
facilitating access to technological enhancements within and among countries.
Governments need creative solutions to ensure that the benefits of new technologies
are broadly shared. The direction of technological change partly depends on policy,
including tax incentives and public investment in research and development. Policies
for research and development can promote innovation that prioritizes technologies
that create new jobs or complement – rather than displace – existing jobs. Another
solution is to deploy funds to acquire stakes in technological innovation and
commercialization so that the profits they generate can be shared with the wider
public rather than mainly benefiting a narrow group of stakeholders.
IN ORDER TO
HARNESS THE
POTENTIAL OF NEW
TECHNOLOGIES,
GOVERNMENTS
NEED TO INTRODUCE
POLICIES AND
STRATEGIES
TO MAKE THEM
ACCESSIBLE TO ALL
INEQUALITY IN A RAPIDLY CHANGING WORLD
79
Finally, ensuring that the equality-enhancing opportunities outpace the risks involved
in technological change requires integrated, far-sighted and government-wide
strategies. These must be complemented by policies that enable access to basic
social services, infrastructure, employment and financial inclusion. To be effective,
supportive policies that enable technology transfer, adoption and development in
productive activities in the agriculture, manufacturing and service sectors have to
be carried out in tandem with wider access to education, basic services (water,
sanitation and electricity), employment and financial inclusion.
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QUOTE
CHAPTER 3
CLIMATE CHANGE:
EXACERBATING POVERTY
AND INEQUALITY
81
INEQUALITY IN A RAPIDLY CHANGING WORLD
KEY MESSAGES
• The effects of climate change are experienced to varying degrees across and within
countries due to differences in exposure, susceptibility and coping capacities. If left
unaddressed, climate change will lead to increased inequality both within and among
countries and could leave a substantial part of the world further behind.
• Developing countries, particularly small island developing States, face disproportionate
risks from an altered climate, while high-income countries are generally less vulnerable
and more resilient.
• Within countries, people living in poverty and other vulnerable groups – including
smallholder farmers, indigenous peoples and rural coastal populations – are more
exposed to climate change and incur greater losses from it, while having fewer
resources with which to cope and recover.
• Climate change can generate a vicious cycle of increasing poverty and vulnerability,
worsening inequality and the already precarious situation of many disadvantaged
groups.
• Just as the effects of climate change are distributed unevenly, so too are the policies
designed to counter them. As countries take climate action, there will be trade-offs
to consider between the positive and negative effects of mitigation and adaptation
measures and distributional impacts.
• An equitable transition towards green economies calls for integrating climate goals
with social and economic policies aimed at reducing vulnerability, supporting those
affected by climate change and creating decent jobs.
• At the international level, climate nance, technological transfer and capacity-building
can support developing countries in implementing a just transition.
CHAPTER 3
CLIMATE CHANGE:
EXACERBATING
POVERTY AND
INEQUALITY
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INTRODUCTION
Climate change is accelerating environmental degradation and increasing the frequency,
duration and intensity of extreme weather and climate events.
59
Countries and societies
are now increasingly facing excessive or insucient precipitation, rising sea levels,
extreme temperature changes, storms, droughts, oods and other climate hazards that
are only expected to intensify in the future (Hoegh-Guldberg, and others, 2018).
60
Whether they manifest as individual shocks or gradual environmental degradation, the
effects of climate change are contributing to the loss of lives and homes, poor health,
and damage to infrastructure, livelihoods and environmental resources. In extreme
cases of ooding and coastal erosion, the physical survival of whole communities –
or even nations, in the case of small island developing States – may be at stake. In
2010, deaths resulting from climate change were estimated at 400,000 (DARA and the
Climate Vulnerable Forum, 2012). By the end of the century, this number may increase
to 1.5 million per year if the rate of emissions remains unchanged (Climate Impact
Lab, 2018). Assessing the effect of climate change on displacement is challenging.
However, one estimate puts the number of people forced to move as a result of
weather events and natural disasters at an average of 24.1 million people per year
from 2008 to 2018.
61
In the 20 years between 1998 and 2017, losses from extreme
weather events amounted to an estimated $174 billion (PPP) annually (Eckstein,
Hutls and Winges, 2018). As climate change progresses, these losses are expected
to rise and will increase in severity unless urgent climate action is taken.
Aside from the direct damage that the effects of climate change inict on human
society and the environment, emerging research indicates that they can also increase
inequality within and among countries. Indeed, the effects of climate change are
not uniform in their reach or magnitude – nor are the abilities of countries and
communities to cope and respond. The most severe impacts of climate to date have
been in tropical regions, where most developing countries are located. Such impacts
are expected to become more intense. These countries often have little capacity to
recover on their own, and losses from climate hazards can hamper or even reverse
years of development efforts. Countries in the Caribbean, for instance, are severely
affected by climate events such as hurricanes, with Dominica and Antigua and
Barbuda suffering damages estimated at 46 per cent and 215 per cent of GDP (PPP),
respectively, in 2017 (ibid.).
In developing and developed countries alike, persons who are disadvantaged
(socioeconomically or because of where they live), or whose livelihoods are reliant on
climate-sensitive resources, are disproportionately affected. People living in poverty
THE EFFECTS OF
CLIMATE CHANGE
ARE NOT UNIFORM
IN THEIR REACH OR
MAGNITUDE – NOR
ARE THE ABILITIES
OF COUNTRIES AND
COMMUNITIES TO
COPE AND RESPOND
59
Article 1(2) of the United Nations Framework Convention on Climate Change denes climate change as a "change of
climate which is attributed directly or indirectly to human activity that alters the composition of the global atmosphere and
which is in addition to natural climate variability observed over comparable time periods.”
60
The Intergovernmental Panel on Climate Change benchmarks global temperature increases against a baseline from a
“pre-industrial” period of 1850-1900. The Paris Agreement aims to limit this temperature increase to well below 2 degrees,
although trends indicate that global warming and other effects of climate change are proceeding at a quicker pace than
previously projected.
61
Author’s calculations based on displacement data from the Internal Displacement Monitoring Centre: www.
internal-displacement.org/database/displacement-data.
INEQUALITY IN A RAPIDLY CHANGING WORLD
83
are more frequently exposed to climate hazards than their wealthier counterparts.
They also tend to lose relatively more when affected, as do smallholder farmers,
rural coastal populations and indigenous peoples. Having suffered setbacks – such
as livelihood losses or deteriorating health – from climate hazards, those who are
disadvantaged may have few resources to enable them to cope and recover.
This chapter discusses how the effects of climate change can exacerbate inequality.
Section A introduces a conceptual framework outlining the linkages between the two.
Section B illustrates how climate change can increase inequality across countries,
through varying effects in different geographic regions and by level of income. Section
C examines how climate change is linked to inequality within countries, describing the
particular challenges encountered by people living in poverty and other disadvantaged
groups that are especially at risk. Section D presents a brief assessment of the
inequality impacts of adaptation and mitigation strategies and discusses policy
implications. The section concludes that climate action policies can act in tandem
with social and economic policies to reduce inequality.
A. Climate change through an inequality lens
The links between climate change and inequality are dependent on: (1) the channels
through which climate impacts are felt and (2) the determinants of how these impacts
are experienced by different people or groups.
62
1. Channels through which climate change exerts its effects
Whether they are immediate or pan out over time, climate change impacts are felt both
directly and indirectly on livelihoods, health and mortality, agriculture and food prices,
and labour productivity. These effects reinforce one another: the negative effects of a
changing climate on health, agriculture, food prices and labour productivity may also
undermine opportunities to make a living. The inability to sustain decent livelihoods,
in turn, is likely to exacerbate the harmful health effects of climate change.
a. Livelihoods
Climate change has a direct impact on the assets and resources needed to earn a living.
The destruction of homes and infrastructure, degradation of ecological resources
and loss of biodiversity affect all, but the wealth of those in poverty is more likely
to be concentrated in material forms, such as housing or livestock, and their assets
are more fragile. In addition, environmental damage severely harms livelihoods that
are climate-sensitive, including agriculture and shing. The erosion of natural assets
can force those reliant on them for their livelihoods to seek other sources of income,
such as by shifting from crop-based to hybrid livestock-based agriculture, or wage
labour employment. However, alternatives may not always be available or feasible.
Such shifts may also incur high costs, or entail the acquisition of new technical
62
Climate change can also exacerbate intergenerational inequality, since worsening conditions present greater challenges
for succeeding generations. Impacts that occur today can have long-lasting effects, particularly if environmental damage
reduces livelihood opportunities for the future. The potential effects of climate change on intergenerational inequality are
not discussed in this chapter.
PEOPLE LIVING
IN POVERTY RELY
MORE OFTEN ON
MATERIAL ASSETS,
SUCH AS HOUSING
OR LIVESTOCK,
THAT CAN BE
EASILY DAMAGED
BY THE EFFECTS OF
CLIMATE CHANGE
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84
know-how. Outcomes can be particularly disastrous when climate hazards occur in
quick succession, leaving little time for those already aicted to recover, readjust and
rebuild their assets and livelihoods.
b. Health and mortality
Changes in temperature and the occurrence of heat waves, droughts and oods,
among other extreme events, also affect human health and mortality, with the
greatest burdens expected to fall on lower-income countries (Smith and others, 2014).
Extreme temperatures, for instance, aggravate cardiovascular and respiratory disease
and increase mortality (UNFCCC, 2017). Fluctuating and increased precipitation
levels compromise freshwater supplies and raise the risk of diarrhoea, waterborne
illnesses and diseases transmitted through insects and animals. Changing climatic
conditions will not only lengthen periods of disease transmission, but also expand
their geographic range.
Children and older persons are especially at risk due to their limited mobility, vulnerability
to infectious diseases, lower caloric and nutritional intake and, for older persons, greater
social isolation (Field and others, 2014). Young children are more likely to suffer or die
from diarrhoeal diseases and oods, while older persons are particularly susceptible
to heat stress, droughts and wildres. Climate change is also likely to affect pregnancy
and maternal health outcomes, since pregnant women are especially vulnerable to
climate hazards and infectious diseases, including malaria, foodborne infections and
inuenza (Smith and others, 2014).
Moreover, increased carbon dioxide levels have been linked to poorer nutritional quality in
crops and may even compromise food safety through increasing foodborne pathogens,
or by inducing chemical changes that raise the concentration of toxic compounds in
agricultural produce (FAO, 2018).
The World Health Organization (2014) estimates that, in 2030, sub-Saharan Africa will have
the greatest burden of mortality attributable to climate change, while in 2050 South-East
Asia will be the region most affected by the health impacts of climate change.
63
Globally,
between 2030 and 2050, climate change is projected to cause an additional 250,000
deaths per year from increased rates of malaria infection, diarrhoea, heat stress and
undernutrition; direct health damages will cost an estimated $2 billion to $4 billion a year
by 2030 (WHO, 2018a and 2018b).
64
According to one study, even after accounting for
adaptation and possible reductions in mortality caused by cold weather, if the rate of
emissions remains unchanged, climate change will result in an estimated 1.5 million
deaths per year by the end of the century (Climate Impact Lab, 2018).
65, 66
CLIMATE CHANGE
MAY RESULT IN
AN ESTIMATED
1.5 MILLION DEATHS
PER YEAR BY
THE END OF
THE CENTURY
63
WHO (2014) uses the following country grouping for South Asia: Afghanistan, Bangladesh, Bhutan, India, Nepal
and Pakistan.
64
Estimates of additional deaths are based on global climate-health models of mortality from these four causes, comparing
projections between (i) a future world of medium-high emissions, and (ii) a future world where climate conditions remain
at 1961-1990 average levels.
65
Climate Impact Lab’s estimation models utilize historical mortality data covering 399 million deaths in 41 countries, and
simulate future global scenarios taking into account projected changes in emissions, income and population.
66
Although cold-related mortality and morbidity are projected to decrease in some areas due to fewer cold extremes, globally
this will be outweighed by the harm caused by temperature rise.
INEQUALITY IN A RAPIDLY CHANGING WORLD
85
c. Agricultural production and food prices
Shifts in climatic conditions exert both direct and indirect effects on agricultural
yields, aquaculture, livestock and sheries production (FAO, 2018). In regions other
than those with low baseline temperatures, higher temperatures will damage plant
cells and reduce crop yields, and adversely affect animal growth rates and dairy
production. Increased frequency and intensity of extreme weather events will diminish
agricultural yields. Damages and losses from pests, diseases and livestock mortality
are also expected to rise.
According to some estimates, by 2050, international producer food prices are
expected to grow by an average of 20 per cent (Nelson and others, 2014). Although
higher prices could benet farmers, this gain may not be enough to offset drastically
lower yields. In addition, higher food prices will put a strain on households that spend
a signicant proportion of their income on food.
d. Labour and economic productivity
High temperatures and heat waves result in lower economic output in countries around
the world (Burke, Hsiang and Miguel, 2015). Production losses in climate-sensitive
industries, increased workplace accident risks and heat-related illnesses contribute
partly to this phenomenon. Studies have identied decreased labour productivity as
a major factor affecting economic growth in a majority of countries (ibid.; Day and
others, 2019; UNDP, 2016). Thermal conditions affect worker performance in both
physical and mental tasks, a problem most severely affecting manual labourers and
those who work outdoors in hot conditions.
These effects of climate change on productivity and livelihoods will also be felt at the
household and community levels. For example, children pulled out of school in the
aftermath of a disaster are signicantly less likely to complete their schooling than
other students in the same communities, with consequences for future productivity
(Hallegatte and others, 2017).
Beyond the four channels described above, the negative effects of climate change
are also increasingly reected in the displacement and forced movement of people
attempting to avoid climate hazards or following such disasters. Estimating the
extent of migration stemming from climate change is challenging. Nevertheless, it
is emerging as a key concern for the future as climate change intensies and inicts
even greater damage to homes and habitats (see box 3.1).
2. Determinants of the uneven impacts of climate change
The effects of climate change are not experienced by everyone in the same way
due to differences in exposure to climate hazards, their susceptibility to the damage
caused by such hazards, and their ability to cope with the effects and recover. These
determine the overall climate risk prole of a country, an individual or group.
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Exposure refers to the presence of people and their livelihoods, environmental
resources and infrastructure, or economic, social or cultural assets in places that
could be adversely affected by climate hazards (IPCC, 2012). Location and living
conditions are important determinants of exposure. Elevation and proximity to
the sea, for example, determine the extent to which an area is exposed to coastal
ooding. The nature of the work or activity undertaken at a location also has a role in
determining exposure, by affecting how much a person is outdoors and the extent to
which activities are sensitive to changes in climate.
Two communities or households that are identically exposed to a climate hazard,
however, may not experience the same degree of damage. They may have different
levels of susceptibility to the damage caused by climate events. Housing quality is a
major factor determining susceptibility. Those living in solid, well-constructed homes,
for example, are less likely to experience damage than neighbours living in houses
built out of thin, structurally weak materials.
BOX 3.1
Climate change and migration: what we know so far
A good deal of uncertainty surrounds the scale of climate-induced migration. The decision
to move is motivated by myriad factors, climate risk being only one of them. Therefore,
isolating the primary driver of this process is extremely complex. Nevertheless, climate
change is affecting the movement of people and is likely to continue due to four factors:
(1) increased frequency and intensity of weather-related natural disasters, (2) the effects
of climate change on livelihoods, health, food and water security, which will increase
pre-existing vulnerabilities, (3) rising sea levels, which could make coastal areas and
low-lying islands uninhabitable, and (4) competition over increasingly scarce resources,
which could exacerbate tensions and potentially lead to conflict and displacement (IOM,
2014). If no appropriate action is taken to mitigate the effects of climate change, it is
reasonable to expect that climate-induced migration will continue to increase.
Most of this displacement is currently internal, but some people are forced to cross
borders (GMDAC, 2018). The most severe effects of climate change will not only drastically
limit livelihood options; they are also likely to result in environmental conditions that are
increasingly uninhabitable. This is a concern for many Pacific communities living on
small, low-lying islands, such as the Tebunginako village in Kiribati. Coastal erosion and
saltwater intrusion have pushed residents to relocate their village farther inland (Republic
of Kiribati, 2019). However, as climate change worsens and the area of habitable physical
land continues to decrease, residents may be forced to leave the island altogether.
INEQUALITY IN A RAPIDLY CHANGING WORLD
87
Ability to cope with and recover from losses can differ, too. Individuals and households
have varying levels of resources or access to resources needed for reconstruction
or to rebuild one’s health or livelihood following a climate hazard. Beyond personal
assets such as savings and property, this also includes access to formal social
protection and informal support, including familial networks, and the ability to tap into
community resources.
In some cases, individuals or households may decide to reside in an area affected
by climate hazards – even though they are aware of its risks – to take advantage of
certain (often livelihood-related) benets, such as fertile soil in coastal deltas. Many
others, however, face these risks due to lack of awareness and knowledge, insucient
resources to relocate or adapt, or because of circumstances beyond their control (as
in the case of refugees and internally displaced persons, for example).
Countries also differ in climate change exposure, susceptibility and coping capacity.
In addition to location, the level of development/income and the structure of the
economy, in terms of its reliance on climate-sensitive industries and/or natural
resources, are also important factors. Development status has particularly signicant
ramications for both the wealth and income levels of a country’s citizens, and
on a society's ability to take necessary mitigation and adaptation measures
(see box 3.2). At the same time, developing countries are also those whose economies
tend to lean towards climate-sensitive and natural resource-focused industries, such
as agriculture and shing.
B. Unequal exposure and impacts across countries
Unaddressed, the impacts of climate change will exacerbate inequalities among
countries. Diffenbaugh and Burke (2019) nd that, from 1961 to 2010, higher
temperatures improved economic growth in cool countries (most of which are
developed), while they negatively affected growth in warm countries (most of which
are developing). The researchers estimate that the ratio between the incomes of the
richest and the poorest 10 per cent of the global population is 25 per cent larger than
it would be in a world without global warming. Developing countries – including small
island developing States – face signicantly higher climate-related risk and have
fewer resources for mitigation or adaptation than developed countries. Many of these
The ratio between the incomes
of the richest and the poorest
10 per cent of the global population
is 25 per cent larger than it would
be in a world without global warming
WORLD SOCIAL REPORT 2020
88
countries will nd it increasingly dicult to recover from worsening climate conditions
and more extreme events. In fact, unless appropriate action is taken, climate change
threatens to leave a substantial part of the world further behind.
Countries in different regions suffer from different levels of exposure and susceptibility
to the effects of climate change and possess varying capacities to cope with them.
A country’s location is an important determinant of the level of exposure. Mean
temperatures are projected to increase in most land and ocean regions, with hot
extremes in most inhabited regions becoming more frequent. The number of hot days
is projected to increase, with tropical regions affected most. Additionally, increased
heavy precipitation will affect certain regions, while some others – including semi-arid
and arid areas in the Mediterranean, Southern Africa and northeastern Brazil – will
67
Even if global emissions were drastically reduced, continued warming is expected to a certain extent from greenhouse
gases already present in the atmosphere, and those that will be released from melting polar ice caps. In other words,
it is likely that adaptation will continue to be necessary, even if mitigation efforts increase signicantly.
BOX 3.2
Mitigation and adaptation: preventing and preparing
for climate change
Mitigation aims to slow the process of climate change by limiting or preventing greenhouse
gas emissions, and by removing these gases from the atmosphere. Greenhouse gases are
emitted from a range of sources, and mitigation can take place across all sectors and
activities of different levels, including national policies curbing industrial carbon emissions,
reforestation that aids the removal of carbon dioxide in the atmosphere, and changes in
individual consumption aimed at reducing one’s carbon footprint.
Adaptation, on the other hand, involves changes that facilitate adjustment to actual or
expected future climate, by moderating the harmful effects or taking advantage of beneficial
opportunities arising from it. While climate change is a global issue and mitigation efforts
benefit the international community, adaptation is often felt and dealt with on a more
regional or local scale. Adaptive measures can be reactive, as a response to conditions
that have already changed, or proactive, in anticipation of future impacts. Examples include
strengthening buildings to better withstand storms, restoring the environment, building
early warning systems, and developing climate-resilient crop varieties.
These two forms of climate action are complementary and equally vital. In the absence of
mitigation, societies will have to grapple with ever-worsening climate change regardless
of the adaptation measures taken. Mitigation delays the impacts of climate change and
allows more time for the development and adoption of newer adaptive methods. However,
mitigation alone, without adaptation, is insufficient to help communities cope with the
climate impacts that are already occurring, or those that will transpire in the near future.
67
INEQUALITY IN A RAPIDLY CHANGING WORLD
89
face worsening drought and precipitation decits (Cisneros and others, 2014).
Hoegh-Guldberg and others (2018) note that projected changes in precipitation are
more uncertain than changes in temperature, pointing out that there is larger variation
among models projecting precipitation changes. Climate change will also cause a
global rise in sea level, with signicant consequences for coastal regions.
Figure 3.1 shows the risk level experienced by countries due to climate change, as
measured by the Notre Dame Global Adaptation Initiative (ND-GAIN) Index. Africa and
Southern Asia – currently the two poorest regions in the world – are more vulnerable to
climate change and less ready to strengthen resilience than other regions.
The threat posed by climate change does not depend solely on a country’s location
and degree of exposure. The level of development, infrastructure, composition of the
economy and coping capacity are also important factors in inuencing a country’s
climate resilience. According to data from ND-GAIN, for instance, Singapore is highly
FIGURE 3.1
Climate risk by country, 2017
HIGHER RISK LOWER RISK
Source: Based on University of Notre Dame Global Adaptation Initiative Index (available at https://gain.nd.edu/).
Note: The climate risk of each country is based on its ND-GAIN Index score for 2017. The ND-GAIN Index is a composite measure, with a range of 0-100, of
a country’s vulnerability to climate change and its readiness to improve resilience. Vulnerability is quantied by the level of exposure, sensitivity and adaptive
capacity of six life-supporting sectors (food, water, health, ecosystem services, human habitat and infrastructure). Readiness measures a country’s ability to
realize adaptive actions in the economic, governance and social spheres. ND-GAIN score ranges for each of the seven colour groups used in the map, from
dark brown (higher risk) to dark green (lower risk), are as follows: [20 to 28.5], (28.5 to 37], (37 to 45.5], (45.5 to 54], (54 to 62.5], (62.5 to 71] and (71 to 80].
WORLD SOCIAL REPORT 2020
90
exposed to climate change as an island city-state near the equator, ranking as the
18
th
most exposed country out of 192 countries (ND-GAIN, 2019). However, when
susceptibility and coping abilities are taken into account, Singapore’s overall level of
climate risk, as rated by the ND-GAIN Index score, is the 9
th
lowest out of 181 countries.
Among other things, this is related to the country’s developed infrastructure, high
disaster preparedness and the structure of its economy, which has a low reliance on
climate-sensitive sectors such as agriculture. On the other hand, Mauritania is the
42
nd
least exposed country, but its overall level of climate risk is the 28
th
highest. A
signicant proportion of its population relies on agriculture for their livelihoods and, as
a least developed country, Mauritania has limited resources with which to implement
adaptation strategies.
Table 3.1 shows a breakdown of the levels of climate risk, vulnerability and
resilience-readiness of countries based on their level of income. According to the
scores shown, high-income countries are generally less vulnerable to the risks posed
by climate change and are more prepared to handle its consequences. In comparison,
many developing countries are disproportionately at risk, owing to their location, lower
levels of income, lack of high-quality infrastructure, and reliance on climate-sensitive
industries and natural resources. For Africa and Asia, the Fifth Assessment Report
(2014) of the UN Intergovernmental Panel on Climate Change identies the following
risks: compounded stress on water resources; reduced crop productivity; increased
risk of heat-related mortality; and increased risk of drought-related water and food
shortages, which could lead to malnutrition.
The economic consequences of heightened vulnerability and reduced readiness among
low- and lower-middle-income countries are substantial and have implications for their
future development. In absolute terms, economic losses due to climate-related disasters
were highest in high-income countries from 1998 to 2017 (CRED and UNISDR, 2018).
TABLE 3.1
Average ND-GAIN scores by country income group
Income group
ND-GAIN Index
Range 0 to 100
(Higher is better)
Vulnerability
Range 0 to 1
(Lower is better)
Readiness
Range 0 to 1
(Higher is better)
High 62 0.36 0.59
Upper middle 49 0.41 0.40
Lower middle 41 0.50 0.33
Low 34 0.57 0.25
Sources: University of Notre Dame Global Adaptation Initiative Index (available at https://gain.nd.edu/).
Note: The ND-GAIN Index is a composite measure of a country’s vulnerability to climate change and its readiness to improve resilience. Vulnerability is the
average score of 36 indicators, scaled from 0 to 1, quantifying the level of exposure, sensitivity and adaptive capacity of six life-supporting sectors (food,
water, health, ecosystem services, human habitat, and infrastructure). Readiness is the average score of nine indicators, scaled from 0 to 1, that measure
a country’s ability to realize adaptive actions in the economic, governance and social spheres. The ND-GAIN Index score is calculated using the following
formula: ND-GAIN Index = (Readiness – Vulnerability + 1) * 50.
INEQUALITY IN A RAPIDLY CHANGING WORLD
91
However, as illustrated in gure 3.2, losses relative to GDP were far more substantial in
lower-income countries. For example, in a scenario of continued high emissions and
the absence of climate policy, by 2050, temperature and precipitation changes alone in
Eastern and Western Africa are projected to reduce annual GDP per capita growth rates
by more than 10 per cent (Baarsch and others, 2019).
Climate change also has varying effects on agricultural output and food security
across countries. Tropical and arid regions, where most developing countries are
located, are expected to experience reduced yields and outputs in agriculture and
aquaculture – sectors that make up a signicant share of their GDP and employment
(FAO, 2018). Agriculture in these countries is also more reliant on weather conditions
due to lack of infrastructure such as irrigation or ood control systems. The overall
resilience to extreme weather events is much lower in low-income developing
countries compared to their more developed counterparts. In light of these changes,
countries that are net exporters or self-sucient may have to rely on imports for
their food in the future. Depending on the extent of impact, global progress made in
ending hunger and malnutrition, particularly in developing countries, may be reversed
(WMO, 2019).
68
On the other hand, temperate zones – where most developed countries are located –
could benet from warmer weather. Some may even become more competitive in a
wider range of agricultural products, and could gain from increases in sheries catch
potential due to spatial shifts of marine species from warmer waters (FAO, 2018;
68
Following decades of decline, the percentage of the global population suffering from hunger stagnated from 2015 to 2018,
while the absolute number of people going hungry rose annually over those three years (FAO, 2019). Climate change has
contributed to this lack of progress and threatens to further hamper efforts in reaching SDG 2 on reducing world hunger
and malnutrition.
GLOBAL PROGRESS
MADE IN ENDING
HUNGER AND
MALNUTRITION MAY
BE REVERSED BY
CLIMATE CHANGE
FIGURE 3.2
Climate-related economic losses by country income group, 1998-2017
0
400
800
1,200
1,600
Low incomeLower-middle incomeUpper-middle incomeHigh income
Absolute value
Billion US$
Percentage
0
1
2
%GDP
1.14
1.77
21
0.41
0.60
1,432
567
194
Source: CRED and UNISDR (2018).
Note: Economic losses are dened as the amount of damage to property, crops and livestock due to climate-related
disasters (oods, landslides, storms, extreme temperatures, droughts and wildres). For each disaster, the absolute
value of loss registered corresponds to the damage value at the moment of the event, adjusted to 2017 US$ using
the consumer price index for the United States of America (with 2010 as the base index value of 100) from the
World Bank (as of June 2018). Economic losses as a percentage of GDP for each income group are calculated
by averaging the corresponding percentages for all countries within the group.
WORLD SOCIAL REPORT 2020
92
Field and others, 2014). In certain areas, rising temperatures due to climate change
may even facilitate the development of an agricultural sector where, historically, it has
not been protable, such as cereal production in marginal areas in Finland.
Some countries are facing extreme risks, possibly existential, from climate change.
A group at particular risk are the small island developing States, with 3 in 10 people
living in locations less than ve metres above sea level (UNDP, 2017). These countries
have experienced rst-hand the effects of worsening storms, loss of livelihoods,
and salinization of agricultural land. All the while, few have the resources required to
adequately defend themselves against these changing conditions. The Government
of Kiribati, for example, acknowledges that the long-term survival of the island is
severely threatened by climate change.
69
As climate conditions worsen, its citizens
may be forced to relocate. Similar concerns hold true for other small island developing
States, and this has motivated their commitment to demonstrate global leadership in
the areas of climate change, disaster risk reduction and sustainable development.
Indeed, their very existence depends on it.
C. Unequal exposure and impacts within countries
Within countries, population groups differ in their degree of exposure, susceptibility
to damage and their ability to cope with climate change. Income and asset levels
inuence these differences, as do social networks and community resources. People
living in poverty as well as other population groups that are socioeconomically
vulnerable or disadvantaged are particularly affected by climate change. They are also
at greater risk of death from climate change causes, owing to their higher exposure and
susceptibility and low access to adaptation tools (International Actuarial Association,
2017). The disproportionate effects on these groups will exacerbate economic and
other forms of inequality.
1. People living in poverty
Hallegatte and others (2016) estimate that, even under a low-impact scenario where
mitigation and adaptation strategies are successful, climate change could result in an
additional 3 million to 16 million people living in poverty by 2030. Under a high-impact
scenario, between 35 million and 122 million could fall into poverty (Hallegatte and
Rozenberg, 2017). These individuals and those already in poverty face high levels of
climate risk.
a. Exposure
Because disaster-prone areas tend to be more affordable, people living in poverty are
disproportionately exposed to climate change, feeding a vicious cycle of poverty and
exposure. Poverty is indeed higher in marginal areas and other precarious locations
that are prone to climate hazards, despite general awareness of the related risks.
These locations include arid areas, which are highly exposed to drought and often
experience water scarcity, and the bottom of hill slopes, which are prone to mudslides
that are increasing in frequency (United Nations, 2016b; Sepúlveda and Petley, 2015).
BECAUSE
DISASTER-PRONE
AREAS TEND TO BE
MORE AFFORDABLE,
PEOPLE LIVING
IN POVERTY ARE
DISPROPORTIONATELY
EXPOSED TO CLIMATE
CHANGE, FEEDING
A VICIOUS CYCLE
OF POVERTY
AND EXPOSURE
69
See: www .climate.gov.ki/category/action/relocation/ .
INEQUALITY IN A RAPIDLY CHANGING WORLD
93
Notwithstanding exceptions such as prime coastal residences for high-income
households, many of those who are impoverished also live in coastal and low-lying
areas, which are prone to ooding and erosion.
In Bangladesh, for example, many lower-income households live in slums that tend
to be located in low-lying areas. During Cyclone Aila in 2009, 1 in 4 poor households
were affected by the storm, compared to 1 in 7 non-poor households (United Nations,
2016a; UNICEF, 2009; Akter and Mallick, 2013). Similarly, in New Orleans, in the United
States, a majority of residents living in low-lying districts in 2005 were lower-income
households that suffered disproportionately during Hurricane Katrina (United Nations,
2016a; Logan, 2006).
Income is linked to exposure to climate hazards at work as well, since less-skilled
low-earning workers are more likely to do physical or manual labour out of doors. They
are at greater risk of sustaining the health impacts of high temperatures, including
injuries, cardiovascular and respiratory diseases, and even death. Their labour
productivity also suffers in hot weather, making it more dicult or time-consuming to
complete a task, which can negatively affect wages, production of goods for sale, and
subsistence farming output.
Women living in poverty may face particular circumstances that increase their
exposure to climate change. In 7 out of 10 developing countries, for example, women
are primarily in charge of collecting water for the household (Sellers, 2016). As climate
change reduces the availability of safe water sources, they often have to walk longer
distances in search of water, increasing their exposure to climate hazards.
b. Susceptibility
At similar levels of exposure, people in poverty are more susceptible to damage from
climate change than those who are better off. Differences in housing quality and
local infrastructure, including whether adaptation strategies are in place, is a major
determinant of their susceptibility. Overall, the assets of those who are impoverished
are more fragile than those of their wealthier neighbours. During Cyclone Aila, in
Bangladesh, the homes of lower-income households incurred signicantly more
damage than those of higher-income groups (Hallegatte and others, 2016; United
Nations, 2016a). In Honduras, lower-income households affected by Hurricane
Mitch lost a greater percentage of their assets compared to affected higher-income
households (Carter and others, 2007).
Many people in poverty make their living from agriculture and shing, sectors highly
susceptible to the effects of climate change. In 2013, 65 per cent of people living
on less than $1.90 a day worked in agriculture (Castañeda and others, 2016). Be
it subsistence farming, shing, full-time labour employment or seasonal work,
livelihoods are threatened as climate change impacts cause losses in agricultural
yields and sheries production. The problem is compounded when the natural assets
on which these livelihoods depend are located in hazard-prone areas. The land plots
WORLD SOCIAL REPORT 2020
94
of farmers residing in coastal zones, for instance, are exposed to saltwater intrusion
from the sea, a process aggravated by climate change that decreases agricultural
productivity (Dasgupta and others, 2014; Rabbani, Rahman and Mainuddin, 2013).
The lack of asset diversication and access to formal nancial markets also
contributes to increased susceptibility among people living in poverty. Unlike richer
households that are better able to invest in a range of physical and nancial assets,
lower-income households tend to have their wealth concentrated in their homes, crops
and livestock, all of which are more susceptible to climate change impacts. Labour is
also a more important asset for lower-income households, and the capacity to work
can be affected by climate-related injuries and diseases (Douglas and others, 2008).
In addition, people in poverty are more susceptible to malaria and other waterborne
diseases that climate hazards help to spread (Hallegatte and others, 2016). Their areas
of residence are often more conducive to the breeding of malaria vectors, and they
tend to have more limited access to piped water than their wealthier counterparts.
During oods, their water sources can be contaminated with pathogens, which
increases the risk of waterborne diseases.
In developing countries, women living in poverty tend to be disproportionately
susceptible to food insecurity, which can be aggravated by climate change. They are
often the rst ones to reduce food consumption in the event of lowered crop yields and
crop failure, or in cases of food shortage after a drought, ood or storm (Sellers, 2016).
c. Ability to cope and recover
Faced with the negative consequences of climate change, people living in poverty
often have fewer resources with which to cope and recover. Among other challenges,
they have limited capacity to relocate to safer areas, build structurally stronger
homes, or pay for the costs of adaptation and coping methods. These obstacles are
affected by differences in local infrastructure and resources. People living in poverty
in a poor region, for instance, are likely to have less access to recovery options and
public resources than people in wealthier areas or countries.
Adapting livelihoods to climate hazards and changing climatic conditions, through the
use of technological solutions or shifting to other forms of employment, for example,
is a major challenge. In the midst of reduced rainfall, lower-income farmers in Uganda
have found it more dicult than wealthier farmers to change their crop patterns and
access water-saving technology and water storage sources (Hill and Mejia-Mantilla,
2015). In the Sahel region of West Africa, where desertication is worsening, farmers
living in poverty are less able to expand their land resources, intensify farming to
stabilize food production, or diversify to non-agricultural production (Dietz, Ruben and
Verhagen, eds., 2004).
Compared to wealthier households, those in poverty are much less likely to have
insurance or access to other nancial instruments, including loans for disaster recovery.
Globally, half of adults without an account at a nancial institution or a mobile money
WOMEN LIVING IN
POVERTY TEND TO BE
DISPROPORTIONATELY
SUSCEPTIBLE TO
FOOD INSECURITY,
WHICH CAN BE
AGGRAVATED BY
CLIMATE CHANGE
INEQUALITY IN A RAPIDLY CHANGING WORLD
95
provider in 2017 were from the poorest 40 per cent of households in their countries
(Demirgüç-Kunt and others, 2018). They may also encounter obstacles in accessing
remittances or informal, community-based resources. In order to pay for vital housing
repairs and health expenses in the aftermath of a climate hazard, they often have
to resort to selling their physical assets, which limits future efforts to rebuild their
livelihoods and income earnings (Clarke and Dercon, 2015). Alternatively, they might
reduce expenses to preserve their assets, which can be detrimental for health if food
consumption and health care are compromised. This is the case in sub-Saharan Africa
where, following extreme weather events, children of asset-poor households are more
likely to receive lower-quality nutrition and less likely to be taken to medical facilities if
they are ill (Hallegatte and others, 2016). If climate hazards occur in quick succession,
households will have even less time to recover and rebuild their assets; this can push
disaster-affected households into not just transient but chronic poverty and exacerbate
the challenge for households that were already impoverished (Olsson and others, 2014).
Climate change will also lead to lower nutritional levels in crops, reduced agricultural
yields and higher food prices. With food expenses constituting a larger proportion of
their budgets, lower-income households will nd it harder than auent households to
cope with food insecurity, undernourishment and chronic hunger. Undernourishment
is made even worse when lower-income households are unable to diversify their food
consumption in the face of rising prices. Often, they resort to eating mainly staple
foods while cutting consumption of more expensive but nutrient-rich vegetables and
protein-rich foods (FAO, 2018). In the United Republic of Tanzania, declining nutrient
intake associated with increased maize prices have contributed to iron and vitamin A
deciencies among the rural poor (ibid.).
Women face particular barriers in coping with the effects of climate change. Household
responsibilities can place time and labour constraints on women, hampering their
ability to seek paid formal employment when primary livelihoods are threatened by
climate change (Sellers, 2016). Being conned to domestic duties also limits their social
networks and access to information – especially since women use communication
tools such as mobile phones less often than men. Gender prejudice can aggravate
the social exclusion of women already living in poverty, increasing their diculty in
accessing communal resources.
Finally, gender-biased land-tenure practices limit land ownership for women, diminishing
their ability to make decisions on the adaptation or diversication of farming activities
(ibid.). This inability to own land, which can serve as collateral, further restricts women’s
access to the loans needed to nance livelihood diversication and adaptation. In rural
areas, forest resources are also often unavailable to women, given their low levels of
representation in governance committees in a male-dominated sector (ibid.).
DISASTER-AFFECTED
HOUSEHOLDS ARE AT
RISK OF FALLING INTO
CHRONIC POVERTY
WORLD SOCIAL REPORT 2020
96
2. Other vulnerable groups
Due in part to their geographic location and way of life, some population groups
are especially vulnerable to the impacts of climate change. These groups are at a
disproportionately high risk of poverty and share many of the challenges faced by
those who are impoverished: typically, they live in disadvantageous locations with high
exposure to climate hazards, are heavily reliant on climate-sensitive natural resources
for their livelihoods, and have limited options in terms of coping strategies, such as
diversifying into climate-resilient income sources.
a. Smallholder farmers
Smallholder farmers tend to rely heavily on family labour to work on small agricultural
lands no larger than two hectares (Rapsomanikis, 2015). Many of them live in marginal
areas and depend on rain-fed agriculture. Since irrigation systems are often unaffordable
for most smallholders, livelihoods are at risk as rainfall patterns become increasingly
erratic, resulting in decreased and unstable crop yields (Ubisi and others, 2017).
Unlike industrial-scale farmers, smallholders are constrained by their low utilization of
technology, the small size of their agricultural lands and poor soil quality. All of these
factors hinder their ability to diversify their crops, especially to ones that are less
sensitive to precipitation patterns. On the whole, smallholders lack the technical and
nancial means needed to increase agricultural productivity, and may not have access
to public services and support mechanisms due to their remote locations (Donatti and
others, 2018; Rapsomanikis, 2015).
For example, many of the estimated 2.3 million smallholder farmers in Central America
work on steep lands with thin soils (Harvey and others, 2018). The crops they plant are
sensitive to high temperatures and unstable rainfall, and extended droughts and extreme
rain events mean that many of them struggle with food insecurity. Moreover, these small
farms regularly suffer from hurricane damage to their crops and to infrastructure such
as roads and bridges, which further impairs crop yields and transportation (Philpott
and others, 2008). Like smallholders in other regions, their insecure land tenure, limited
capital and lack of access to nancing and technical solutions constrain their ability to
cope and adapt to a worsening climate.
b. Indigenous peoples
The repercussions of climate change are severe for indigenous peoples, many of whom
already face social exclusion in addition to poverty. Their reliance on natural resources
for their living makes them markedly exposed and susceptible to climate change and
its impacts.
For generations, their way of life has relied on traditional farming, foraging and hunting
methods, some of which are no longer effective due to the changing environment
(McLean, 2012; Baird, 2008). Shifting climate conditions and landscapes reduce
the usefulness of traditional knowledge, and erratic weather patterns mean that
INEQUALITY IN A RAPIDLY CHANGING WORLD
97
generations-old habits for planting crops are no longer reliable. With their primary
livelihoods increasingly under threat, indigenous peoples will be less able to generate
produce needed to trade for goods that they lack.
Increasingly unpredictable climate conditions can damage the condence of indigenous
groups that their traditional knowledge of the environment can guarantee their
livelihoods. This raises the risk of a loss of culturally important practices, as members,
in order to survive, forego traditional livelihoods.
The marginalization faced by many indigenous peoples affects their ability to cope
with climate change, since their needs may not be taken into account in climate
mitigation and adaptation policymaking (Baird, 2008). In addition, they may face
institutional barriers to accessing resources and securing land tenure. Indigenous
Aymara farmers from the Plurinational State of Bolivia, for example, have been
struggling with water shortages and irrigation problems following the retreat of the
Mururata glacier, along with an increase in ash oods and delayed rainfall (McDowell
and Hess, 2012). Discrimination and, often, a lack of infrastructure in areas where
many of them live make it challenging to obtain the loans and property rights that
would facilitate a recovery of their way of life.
Health impacts can be a concern as well. For many indigenous peoples in Latin America
who live on marginal lands, climate change has resulted in the spread of diseases that
previously could not thrive in those locations, causing a rise in respiratory and diarrhoeal
diseases (Kronik and Verner, 2010).
Finally, it must be noted that the social and cultural identities of indigenous peoples
are strongly tied to the environments in which they have lived for generations. Climate
change can accelerate the disappearance of some of these elements of identity
and culture as well as the destruction of natural habitats, as indigenous groups nd
themselves increasingly at risk of displacement.
c. Rural coastal populations
Coastal regions are highly exposed to sea-level rise, ocean acidication and temperature
increases, along with storms and changes in precipitation. Rural areas of such regions
are often inhabited by those living in poverty and other marginalized groups, who cannot
afford to move to safer locations (Barbier, 2015).
Due to their remoteness and low levels of development, rural coastal areas may
lack protection infrastructure such as storm shelters, seawalls and embankments
(Barbier and Hochard, 2018). Instead, natural barriers such as mangroves are relied
on for protection, but these habitats are gradually being lost to climate change, leaving
residents increasingly exposed to coastal climate hazards.
In addition to the possible destruction of their houses and food gardens by rising sea
levels and storms, rural coastal populations also face threats to their livelihoods. Many
of them depend on marine and coastal resources for shing or coastal agriculture,
THE
MARGINALIZATION
FACED BY MANY
INDIGENOUS
PEOPLES AFFECTS
THEIR ABILITY
TO COPE WITH
CLIMATE CHANGE
WORLD SOCIAL REPORT 2020
98
and climate change is affecting the viability of these ecosystems. In addition to the
destruction caused by extreme weather events, changes in ocean temperature and
acidity reduce the yields of sheries, while saltwater intrusion lowers the quality of
coastal agricultural lands, adversely affecting farming productivity (ibid.).
Given their poverty and lack of access to resources, coping strategies are limited for
many rural coastal households. Ships and equipment for shing in deeper waters are
often prohibitively expensive, as are new, climate-resilient crop varieties or the building
of coastal protection infrastructure. Other forms of economic opportunities may also
be unavailable in remote locations.
In such challenging circumstances, lower-income residents in rural coastal regions are
prone to poverty-environment traps, which also affect other communities, including
those living in drylands (see box 3.3).
D. Distributional effects of climate action: implications for policy
Policies have an important role to play in addressing climate risks and building climate
resilience. However, just as climate change impacts are unevenly distributed, so too are
policies built to counter them. As countries take climate action, there will be trade-offs
between the positive and negative effects of mitigation and adaptation measures, and
distributional impacts to consider.
1. The effect of mitigation and adaptation policies on inequality
Climate action strategies have the potential to reduce inequalities, but may not always
incorporate this objective. Beyond their core intended purposes, these strategies often
have other effects – both positive and negative – that can differ greatly for individuals
from different income levels and social groups.
a. Mitigation policies
Whether mitigation policies curb energy consumption, encourage the use of cleaner,
renewable energy or promote reforestation, the primary goal is one that benets the
global community – slowing down climate change through a reduction in carbon
emissions/levels. In meeting emissions targets, mitigation policies have the potential
to decrease air pollution and improve air quality, which has positive health effects. This
can help to reduce inequality, since the greatest benets are expected to accrue to
lower-income households, which are more likely to live in areas heavily affected by air
pollution and poor air quality (Hajat, Hsia, and O’Neill, 2015; Pratt and others, 2015).
Mitigation policies have also contributed to advances in small-scale renewable energy.
The resulting proliferation and lower costs of these technologies, which include
solar, wind and hydropower, are bringing electricity to remote areas unconnected
to conventional power grids, addressing the energy needs of the rural poor in many
countries (UNDP and ETH Zürich, 2018; REN21, 2017).
JUST AS CLIMATE
CHANGE IMPACTS
ARE UNEVENLY
DISTRIBUTED, SO
TOO ARE POLICIES
BUILT TO COUNTER
SUCH IMPACTS
INEQUALITY IN A RAPIDLY CHANGING WORLD
99
BOX 3.3
Climate change and poverty-environment traps
People living in poverty in agricultural areas deemed “less-favoured” or in rural, low-elevation coastal zones are at particular
risk of falling into so-called poverty-environment traps. Barbier and Hochard (2018) explore the implications of climate change
on poverty in these regions. Less-favoured agricultural areas include land where agricultural production is difficult because
of environmental conditions (such as poor soil quality, difficult terrain and a harsh climate) and “favoured” agricultural land
that has limited market access. Low-elevation coastal zones are coastal areas below 10 metres of elevation, and are highly
exposed to sea-level rise and coastal erosion, among other challenges. Lower-income households in these regions are largely
dependent on natural resources for their living.
Climate-induced resource degradation and declining productivity pushes those affected to search for outside work to
supplement their income (ibid.). Considering the regional nature of the climate impacts encountered, however, it is likely
that households living in the same area will take the same action – to seek alternative employment. If too many people
pursue this strategy, the spike in labour supply will inevitably result in falling wages, which may force households to forego
alternative employment and refocus on increasing production at home. This, in turn, puts further stress on local resources
and accelerates degradation, fuelling a vicious cycle. The following two examples illustrate the poverty-environment trap and
ways in which communities are attempting to cope, with government support.
Fishing communities in southwest Bangladesh (Dasgupta and others, 2016)
In Bangladesh, the incidence of poverty is particularly severe in the low-lying coastal region in the country’s southwest. The
area is prone to tidal surges, salinization and cyclones, and living conditions are often challenging. In the coming years,
vulnerability to flooding and salinization is expected to increase, according to climate projections. People in poverty will
be heavily affected by these trends, since they rely on the local ecosystem for their livelihoods and have limited mobility
due to their economic circumstances. Over the years, the region’s inland fishing grounds have been degraded due to
over-exploitation, destructive fishing practices and salinization, among other factors. Climate-induced sea-level rise and
subsequent salinization will adversely affect many of the fish species, which are crucial food and economic resources for
local residents. The Government of Bangladesh has taken action to promote sustainable fishing practices and increase
community access to technological and financial resources. Whether this will be enough to enable these communities to
extricate themselves from this poverty-environment trap remains to be seen.
Dryland communities in Yangguan Town, China (Cao and Zheng, 2016)
Yangguan Town lies at the edge of the Kumtag Desert in China. It faces similar challenges to many other impoverished
regions in the world’s drylands: limited water availability, remoteness and worsening environmental conditions due to climate
change – mainly desertification and flooding. From the 1960s to the 2000s, average precipitation in the area during the rainy
season increased by almost 70 per cent. Since desert soil cannot absorb large quantities of water from a single event, the risk
of flooding has increased. The community has tried to adapt by building basic flood defences and attempting to develop a
fruit industry, but they have found it difficult to stay out of poverty. In collaboration with a private firm that came to Yangguan
in 2000 to gain access to its meltwater resources for fish production, additional flood defences were created, a series of
artificial lakes were constructed and non-forest vegetation was established. These adaptive measures provided a clean
water supply, security and job opportunities for the local community. The town has managed to successfully escape from the
poverty-environment trap, quadrupling average per capita income in the decade from 2005 to 2015.
WORLD SOCIAL REPORT 2020
100
Given that climate change affects disadvantaged groups disproportionately, these
groups stand to benet more from global mitigation efforts in the long term. However,
as with any process of structural transformation, climate action brings challenges in the
short term. Green energy requirements, for instance, can be a source of nancial strain
for those in poverty, many of whom rely on coal and traditional fuels for cooking and
heating, and are unable to afford the upfront costs of newer technology or the ongoing
costs of more expensive, cleaner fuels. Rising fuel prices have spiked protests from
low- and middle-income households in more than one country (see box 3.4). Large-scale
land acquisition and increasing demand for biofuel production affects those in poverty
and smallholder farmers through the dispossession of land and the shifting of land use
from food to fuel production, which can lead to higher food prices. (Collier, Conway and
Venables, 2008; Ruel and others, 2010). Displaced households are often pushed onto
more marginal lands, which are often highly vulnerable to climate hazards (Rulli, Saviori
and D'Odorico, 2013; Weinzettel and others, 2013).
Renewable energy and forest management projects in rural areas can lead to the
displacement of rural communities and the loss of livelihoods, especially if resource
use and ownership rights are unclear or unenforced. Here, forest-dwelling indigenous
peoples are especially vulnerable; their traditional lifestyles may be disrupted by the
projects, and they may even lose their homes if customary indigenous land use and
property rights are not well dened (Bayrak and Marafa, 2016).
70
b. Adaptation policies
With regard to adaptation, measures tend to be tied more specically to a particular
locale or target group, with varying reach. Physical housing renovations in a
neighbourhood, for example, have a narrower impact, beneting mostly local residents.
Meanwhile, adaptation policies involving public services and system-level changes,
such as land-zoning legislation and the enhancement of public water supplies, have a
much wider reach. Whether these policies benet disadvantaged persons or the well-off
more will depend on the context and the precise measure taken.
Some adaptation initiatives entail major construction work and changes to the
environment that require the resettlement of local residents. Among these residents,
those in poverty and other disadvantaged groups may face more severe outcomes,
since they are more likely to live in informal settlements and have fewer legal protections.
They are also at higher risk of being evicted or receiving lower compensation when
dispossessed of their property (Anguelovski and others, 2016).
71
In Dhaka, Bangladesh,
construction of ood-prevention embankments has resulted in the displacement of
low-income communities living near canals (ibid.).
70
Projects may restrict access to the resources in a given area and set regulations on how they can be used, which may
be incompatible with the lifestyles and livelihoods of local inhabitants.
71
For those who are relocated, resettlement sites may continue to be affected by climate hazards, in addition to being farther
away from economic centres and disconnected from social networks.
DISADVANTAGED
GROUPS STAND
TO BENEFIT MORE
FROM GLOBAL
MITIGATION
EFFORTS IN THE
LONG TERM, BUT
CLIMATE ACTION
ALSO BRINGS
CHALLENGES IN
THE SHORT TERM
INEQUALITY IN A RAPIDLY CHANGING WORLD
101
In some instances, the groups most negatively affected by adaptation policies may even
be the intended beneciaries themselves. One area where this may occur is in the building
of climate-resilient infrastructure – such as green spaces that lower urban temperatures
and alleviate ooding – in low-income areas. As these neighbourhoods become more
attractive, property and rental prices can rise signicantly from an inux of wealthier
residents, pricing out the low-income households that the policy was meant to aid in the
BOX 3.4
Tempering public reaction to rising fuel prices: a balancing act
Reforming fossil fuel subsidies can play an important role in reducing emissions. Yet enacting such changes can be
politically fraught.
The gilet jaunes movement in France exemplies the backlash that government policies of this nature can bring when viewed as
inequitable and implemented without regard to distributional consequences. Named after the yellow vests all French drivers must
carry, this grass-roots movement started in 2018 when thousands of unaligned individuals from rural and suburban areas united in
their opposition to a proposed fuel tax.
The tax was part of a green agenda, which the public generally approved of, but was announced without public dialogue and
following a period of economic reforms that were seen to benet upper-income groups (Council on Foreign Relations, 2019).
Because people living outside of urban areas often lack access to public transportation systems, they would be forced to shoulder
most of the tax burden. The tax angered a population that was already frustrated by long-stagnant wages and high levels of
unemployment in rural and suburban areas. After months of social unrest, the tax was eventually rolled back. Many people in
France are calling for a just transition to a low-carbon economy that is not seen to favour the urban elites over the working class.
Many countries in Western Asia and Northern Africa have traditionally subsidized energy prices. Often, the biggest beneciaries of
these subsidies are not those most in need. In addition, the high public cost of the subsidies can prevent the State from implementing
equitable and ecient social protection schemes. While subsidies tend to be popular among all income groups, when reforms are
linked to improvements in social protection, they tend to be more successful (Inchauste, Mansur and Serajuddin, 2017).
In Jordan, energy subsidies accounted for roughly 40 per cent of government spending in 2012 (El-Katri and Fattouh, 2017).
Soaring budget decits made reforms a scal necessity. Yet attempts by the Government to lift petroleum-based subsidies led
to intense public protest and widespread political opposition. To counter this, the Government took steps to gain support for
the reforms, including a major public communication effort outlining their rationale. To mitigate the impact on households, the
Government was able to provide cash transfers to families living in poverty (ibid.). These efforts were key in the eventual public
acceptance of the reforms and their viability.
Egypt has also had success in transitioning away from energy subsidies, which by 2013 had grown to more than 20 per cent of
the Government’s budget. To reduce the impact of the reforms on the most vulnerable, the Government created two new separate
social protection schemes. One targeted households in poverty with added benets for children, and the second provided a social
pension to persons with disabilities and individuals aged 65 and older. By defunding a regressive public support system, the
Government was able to increase social spending and invest much needed capital into renewable energy sources (Canonge, n.d.;
World Bank, 2017b).
These examples illustrate the need for Governments to consider the timing of reforms and take steps to mitigate their negative
impacts, ensuring that their implementation is the outcome of a participatory process.
WORLD SOCIAL REPORT 2020
102
rst place (ibid.). An example of this is the St. Kjeld district of Copenhagen, Denmark,
where rents increased following the completion of climate resilience projects, leading to
some displacement of low-income households (Keenan, Hill and Gumber, 2018).
Adaptation measures can also increase inequality when they prioritize higher-income
groups and economically valuable areas over low-income or marginalized
neighbourhoods (Anguelovski and others, 2016). For example, ood prevention
developments in Surat, India, which have focused on protecting economic assets such
as oil reneries and textile mills, have contributed to the relocation of communities living
in vulnerable riverine and oodplain areas (ibid.). In Manila, Philippines, new drainage
infrastructure is often planned for construction in informal settlements, leading to the
relocation of residents, even though other forms of urban development also contribute
to the congestion of the city’s waterways and drainage networks (ibid.).
In addition to the above, inequitable outcomes can emerge if the costs of climate action
are passed on to the public through regressive taxation, or if climate action results in
price changes that erode the purchasing power of lower-income households. This
is particularly relevant where climate action involves expensive technology or fuel
sources, or where policies cause an increase in the costs of energy, public transport
and basic consumer goods – a nancial burden that weighs more heavily on those
living in poverty, since they spend a large proportion of their incomes on such goods
and services.
On a broader scale, green objectives related to climate action also have repercussions
for livelihoods and development. As climate-friendly policies gain traction and as
livelihoods and activities adjust to meet emissions-reduction targets, inequality may
increase as a result of changes in the economy and the labour market.
The urgency of cutting emissions calls for immediate action to transition to a green
economy. Recent progress in the development of low-carbon technologies and the
reduction of their costs facilitate this transition. Still, the process may be particularly
challenging for existing, more carbon-intensive rms and economic activities. On
aggregate, reduced demand for fossil fuels, coupled with an increasing focus on
renewable energy and other industries associated with mitigation and adaptation,
can lead to job losses and the phasing out of carbon-intensive sectors (ILO, 2019).
The removal or scaling back of fossil-fuel subsidies can also disproportionately affect
lower-income households. Geographically, the negative impacts could be particularly
severe for regions dependent on carbon-intensive sectors. In India, for example,
coal royalties constitute almost half of revenue in some states (Gambhir, Green and
Pearson, 2018). Disproportionate losses in certain locations could thus contribute to
spatial inequality.
INEQUALITY MAY
INCREASE IF THE
COSTS OF CLIMATE
ACTION ARE
FUNDED THROUGH
REGRESSIVE
TAXATION
INEQUALITY IN A RAPIDLY CHANGING WORLD
103
With carefully designed adaptation strategies, however, economic restructuring brought
about by the greening of economies can result in the creation of 24 million new jobs
worldwide by 2030 (ILO, 2018a). At the same time, at least 6 million jobs will be lost,
including many low-skilled jobs in carbon-intensive sectors (ibid.). The net increase of
approximately 18 million jobs around the world should be the result of the adoption
of sustainable practices, including changes in the energy mix, the projected growth in
the use of electric vehicles and increases in energy eciency in existing and future
buildings. The extent to which displaced workers, particularly those with low skills, can
take advantage of new opportunities is uncertain. The mismatch of skills is a major
challenge, and those who lose their livelihoods may not be suciently equipped to enter
into new vocations.
Ultimately, the overall impact on inequality will depend on the distribution of new and
destroyed jobs. Where losses fall disproportionately on those in poverty and other
disadvantaged population groups, inequality will rise unless efforts are made to ensure
a just transition.
2. Promoting a just transition with equitable outcomes
In 2015, world leaders took important steps to full the promise of eradicating poverty,
reducing inequality and reversing environmental degradation. With the signing of the
2030 Agenda for Sustainable Development, they committed to take urgent action to
combat climate change and its impacts while reducing inequality.
The subsequent adoption of the Paris Agreement set forth a concrete road map to
achieving climate targets globally. The Agreement includes obligations for developed
countries to provide nancial resources to assist developing countries with mitigation
and adaptation, as well as technology transfer and capacity-building support to
build clean, climate-resilient futures.
72
Five years into the implementation of these
agreements, public attention to climate change has intensied as its effects are
felt by increasing numbers of people around the globe. Important scientic reports,
government statements and calls to action by civil society reect heightened and
growing awareness of this alarming megatrend.
With well-designed adaptation strategies,
the greening of economies can result
in 24 million new jobs by 2030
24 MILLION NEW JOBS
72
Article 9 of the Paris Agreement, adopted through Decision 1/CP.21 refers to climate nance, while Article 10 refers to
technology transfer and capacity-building.
WORLD SOCIAL REPORT 2020
104
a. A systems perspective
As public awareness triggers action, ensuring a just transition is of the essence. In
this regard, it is important for policymakers to take a systems perspective, integrating
mitigation and adaptation measures with goals to reduce inequality. Inequality and
climate change are locked in a vicious cycle, where climate change exacerbates
existing vulnerabilities of disadvantaged countries, communities, groups and
individuals, worsening inequality and raising their climate risk further (United Nations,
2016b). Reducing inequality not only breaks this cycle, but also facilitates the success
of climate action policies, which should be formulated in an inclusive, participatory
manner so that the perspectives of those most disadvantaged by climate change are
taken into account.
In the course of designing solutions, it will be crucial to weigh trade-offs between policy
priorities, since measures that advance one development objective, or a particular SDG,
may complicate other objectives. Climate-impact assessments are a valuable tool in
this process. By quantifying and incorporating multidimensional poverty and inequality
into climate scenarios, integrated assessments shed light on the distributional impacts
of climate hazards and policy options, yielding scientic evidence to aid decision-making
(ibid.; Rao and others, 2017).
Managed well, a just transition would be able to balance sustainable economic
growth and job creation at the national and global levels with climate action and
inequality-reduction objectives. To this end, policies designed to reduce inequalities
that exacerbate vulnerability to climate hazards are sound development policies and
are essential to reducing climate risk. That is, social and economic policies that reduce
vulnerabilities and support decent job creation and access to equal opportunity are also
forms of climate adaptation.
b. Climate action and social protection
At the international level, dedicated climate nance, technological transfer and
capacity-building – provided predominately by developed countries – can support
developing country plans for adaptation and mitigation. The Green Climate Fund, under
the United Nations Framework Convention on Climate Change, is a prominent example
of providing resources to developing countries, especially those most vulnerable
to climate change, in support of low-emission and climate-resilient development.
Specically, the Fund provides nancial and technical assistance to help countries
formulate and implement national adaptation plans and to integrate them into national
development planning.
At the national level, environmental taxation can play a key role in promoting more
sustainable production and consumption patterns, but potential regressive effects
have to be mitigated. Subsidies, grants and other forms of accessible nancing should
be made available to lower-income households and other disadvantaged groups to
help them cope with rising food, transport and clean energy prices, adaptation costs,
A JUST TRANSITION
CALLS FOR
INTEGRATING
MITIGATION AND
ADAPTATION
POLICIES WITH
INEQUALITY-
REDUCING
MEASURES
INEQUALITY IN A RAPIDLY CHANGING WORLD
105
and expenses incurred in their recovery from climate hazards. Insurance targeted at
low-income earners can reduce future climate risk. However, Governments must
provide a safe regulatory environment that protects the rights and investments of the
insured (Akter, 2012).
Climate action projects such as renewable energy production can be strategically located
in poor rural areas to provide the local workforce with employment opportunities (ILO,
2018a). In doing so, the traditional land use and rights of local indigenous peoples should
be taken into account, with benets equitably distributed. Any eventual resettlement
should be mutually agreed upon and fairly compensated, with new housing arranged in
a location that does not leave residents worse off.
Social protection and access to social services can bolster recipients’ capacities
to cope with and recover from all manner of shocks. Social protection systems are
effective at building resilience by providing an income source that can help individuals
and households cope with climate change and other shocks.
For workers at risk of losing their jobs in the green transition, social protection can soften
the blow of income losses and strengthen the adaptive capacity of their households. The
availability of safeguards against unemployment and income losses also contributes to
mitigation efforts by easing public acceptance of green policies that may affect them
negatively (ILO, 2018a). As economies and the world of work evolve, however, social
protection systems must adapt to deliver continued support to workers coping with the
shift to new forms of production and employment.
Public employment programmes can help vulnerable workers by serving as a source of
temporary employment, while offering training in new skills when implemented in the
form of green transition projects. Governments can consider providing scal incentives,
such as tax exemptions or social security rebates, to employers to encourage skills
training for their employees.
When disasters occur, post-disaster transfers can facilitate or accelerate recovery as
well as reduce reliance on negative coping mechanisms. The result is benecial to the
environment as well. With sucient support, recipients are better able to engage in
more sustainable forms of livelihoods, such as agriculture and aquaculture practices
that facilitate the care and regeneration of natural ecosystems. Addressing inequality,
then, is important not only in and of itself, but also to address the impacts of climate
change and strengthen people’s resilience.
SOCIAL
PROTECTION
CAN SOFTEN THE
BLOW OF CLIMATE
SHOCKS AND
STRENGTHEN THE
ADAPTIVE CAPACITY
OF HOUSEHOLDS
WORLD SOCIAL REPORT 2020
106
QUOTE
CHAPTER 4
URBANIZATION: EXPANDING
OPPORTUNITIES BUT
DEEPER DIVIDES
107
INEQUALITY IN A RAPIDLY CHANGING WORLD
KEY MESSAGES
• In general, cities offer better access to jobs and services than rural areas. Rapid
progress has been made in rural areas, when measured by a variety of development
indicators. However, rural populations will continue to lag behind urban dwellers
by 2030 if current trends continue.
• Still, cities are more unequal than rural areas, though levels of inequality vary greatly,
even among cities within a single country.
• Inequality tends to be higher in large cities than in small cities and towns, but the
prevalence of poverty also tends to be lower in large urban areas.
• Sustained exposure to concentrated poverty in underserved urban neighbourhoods
leads to marginalization and exclusion, reinforcing the mechanisms that perpetuate
poverty and disadvantage.
• Urbanization is proceeding at a fast pace in many developing countries, making urban
governance and adequate planning increasingly urgent.
• Reducing inequalities within cities calls for meeting the housing and land needs
of all people, including those living in poverty, ensuring the equitable provision of
public services and infrastructure, improving connectivity and promoting access to
decent, formal employment.
CHAPTER 4
URBANIZATION:
EXPANDING
OPPORTUNITIES
BUT DEEPER DIVIDES
73
73
This chapter was prepared by UN-Habitat with inputs from DESA.
WORLD SOCIAL REPORT 2020
108
INTRODUCTION
Where people live exerts a strong influence on their opportunities in life, including
access to safe drinking water, electricity, health care, good schools, decent work and
other goals envisioned in the 2030 Agenda. Inequalities related to location – also
known as “spatial inequalities” – can be extreme between rural and urban areas,
74
especially in developing countries.
High levels of inequality are also found within cities, where virtually all of the world’s
population growth will take place over the next 30 years. Cities can be incubators
for innovation and boost prosperity. The concentration of people and human activity
leads to increased productivity, facilitates the provision of public infrastructure
and services, and stimulates the development and diffusion of new ideas. The
generation of new opportunities, in turn, boosts social mobility. Yet in most cities,
high levels of wealth and modern infrastructure coexist with areas characterized by
deprivation and a dearth of services. Underinvestment in infrastructure and public
transportation prevents some urban residents from accessing good jobs, education
and services. Furthermore, the concentration of poverty in certain underserved
neighbourhoods reinforces the mechanisms that perpetuate disadvantage.
In a world with high and growing levels of urbanization, the future of inequality
depends largely on what happens in cities. The urban advantage in terms of
innovation and opportunities for social mobility may not be sustained if development
and urban planning policies neglect equity concerns. Based on a review of spatial
disparities and inequalities within cities, this chapter discusses lessons learned in
promoting spatial inclusion and reducing urban divisions.
A. Spatial inequalities: the rural-urban divide
Spatial inequalities within countries are often more dramatic than those between
countries. The poorest regions of middle-income countries, for instance, are frequently
as poor as low-income countries.
75
In Argentina and Mexico, for instance, GDP per
capita in the poorest administrative regions is 16 times lower than that of the richest
regions (Muñoz, Radics and Bone, 2016). Typically, spatial inequalities account for
a signicant proportion of total in-country inequality: they explain over 60 per cent
of total income inequality in African countries such as Angola and Madagascar, for
instance, and about 40 per cent in Zambia (Shimeles and Nabassaga, 2017; Beegle
and others, 2016). These spatial divides are entrenched and often persistent, despite
overall economic growth, enhancements in infrastructure and technological gains
IN A WORLD
WITH HIGH AND
GROWING LEVELS
OF URBANIZATION,
THE FUTURE
OF INEQUALITY
DEPENDS LARGELY
ON WHAT HAPPENS
IN CITIES
74
No uniform set of criteria are currently available to distinguish urban areas from rural areas. Due to the complexity and
variety of situations in which the urbanization process occurs, national statistical oces are best placed to dene urban
areas in their respective countries. For additional information, see United Nations (2018c).
75
Poverty as measured by the Multidimensional Poverty Index is as high in the poorest region of India as in Malawi; the
poorest region of Guatemala is poorer than Haiti; and the poorest region of Nigeria is poorer than Chad and as poor
as Niger. See the Oxford Poverty & Human Development Initiative, Global MPI 2018, tables 5.1-5.6, available at: https://
ophi.org.uk/multidimensional-poverty-index/mpi-resources/. Accessed on 25 June 2019. See also Alkire, Roche and Seth
(2011) for a summary of subnational disparities.
INEQUALITY IN A RAPIDLY CHANGING WORLD
109
that should improve access to opportunities and resources everywhere. Certain areas
benet more from these advances for a variety of reasons, including natural resource
endowments, weather conditions, market integration and access to public institutions.
At the same time, the concentration of activities within cities creates economies of
scale and networking effects that further benet the richest regions.
In Europe, for instance, spatial inequality within many countries expanded between
1995 and 2008 (OECD, 2018b and 2018c). Over that period, many small manufacturing
cities and regions suffered losses in employment and income, while large metropolitan
areas became more dynamic. The 2008 economic and nancial crisis hit metropolitan
areas harder than small towns and rural areas in some countries but not in others,
resulting in a territorial patchwork of diverging real incomes and rates of labour force
participation. In contrast, while spatial inequalities remain prominent in China, the
share of provincial income inequality over total inequality declined from 35 per cent in
1995 to 11 per cent in 2013 (Jain-Chandra and others, 2018).
One of the most conspicuous forms of spatial inequality is that between rural and
urban areas. On average, people in urban areas have more job opportunities and
better access to education, safe drinking water, health services and high-quality
infrastructure than rural populations. As a result, at least 80 per cent of people living
in poverty are found in rural areas, even though rural areas account for only 45 per
cent of the world’s population (World Bank, 2016a; United Nations, 2018d). Based on
recent estimates of multidimensional poverty, which takes into account overlapping
deprivations in education, health and living standards, poverty is higher in rural than
in urban areas in all regions, as shown in gure 4.1. A rural-urban gap is found even in
regions where the overall prevalence of multidimensional poverty is very low – such
as Europe and Northern America.
In most developed countries, disparities between urban and rural areas are
easing in terms of economic structures and the quality of physical infrastructure
(Champion, 2011; Champion and Hugo, 2004). Improvements in communication
and transportation, for example, have allowed people to move out of cities into the
surrounding countryside without losing access to urban jobs and services.
In developing countries, however, some rural disadvantages have persisted. Access
to improved sanitation, for instance, has increased at a quicker pace in urban than in
rural areas. Other indicators, however, suggest that a shift may be under way. Since the
1990s, evidence shows that progress against stunting has proceeded at a somewhat
faster pace in rural than in urban areas; the same holds true for secondary school
attendance and access to electricity (see gure 4.2). That said, even if the progress
observed in most indicators from the 1990s to the 2010s continues, rural areas will
still lag behind urban centres by 2030.
PROGRESS IN MANY
INDICATORS HAS
BEEN FASTER IN
RURAL THAN IN
URBAN AREAS. AT
THE CURRENT RATE
OF PROGRESS,
HOWEVER, RURAL
AREAS WILL STILL
BE LAGGING BEHIND
BY 2030
WORLD SOCIAL REPORT 2020
110
What’s more, such averages hide substantial cross-country differences. The
rural-urban gap in access to electricity declined by 25 percentage points in Bangladesh
and by 29 percentage points in India between 1998 and 2016, but it increased by
22 percentage points in Benin from 1996 to 2011. Similarly, different indicators can
show opposing trends. In Nigeria, for instance, secondary school attendance showed
progress, though limited, in both urban and rural areas from 2003 to 2013, yet the
number of out-of-school children increased in rural areas (UNESCO, 2015). In China,
rising rural-urban inequalities across multiple indicators over the last few decades
have been widely documented, although recent initiatives by the central and local
governments to reduce them may have begun to bear fruit (see box 4.1).
These examples suggest that a strong focus on easing the rural-urban divide will be
needed to ensure that no one is left behind. They also highlight the need to monitor
trends using multiple indicators, since progress in one domain is not necessarily
indicative of progress in others.
FIGURE 4.1
Percentage of the population living in multidimensional poverty, by region, 2018
Rural Urban
Percentage
0
10
20
30
40
50
60
70
80
Sub-Saharan
Africa
Central
and Southern
Asia
Latin America
and the
Caribbean
Europe and
Northern
America
Eastern and
South-Eastern
Asia
Northern
Africa and
Western Asia
17
6
25
6
2
1
19
4
28
10
71
31
Source: Calculations based on the Oxford Poverty & Human Development Initiative’s global Multidimensional Poverty
Index 2018, Tables 4.1- 4.6. Available from https://ophi.org.uk/multidimensional-poverty-index/global-mpi-2018/.
Accessed on 15 July 2019.
Note: Regional averages based on information for 13 countries and areas in Northern Africa and Western Asia,
10 countries in Eastern and South-Eastern Asia, 17 in Europe and Northern America, 20 in Latin America and
the Caribbean, 12 in Central and Southern Asia, and 42 in sub-Saharan Africa. Results are not weighted by
population size.
INEQUALITY IN A RAPIDLY CHANGING WORLD
111
In sum, access to opportunities and resources has a clear spatial dimension: people
in rural areas are worse off than urban populations, despite a shrinking of that gap in
many countries.
While most evidence regarding spatial inequalities is highly aggregated and generally
compares only urban to rural areas, or major subnational regions, the economic
and social landscape of cities and rural areas differs widely in both developed and
developing countries. Moreover, the boundaries between urban and rural areas are
not clear-cut. For example, Van Duijne and Nijman (2019) have found that substantial
urban growth is taking place in areas of India that are currently classied as rural
in censuses and administrative sources (see also Van Duijne, forthcoming). That is,
part of the population classied as rural in fact live in high-density towns and work
in non-farm activities. Corridors of what are currently classied as rural villages can
result in contiguous built-up areas of more than 250,000 people without any form of
urban governance (ibid.). This ambiguity challenges the use of administrative data.
Accurate analyses of spatial inequalities call for the use of alternative data sources,
including satellite imagery.
FIGURE 4.2
Trends in four selected indicators of well-being for rural and urban areas, 1990s to 2010s
Stunting
Secondary
school attendance
Electricity
Sanitation
30
20
26
45
33
69
38
27
43
60
47
81
-0.6
-0.4
1.1
1.0
0.9
0.8
Rural
Urban
Rural
Urban
Rural
Urban
26
47
52
82
1.7
2.3
Rural
Urban
Annual
percentage
change
Source: Calculations based on DHS and MICS data.
Note: The averages shown are based on data for 53 countries in the case of stunting, on 50 countries for
secondary school attendance, and on 55 countries for electricity and sanitation. Data collection ranges from
1993 to 1999 for the rst survey, and from 2010 to 2018 for the most recent survey. A child is considered stunted
if (s)he is below minus two standard deviations from the median height-for-age of the World Health Organization
Child Growth Standards.
WORLD SOCIAL REPORT 2020
112
BOX 4.1
China: bridging the rural-urban divide
Rising rural-urban inequalities in China over the last several decades have been widely
documented. From the early 1980s to the mid-2000s, the uneven distribution of economic
growth, poverty reduction and public investment to the benefit of cities and industrial
development resulted in significant increases in the absolute gap between urban and rural
incomes (Chaudhuri and Ravallion, 2006; Whyte, 2010). Education shows large disparities
as well (Zhang, Li and Xue, 2015). China’s system of household registration (the hukou
system), which severely restricts internal migration, has contributed to observed disparities
through the marginalization of rural residents and rural-to-urban migrants. New migrants
to urban areas often lack access to health care, education and housing due to stringent
registration requirements.
Inequality between urban and rural areas explains a large share of China’s income inequality
and its trends. It accounted for 44 per cent of total income inequality in 1995 and continued
to increase until 2007 (Jain-Chandra and others, 2018). Rural-urban inequalities in income
declined rapidly after 2007 and, by 2013, constituted 34 per cent of total inequality (ibid.).
Yet disparities remain large. In 2017, per capita disposable income was almost three times
higher in urban than in rural areas: 36,000 yuan versus 13,000 yuan, respectively (NBS
China, 2018).
Central and local governments in China have committed to eradicating rural poverty
and improving the distribution of income. To date, measures taken include a reform
of the personal income tax system, increases in the minimum wage, expansion of the
Dibao minimum-income guarantee programme, increased public investment in rural
infrastructure and several other pro-farmer policies. Some progress has been made in
improving rural health since the implementation of the New Rural Cooperative Medical
Scheme, which provides coverage to all rural inhabitants (Meng and Xu, 2014). To promote
financial inclusion, the Government has expanded payment systems to rural areas and has
introduced regulation for new types of rural financial service providers. As a result, rural
residents are catching up to urban dwellers in terms of account ownership and the number
of people saving at financial institutions (Jain-Chandra and others, 2018).
Announced reforms to the hukou system are also necessary to reduce the rural-urban
gap. Some urban provinces have already acted to ease hukou restrictions. In 2016, China’s
Government announced its goal of expanding urban residency permits to 100 million
migrant workers by 2020 (Sheehan, 2017). China’s Ministry of Public Security announced
that it had issued 28.9 million new urban residency permits in 2016 alone (ibid.). However,
the Government still needs to deliver a whole range of supporting policies to achieve this
goal, and it may lack the nancing to do so.
INEQUALITY IN A RAPIDLY CHANGING WORLD
113
B. An increasingly urban world
For the rst time in history, more people now live in urban than in rural areas. The
proportion of the world population living in cities has increased rapidly, as shown in
gure 4.3. Over the next three decades, global population growth is expected to take
place almost exclusively in the world’s cities and towns, in part due to migration from
rural areas. In developed countries and those of Latin America and the Caribbean, a
large proportion of the population already resides in urban areas. Africa and Asia are
still largely rural but are urbanizing faster than other regions.
In all regions, the speed of urbanization is slower now than in past decades, largely
because many countries are already highly urbanized.
76
The rate of urban population
growth is also declining, and is expected to continue falling until 2050, although it
is still very high in Africa. Nevertheless, the total number of people living in cities is
expected to grow substantially, from approximately 4.4 billion in 2020 to 6.7 billion
in 2050 (United Nations, 2018d). Africa and Asia alone are projected to account for
an increase of 2 billion people living in urban areas by 2050 (ibid.). In contrast, the
number of people living in rural areas is estimated to decline from 3.4 billion in 2015
to 3.1 billion in 2050.
Migration from rural to urban areas has historically played a key role in the rapid
growth of cities. Together with the reclassication of rural into urban communities,
migration continues to be an important component of urban growth. However, natural
population growth – the difference between births and deaths – currently makes a
larger contribution to the growth of cities than internal migration in the majority of
developing countries (United Nations, 2018d).
76
Urbanization refers to the proportion of a country’s total population living in areas classied as urban. Urban population
growth refers to the rate of change in the number of people living in areas classied as urban.
FIGURE 4.3
Levels of urbanization in 1980, 2015 and projections to 2050
1980 2015 2050
Developed
countries
Oceania
(except Australia
and New Zealand)
Latin America
and the
Caribbean
Asia
(except Japan)
AfricaWorld
39
Urban population as
percentage of total
54
68
27
41
59
70
78
87
65
80
88
25
47
66
22
23
32
Source: United Nations (2018d), World Urbanization Prospects: The 2018 Revision.
WORLD SOCIAL REPORT 2020
114
Like some other megatrends, urbanization has the potential to become a positive
transformative force for every aspect of sustainable development, including the
reduction of inequality. When properly planned and managed, urbanization can reduce
poverty and inequality through increased employment opportunities and improved
quality of life via better education and health. When poorly planned, urbanization can
lead to congestion, higher crime rates, pollution, increased levels of inequality and
social exclusion. Whether the process of urbanization is harnessed and managed, or
allowed to fuel growing divides, will largely determine the future of inequality.
1. Inequality within cities: economic, spatial and social dimensions
Inequality within cities has economic, spatial and social dimensions. Economically,
inequality is generally greater in urban than in rural areas: the Gini coecient of
income inequality is higher in urban areas in 36 out of 42 countries with data.
77
China
is an important exception to this pattern, with a Gini coecient that stood at 40 in
rural areas and 37 in urban areas in 2014.
78
When opportunities found in cities are unevenly distributed, disadvantages tend to
concentrate in specic locations, generating various forms of spatial inequality (see
box 4.2). People living in disadvantaged communities often lack access to health
care, schools, sanitation, piped water, employment opportunities, adequate housing
and more. In the metropolitan region of Puebla-Tlaxcala, Mexico, for instance, more
77
Calculations based on data for 16 countries in Africa, 9 in Asia, and 17 in Latin America from UNU-WIDER’s World Income
Inequality Database (WIID) version 4, released in December 2018. Available at: https://www.wider.unu.edu/database/
world-income-inequality-database-wiid4.
78
There is greater spatial integration among the economies of coastal provinces, which are more urbanized than inland
provinces (Knight, 2013). Sicular and others (2007) found that, in 2002, inequality across provinces contributed more to
household inequality in rural areas than in urban areas.
BOX 4.2
Brazil’s planned capital: from a utopian vision to a cautionary tale
Brasilia was planned and built from the ground up at breakneck speed between 1956 and 1961 as the new capital of Brazil.
Originally envisioned as a progressive model that would guarantee a good quality of life to all its residents, Brasilia has failed
to live up to its ambitions.
With a Gini coefficient of 67.2, Brasilia is the most unequal capital city in Latin America and the Caribbean (UN-Habitat, 2014).
On average, the income of the population’s richest decile was 87 times that of the poorest decile in 2009 (ibid.). Not only are
households divided by income, but the urban space is highly segregated. This is the result of an exclusionary city model that
separated working-class neighbourhoods in satellite towns (small metropolitan areas located close to the city) from wealthy
households in the central part of the city as well as in gated communities. The city hosts the wealthiest population of Brazil
and, at the same time, its satellite towns register Brazil’s highest homicide rates (ibid.).
INEQUALITY IN A RAPIDLY CHANGING WORLD
115
than 65 per cent of the population had not completed secondary education in some
peripheral areas, while the share was below 20 per cent in the metropolitan core in
2010 (OECD, 2013). Life expectancy can also differ signicantly by neighbourhood.
In cities of the developed world such as Baltimore and London, differences in life
expectancy across neighbourhoods are a staggering 20 years (OECD, 2016).
Additionally, people in low-income households – in both urban and rural areas – tend
to have little or no political voice or formal representation, particularly if they live in
settlements without ocial addresses. Inequalities in power, inuence and access
can help reinforce urban divisions and tilt public investment towards the interests of
the elite. Moreover, political voice can be controlled through relationships that trade
access to benets for electoral support.
Social and economic conditions also vary by city size. In general, large cities – usually
dened as those with a population of 1 million or more – are better served than smaller
cities and towns in terms of social services and infrastructure, including safe drinking
water, sanitation and electricity (World Bank, 2013b). As a result, poverty tends to be
lower in large versus small cities. Cities of over 1 million host 22 per cent of Brazil’s and
27 per cent Mexico’s population, for instance, but they are home to 9 per cent and 16 per
cent, respectively, of people living in poverty (Ferré, Ferreira and Lanjouw, 2012).
Table 4.1 shows the ratio of the share of the national population living in poverty in
cities of different sizes to the share of the total population in such cities in a selection
of developing countries. A ratio below (or above) 1 indicates that the prevalence of
poverty in cities of a given size is below (or above) the national average. The prevalence
MEDIUM-SIZED AND,
IN PARTICULAR,
SMALL CITIES
ARE HOME TO A
DISPROPORTIONATE
SHARE OF THE
URBAN POOR
TABLE 4.1
Poverty share over proportion of total population by city size
Country Urban XL cities L cities M cities S cities XS cities
Albania 0.74 – – 0.73 0.69 0.79
Brazil 0.87 0.41 0.86 0.71 1.00 1.39
Kazakhstan 0.75 0.13 – 0.72 1.00 1.00
Kenya 0.89 0.86 1.00 1.00 7.00 1.00
Mexico 0.65 0.59 0.46 0.64 0.75 1.17
Morocco 0.67 0.25 0.78 0.74 1.00 1.00
Sri Lanka 0.42 – 0.33 0.33 0.50 0.50
Thailand 0.55 0.08 – 0.33 0.50 0.93
Source: Calculations based on Ferré, Ferreira and Lanjouw (2012).
Notes:
1. Ferré, Ferreira and Lanjouw (2012) dene city sizes as follows: XL for cities of more than 1 million inhabitants, L for cities between 500,000 and 1 million,
M for cities between 100,000 and 500,000, S for cities between 50,000 and 100,000, and XS for cities of fewer than 50,000 people.
2. The eight countries shown were selected on the basis of their interest and the availability of data to construct detailed poverty maps (ibid.).
WORLD SOCIAL REPORT 2020
116
of poverty is systematically lower in large than in medium-sized cities. It is also lower
in medium-sized cities than in small towns. Hence, medium and, in particular, small
cities are home to a disproportionate share of the urban poor, as the example of Viet
Nam further illustrates (see box 4.3).
Urban planning efforts have focused largely on the problems of large metropolitan
areas, particularly in developing countries. As a result, these cities may be receiving a
disproportionate share of public resources – in what has been called “metropolitan bias”
(Ferré, Ferreira and Lanjouw, 2012). Yet smaller cities account for 58 per cent of the
world’s urban population and are growing faster than large cities (United Nations, 2018e).
BOX 4.3
Viet Nam: small cities home to large share of urban poverty
79
Like many developing countries, Viet Nam is urbanizing rapidly. The proportion of the country’s population living
in cities is projected to increase from about 30 per cent in 2009 to 45 per cent in 2020. While poverty is still mostly
a rural phenomenon in Viet Nam, urban welfare varies considerably between large and small cities. Only 1.4 per cent of
residents in large cities (1 million inhabitants or more) were below the poverty line in 2010, compared to 5.8 per cent of the
population in small cities (between 150,000 and 300,000 inhabitants) and 12.2 per cent in small towns (between 4,000 and
150,000 inhabitants) (Lanjouw and Marra, 2018).
80
Hanoi and Ho Chi Minh City are home to 32 per cent of the urban population but only 11 per cent of the urban poor.
At the same time, 40 per cent of the population, but 70 per cent of urban dwellers living in poverty, reside in small cities and
towns. Not only is poverty more prevalent in small cities, it is also deeper. Access to education and basic services, including
improved sanitation and piped water supplies, is also much higher in large cities than in small ones.
However, significant variations in living standards are also found in small towns. In general, poverty is lower in towns
close to other, larger, cities. Remote and isolated towns are generally poorer. Yet there is broad variation in poverty
levels even among towns in similar geographic locations, suggesting that other factors, including local policies,
play a role.
While households in larger cities enjoy higher living standards, on average, subjective welfare (as measured by the proportion
of respondents to a 2010 household survey who rated their food consumption as sufficient) is higher in small towns and cities
than in larger ones. Lanjouw and Marra (2018) argue that higher inequality in Viet Nam’s large cities results in less subjective
well-being, as people feel they are relatively less well-off if some of their neighbours are doing better. It is also possible that
negative externalities, such as higher congestion and pollution in large cities, influence perceived consumption well-being.
While additional research is needed to explain these results, the fact that some dimensions of perceived well-being do not
adhere to the city-size gradient observed for poverty or access to services should be of interest to policymakers.
79
Based on Lanjouw and Marra, 2018.
80
Based on Viet Nam’s General Statistics Oce/World Bank expenditure poverty line (equivalent to $1.21 per day in 2009).
INEQUALITY IN A RAPIDLY CHANGING WORLD
117
Despite higher standards of living, larger cities are more unequal than smaller cities.
In Latin America and the Caribbean, for instance, the average Gini coecient was
51.8 in cities of more than 5 million inhabitants, 45.6 for cities of between 500,000
and 1 million, and 43.4 for cities with fewer than 100,000 inhabitants in 2009-2010
(UN-Habitat, 2014).
81
The relationship between city size and economic inequality has been documented
in other parts of the world as well. Chen, Liu and Lu (2018) nd that overall urban
inequality is signicantly and positively correlated with population size in China.
Baum-Snow and Pavan (2013) establish a strong positive relationship between city
size and wage inequality in the United States. The OECD (2018d) also nds that the
larger the population of a city, the higher its degree of income inequality.
Castells-Quintana (2017) nds that inequality within countries rst declines and then
increases with the average size of cities, suggesting a U-shaped relationship between
the two. The author uses panel data for countries with data between 1960 and 2010.
The results imply that increases in a country’s average city size are associated with
rising inequality after a certain point. Although general estimates by the author
suggest that an average city size of 2 million to 3 million inhabitants would minimize
the level of inequality, countries differ greatly in the characteristics of urban areas
(ibid.). “Optimal” city sizes may therefore vary widely across countries.
Inequality and poverty levels also tend to differ considerably across cities, even among
large urban centres within the same country. In China, for instance, the Gini index is
estimated at 50 in Shenzhen but 22 in Beijing, both cities of about 20 million people
(UN-Habitat 2008). Cities have different cultural and political histories, geography
and local policies and follow different development paths. Each city carves out its
own unique trajectory. However, the evidence suggests that as the urban population
grows, inequality is likely to increase in the absence of policies to address it.
The dynamics of clustering and isolation that operate in urban areas are created to
a large extent by the way in which cities are governed (OECD, 2018d). Spending on
education and social programmes is biased towards already auent areas – widening
rather than reducing intra-urban inequalities. Gated communities also contribute
to spatial segregation and the widening of urban divides (see box 4.4). Low social
expenditure and lack of infrastructure limit access to jobs, economic opportunities and
social networks (Kilroy, 2007). The most visible example of the spatial concentration
of urban poverty and disadvantage are slums.
81
The study draws upon a large sample covering 241 cities in 18 countries with ve to nine time series between 1990 and
2010 for each city. The Gini coecients reported above represent a simple average across the cities for the most recent
available year: 2010 (60 per cent), 2009 (33 per cent), 2007 (4 per cent) and 2005 (3 per cent). The database comprises
very small cities of less than 100,000 inhabitants (31 per cent), small cities of between 100,000 and half a million inhabitants
(39 per cent), intermediate cities of between half a million and a million inhabitants (17 per cent), large cities of between
1 million and 5 million inhabitants (11 per cent), and very large cities of more than 5 million inhabitants (3 per cent).
DESPITE HIGHER
STANDARDS OF
LIVING, LARGER
CITIES ARE MORE
UNEQUAL THAN
SMALLER CITIES
WORLD SOCIAL REPORT 2020
118
2. Slums: home to more than 1 billion people
Slums – also known as bidonvilles, taudis, barrios marginales, tugurios, favelas
and many other names – are urban areas characterized by substandard housing,
overcrowding, unsanitary conditions and lack of services. Specically, people living in
slums suffer from one or more of the following ve deprivations: (1) lack of access to
improved water sources, (2) lack of access to improved sanitation facilities, (3) lack
of sucient living area, (4) lack of housing durability and (5) lack of tenure security.
In 2016, one in four urban residents (over 1 billion people) lived in slums (United
Nations, 2019a). For nearly 20 years, the United Nations Human Settlements
Programme (UN-Habitat) has documented the multiple risks that people living in
these informal settlements face. Slum dwellers suffer from chronic hunger and die
younger than other urban dwellers in the same city (UN-Habitat, 2006). Moreover, the
unfavourable health and safety conditions found in slums affect women, children and
youth disproportionately.
BOX 4.4
Gated communities, symbols of exclusion
Gated communities are separated from neighbouring areas by fences, walls or other constructed or natural barriers. Entry
is selective through some form of access-control. Gated communities are a growing phenomenon in countries as diverse
as Argentina, China, Indonesia, Nigeria, South Africa and the United States, and a troubling manifestation of what urban
inequality can sow.
An often-posited explanation for the rise in gated communities is a fear of crime. However, this only applies in countries with
very high crime rates (Cséfalvay and Webster, 2012). Research on the relationship between gated communities and crime
rates in the United States fails to find a clear relationship between the two (Branic and Kubrin, 2018). Another frequently
cited reason for the rise of such communities is the desire of the rich to escape from overcrowded and overregulated cities.
Yet gated communities are not exclusively inhabited by the rich, and many middle-class gated communities can be found
around the world. Factors driving the growth of gated communities differ from country to country, and no single, universal
explanation for the rise of such communities has been found.
In effect, these exclusive developments create a barrier to interaction among people of different socioeconomic, ethnic
or religious groups. They inhibit the formation of the very social networks that promote social mobility and economic
development. Furthermore, gated communities frequently interfere with efficient urban management by limiting access to
high-quality schools, health centres, libraries, parks and other, supposedly public, amenities (UN-Habitat, 2010).
In doing so, gated communities contribute to the polarization and segmentation of the urban space, with increasing levels of
separation among different income and social groups. In Latin America, some of these gated communities have essentially
become cities unto themselves, providing their residents all kinds of services – including schools, hospitals and restaurants –
and connecting them with private highways. In Santiago de Chile, for instance, private highways connect exclusive parts of
the city, which are only accessible to those living in these neighbourhoods (UN-Habitat, 2016a).
INEQUALITY IN A RAPIDLY CHANGING WORLD
119
Slums not only proliferate in large cities, but can be found in smaller cities as well.
For example, the proportion of people living in slums in the capital cities of Angola
(Luanda), Burkina Faso (Ouagadougou) and Ethiopia (Addis Ababa) was 50, 32 and
42 per cent, respectively, in 2015. However, the proportion of people living in slum-like
conditions in non-capital, smaller cities of these countries was as high as 70, 50 and
72 per cent, respectively (UN-Habitat, 2018). In some cases, slums can be found in
every part of the city. In other urban centres, they are highly visible and concentrated
in specic locations. In still other cities, they are located mainly at the margins.
As shown in gure 4.4, the world has made progress in reducing the proportion of
people living in slums in the developing world, from 46 per cent in 1990 to 30 per cent
in 2014. However, the absolute number of slum dwellers increased from 690 million
to 880 million over the same period. Western Asia is the only region that saw a small
increase in the proportion of slum dwellers, rising from 22.5 per cent in 1990 to 24.9
per cent in 2014; over that period, the number of people living in slums more than
tripled, from 12 million to 38 million.
In Northern Africa, in contrast, the number of slum residents steadily declined from 22
million in 1990 to 11 million in 2014. The level of deprivation is low in this subregion, with
most slum households suffering about one of the ve deprivations that characterize
slum conditions. Among the reasons for this success story are effective and sustained
government policies initiated in the 1990s for slum upgrading and prevention, which
contributed to reducing the incidence of urban slums by more than one third in Egypt
and by more than half in Morocco.
Sub-Saharan Africa has the highest incidence of slums in the world, with 56 per cent of
the region’s urban population living in informal settlements in 2014. Slum upgrading and
poverty reduction efforts have contributed to reducing the proportion of households
living in slums by 14 percentage points since 1990. Still, due to a rapidly increasing
urban population, almost 110 million people have joined the ranks of slum dwellers over
the same period. In some sub-Saharan African countries, more than three in four urban
residents live in informal, low-income settlements. Not only is the incidence of slums
high in these countries, but the level of deprivation in some cities is severe, with more
than one third of the slum population living with two or more deprivations.
THE WORLD HAS
MADE PROGRESS
IN REDUCING THE
PROPORTION OF
PEOPLE LIVING IN
SLUMS BUT THE
ABSOLUTE NUMBER
OF SLUM DWELLERS
HAS CONTINUED
TO INCREASE
In 2016, one in every four city residents,
or over one billion people, lived in slums
WORLD SOCIAL REPORT 2020
120
In absolute numbers, Asia has the largest share of the world’s slum population. In
2014, the region was home to almost two thirds of all slum dwellers, or 560 million
people. Slums are most prevalent in Southern Asia, with India accounting for half of all
slum dwellers in the region and Bangladesh having the highest prevalence, at 55 per
cent. South-Eastern Asia has the second highest rate of slum prevalence in the region,
estimated at 28.4 per cent in 2014. Around 75 per cent of Eastern Asia’s slum population
live in China, where the prevalence of slums was 25 per cent in 2014. Western Asia has
not been successful in preventing slum formation, mostly due to ongoing conicts in
Afghanistan and Yemen. In contrast, Turkey saw the proportion of slums decline from
18 per cent in 2000 to 12 per cent in 2014.
Latin America and the Caribbean saw a signicant decrease in the proportion of slum
dwellers – from 34 per cent in 1990 to 21 per cent in 2014, but levels and trends vary
substantially across countries. Whereas 75 per cent of city residents lived in slums
in Haiti in 2014, the proportion was 5 per cent in Costa Rica. The most progress was
recorded in Argentina, which managed to halve its share of slum dwellers from 2000
to 2014. The level of deprivation in slums is generally low in this region, with most
households suffering one deprivation. Local neighbourhood improvement programmes
have promoted access to running water, sewerage, schools and primary health services.
Despite these improvements, most slums are still underserved and face higher levels of
crime and corruption than better-off neighbourhoods.
While slums are the most obvious symptom of a divided city, urban poverty is found
outside of slums as well. In India, for instance, the proportion of the population below
the ocial poverty line was 44 per cent in areas ocially classied as slums, close to
FIGURE 4.4
Proportion of urban population living in slums in developing countries, 1990-2014
Northern Africa
Sub-Saharan Africa
Latin America
and the Caribbean
Eastern Asia
Southern Asia
South-Eastern Asia
Western Asia
Percentage
0
20
40
60
80
201420102005200019951990
0
20
40
60
80
0
20
40
60
80
0
20
40
60
80
0
20
40
60
80
0
20
40
60
80
0
20
40
60
80
Source: UN-Habitat (2016b).
INEQUALITY IN A RAPIDLY CHANGING WORLD
121
52 per cent in non-classied slums and 23 per cent in other urban neighbourhoods
in 2005 (Chandrasekhar and Montgomery, 2010).
82
In addition, over one quarter of
households in slum areas have levels of expenditure that are above the ocial poverty
line, suggesting either that some households living in slums are not poor or that the
ocial poverty line is set too low (ibid.).
The challenges that slum dwellers face arise from inadequate infrastructure, poor
housing, hazardous locations, social and economic exclusion, violence and insecurity.
They are generally disempowered on account of their location and often suffer
from discrimination. Like rural populations, slum dwellers are also caught in “spatial
poverty traps” due to their social, economic and political exclusion, which results in an
unacceptable waste of human potential.
C. Policy implications: shared prosperity or rising inequality?
People in urban areas are generally better off than rural residents. Cities offer a higher
level of public services and more job opportunities. As a result, most of the world's
poorest people are found in rural areas. While rural-urban disparities have lessened over
time, when measured by many indicators, the rate of progress is too slow to ensure that
rural areas will catch up to urban areas by 2030. Thus, leaving no one behind calls for
continued recognition of the importance of rural development.
That said, urbanization is a global reality. When well-managed, it can bring new
opportunities and growing prosperity. However, it can also result in deepening economic,
social and spatial inequalities. Lack of opportunity tends to concentrate in specic parts
of the city, preventing residents of entire neighbourhoods from accessing adequate
housing, health care, schools and other services. In their most extreme form, spatial
inequalities in cities lead to the expansion of slums. While the share of people living in
slum-like conditions has declined, the absolute number of slum dwellers is growing.
82
Non-notied slums are slums that are not recognized by the Government. Lack of legal recognition may create
even more barriers for inhabitants to legal rights and basic services.
SLUM DWELLERS
ARE VICTIMS OF
“SPATIAL POVERTY
TRAPS” DUE TO
THEIR SOCIAL,
ECONOMIC
AND POLITICAL
EXCLUSION
As urbanization continues, inequality
is likely to increase in the absence
of policies to address it
WORLD SOCIAL REPORT 2020
122
Inequalities in urban areas are largely determined by the way in which cities are – or are
not – designed, planned and managed. Many countries face uncontrolled urbanization
processes, especially in developing countries where cities are growing rapidly.
Uncontrolled growth results in the inadequate provision of public services and a failure
to guarantee a minimum quality of life for all. Given the rapid pace of urbanization in the
developing world, Governments in these countries must address urban inequalities now
in order to leverage the potential benets of this powerful global trend.
Location, culture, institutional capacity as well as social and economic structures create
conditions specic to every city. However, a number of common elements are found in
policy approaches that can contribute to reducing inequalities in line with both the 2030
Agenda and the New Urban Agenda.
83
1. Cities that work for everyone
Policies that protect the rights of all urban residents are essential to reducing the
inequalities increasingly found in cities. Securing housing and land rights, in particular,
is a must. Governments have often exacerbated housing crises, instead of resolving
them, by cutting back funds for social housing and failing to intervene to control property
and land speculation. Urban renewal efforts have sometimes resulted in the demolition
of homes and the relocation of residents to areas that are far removed from livelihood
opportunities. Ensuring accessible and affordable housing requires security of tenure
for people living in poverty, including people in slums and unauthorized settlements.
It also calls for improving their access to low-cost housing alternatives as well as
subsidized housing nance.
Inecient historical plot design and land speculation have, in many cases, resulted in
patchy urban development. This, in turn, has led to land shortages and insecure land
and tenure rights, which tend to disproportionately affect the poorest people. Hence,
to promote greater equality, it is important that all people are on a level playing eld
regarding land and property rights as well as tenure security. Particular attention needs
to be paid to the security of land tenure for women, since it is one key to their economic
empowerment (UN-Habitat, 2016a).
Another central policy lever to reduce inequality is expanding access to basic services.
Universal access to safe and affordable drinking water and improved sanitation not only
promotes equality but ensures better hygiene and health throughout the city. Improving
spatial connectivity is also needed to reduce inequality and enable meaningful
participation in social and economic life in all parts of the city. Establishing accessible,
affordable, safe and sustainable transport links between residential, commercial and
industrial areas can encourage agglomeration, open up new employment opportunities,
facilitate access to public goods and reduce imbalances between deprived areas and
URBAN
INEQUALITIES
ARE LARGELY
DETERMINED
BY THE WAY IN
WHICH CITIES
ARE – OR ARE
NOT – DESIGNED,
PLANNED AND
MANAGED
83
The New Urban Agenda was adopted at the United Nations Conference on Housing and Sustainable Development
(Habitat III) in Quito, Ecuador, on 20 October 2016 and endorsed by the United Nations General Assembly
on 23 December 2016.
INEQUALITY IN A RAPIDLY CHANGING WORLD
123
better-off neighbourhoods. The need for greater connectivity is particularly high in
sub-Saharan Africa, where convenient access to public transport was only available to
18 per cent of urban residents in 2018 (United Nations, 2019a).
Urban planning practices supported by appropriate regulations can ease the physical
segregation and marginalization that contribute to inequalities in cities. Reducing
segregation may involve creating spaces where different groups can coexist and
providing housing solutions for different socioeconomic groups – including affordable
housing for low-income households – within neighbourhoods. Public spaces can
strengthen the social fabric and support civil society as well as stimulate local economic
development. However, evidence also suggests that social mixing policies alone will not
be enough to break the cycle of segregation (OECD, 2018d).
Cities also need to adopt more inclusive and equitable growth models. Unplanned
expansions into the distant periphery, known as urban sprawl, can encroach on valuable
rural and agricultural land. They can also result in fragmentation, disconnection and
diminished returns to economies of agglomeration due to decreasing densities.
Planned city extensions are a way of managing urban growth in an orderly manner by
focusing development efforts, increasing density and promoting spatial connectivity.
Additionally, cities should aim to overcome barriers to inclusion posed by disconnected
open spaces by lling the gaps in a coordinated manner. This would increase density,
facilitate an increase in the eciency of public service delivery and promote the vitality
of communities. A planned city extension in Ghana to the Accra metropolitan area is
already under way, and cities in Belize, the Comoros, Kenya, the Philippines and Somalia
are developing similar strategies (United Nations, 2018f).
Facilitating access to education and decent employment for urban residents is also
key for reducing urban inequalities. In addition to formal, high-quality education, some
cities have leveraged density and the concentration of businesses to create training
and skills development programmes. These programmes are adjusted to local market
and labour needs as well as to the city’s comparative advantages, such as proximity to
export opportunities. Appropriate and well-targeted actions, including demand-based
vocational training programmes, offer real prospects for employment. Other cities
have implemented conditional cash transfers to encourage school attendance, created
lifelong learning facilities as well as developed programmes to support microenterprises
and entrepreneurs.
Cities that have improved the quality of life in slums and reduced their reach have gone
beyond mere beautication. They have genuinely considered the needs of residents,
including by securing appropriate long-term nancial investment, improving security
of tenure and encouraging local economic activities (UN-Habitat, 2016b). Participatory
city-wide action plans have consistently been more effective than piecemeal
improvements.
WORLD SOCIAL REPORT 2020
124
Improving security of tenure entails stopping forced eviction policies, nding solutions
that work for both tenant and landlord and, when relocation is necessary, creating
relocation and compensation plans jointly with local communities. Encouraging local
economic development that helps slum dwellers lift themselves out of poverty means
actively supporting the slum economy through investment, encouragement of local
initiatives, recognition of the role of women in the household economy and encouraging
cooperation among slum dwellers.
Finally, solutions must be found for affordable and adequate housing, which typically
fails to keep pace with urban growth. The problem is exacerbated by the fact that the
formal private housing sector tends to prioritize middle- and upper-income housing.
With cities in the developing world growing at a rapid pace, providing adequate housing
to meet the needs of expanding low-income populations is an all too common concern.
Beyond the proliferation of slums, the lack of adequate housing results in an increase
in homelessness. City governments have an important role to play in addressing
this ill. To address homelessness effectively, authorities must recognize its many
causes. Accordingly, while housing and eviction policies are important prevention
mechanisms, effective strategies require a multi-pronged approach that should also
address issues such as mental health and substance-abuse. Finland, for example, has
successfully decreased homelessness by providing modern housing units and tailored
support services to those in need through a national programme to reduce long-term
homelessness.
2. Coordinating, nancing and monitoring urban policies
It is increasingly recognized that local authorities are pivotal to the realization of the
Sustainable Development Goals and the New Urban Agenda. In cities such as Durban,
Jakarta, Madrid and Quito, urban planning approaches are being incorporated into local
development plans and connected to the 2030 Agenda and the New Urban Agenda
(United Nations, 2018f).
Yet reducing urban inequality also requires coordination among national and local
authorities. Addressing intersecting inequalities in income, decent work, access to
public goods and services, housing and land calls for coherent and concerted policy
action in many sectors. Coordination across different levels of government and
different agencies is critical to ensure that initiatives to address inequality are effective.
However, setting up a coordinated urban governance structure is no easy task without
appropriate institutional frameworks and the participation of key stakeholders. This can
be particularly challenging in the context of least developed countries.
Improved coordination and decentralization require effective nancing of subnational
authorities. Local nance typically comes from four sources: (1) (un)conditional
intergovernmental transfers, (2) own revenue generation through local taxes and
INEQUALITY IN A RAPIDLY CHANGING WORLD
125
service charges, (3) borrowing from capital markets and (4) public-private or public-civic
partnerships. All four sources require careful institutional design matched with nancial
capacity and political openness. Cities with well-performing local authorities and sound
tax bases can usually manage with less nancial support from central Governments.
Land-value capture, for instance, is increasingly being used to generate local revenue in
cities in Brazil, China, Colombia, Egypt, India and several OECD countries to recover and
reinvest land-value increases that result from public investment (United Nations, 2018f).
However, implementation of effective local scal mechanisms has lagged in many least
developed countries, which will face the steepest challenges to urban development over
the coming decades.
In terms of borrowing from capital markets, development banks are nancing
initiatives to tackle increasing levels of inequality and exclusion found in growing urban
settlements. Additionally, they are assisting city, subnational and national governments
in attracting new investments for sustainable growth. The World Bank, for example, has
helped 240 city governments tap into capital markets without the need for a sovereign
guarantee (United Nations, 2018f).
Governments also need to improve their capacity to collect and utilize data on urban
inequality. Many cities, particularly in the developing world, are stymied in their efforts
to analyse and formulate urban policies to reduce inequalities due to lack of relevant
information. A concerted effort – involving human, nancial and technological
resources – is needed to ll this gap, and will require the cooperation of national, state/
provincial and local governments and national statistical oces. Local actors, including
civil society, non-governmental organizations, service providers and public institutions
can be empowered to participate in data collection efforts.
Whenever possible, collected data should be disaggregated by income, age, sex, ethnicity,
race, migration status, disability, geographic location and any other characteristics
relevant to national, subnational and local contexts. Disaggregating information at city
and sub-city levels would integrate a spatial component into inequality analysis and
therefore allow Governments to examine access to natural resources, physical and
productive assets and local opportunities across groups. The Mexican Government,
for example, has implemented a national analysis of cities with a strong emphasis on
inclusion through the UN-Habitat City Prosperity Initiative. Implemented in more than
300 Mexican cities, the programme has helped the Ministry of Agrarian, Territorial and
Urban Development to identify key strategic interventions that Infonavit (the largest
mortgage lender in Latin America) is funding to reduce spatial inequalities and boost
shared prosperity in cities. This has enabled the Government to produce more than 100
city action plans (United Nations, 2018f).
REDUCING
INEQUALITY IN
CITIES REQUIRES
COORDINATION
AMONG NATIONAL
AND LOCAL
AUTHORITIES
WORLD SOCIAL REPORT 2020
126
QUOTE
CHAPTER 5
INTERNATIONAL MIGRATION:
A FORCE FOR EQUALITY,
UNDER THE RIGHT
CONDITIONS
127
INEQUALITY IN A RAPIDLY CHANGING WORLD
KEY MESSAGES
• Economic and social inequalities, as well as insecurity, inuence the movement of people.
Fundamentally, however, international migration is part of the development process.
• Whether migration helps to reduce inequality depends on the characteristics of sending
and receiving countries and the conditions under which migration takes place.
• International migration stands a better chance of reducing inequality within and
among countries and contributing to sustainable development when it takes places
in a regular, orderly and safe fashion, when migrants can use their skills productively,
and when remittances can be sent home at a low cost.
• With the right policies in place, lower-skilled workers and their families stand to gain
the most from migration.
• Against a backdrop of growing interconnectedness, policy attempts at restricting
or even trying to deter international migration are likely to be futile. Migration must
be approached as an important dimension of the development process and
governed accordingly.
CHAPTER 5
INTERNATIONAL
MIGRATION:
A FORCE FOR
EQUALITY, UNDER
THE RIGHT
CONDITIONS
WORLD SOCIAL REPORT 2020
128
INTRODUCTION
International migration is at an all-time high. In 2019, according to the United Nations,
the number of international migrants worldwide reached an estimated 272 million –
up from 174 million in 2000. Over half (about 56 per cent) of these migrants live in
developed countries, where they make up about 12 per cent of the total population.
Another 44 per cent reside in developing countries, where they account for about 2 per
cent of the population. Almost three quarters of all migrants (73 per cent) come from
developing countries (United Nations, 2019c).
International migration is a powerful expression of people’s desire to improve their
circumstances in a highly unequal world, whether in terms of wages, opportunities,
safety or lifestyles. Millions of people move each year between countries and even
continents for a variety of reasons, including to study, seek better job opportunities,
marry, reunite with family members, retire or ee conict or natural disasters. Some are
forced to move to escape violence or natural disasters, but most choose to migrate to
reduce what they see as gaps between their opportunities and those of people in other,
usually wealthier, places. In one way or another, the desire for a better life is behind
almost every migrant’s unique story.
For the most part, this desire is fullled. Migrating involves risks and uncertainty but,
in the long run, many migrants benet from moving. They generally end up better off
than people in their countries of origin in terms of employment opportunities, income,
safety or overall well-being. But the opportunities generated by migration do not
accrue only to those who move. The lives of millions of people and whole societies
have been transformed, mostly for the better, through international migration.
Yet the costs and benets of migration are not shared evenly by various population
groups or by different countries. The 2030 Agenda highlights the role that migration
can play in reducing inequality both within and among countries, as long as it is
properly managed.
84
In order to contribute to a reduction in inequality, people who
are disadvantaged must benet more from the process than those who are better
off, whether in terms of income, access to opportunities or political rights. Similarly,
migration must bring net gains for low-income countries.
This chapter provides a review of the evidence on the relationship between international
migration and inequality, focusing mainly on voluntary migration. The chapter shows
that economic inequalities are just one of the many drivers of this megatrend.
Differences in social, political and institutional frameworks matter as well, even for
those who migrate voluntarily. Section 5.A assesses both the effect of inequality
between countries on migration and the conditions under which migration can help
reduce inequality. Section 5.B examines the impact of migration on inequality within
countries. Section 5.C provides examples of policies that can enhance the potential
of international migration to be an equalizing force.
INTERNATIONAL
MIGRATION IS
A POWERFUL
EXPRESSION OF
PEOPLE’S DESIRE
TO IMPROVE THEIR
CIRCUMSTANCES
IN A HIGHLY
UNEQUAL WORLD
84
SDG Target 10.7 is to facilitate orderly, safe, regular and responsible migration and mobility of people, including through the
implementation of planned and well-managed migration policies.
INEQUALITY IN A RAPIDLY CHANGING WORLD
129
A. International migration and inequality among countries
1. Migration as part of the development process
Whether to migrate is a decision taken by individuals and households. Their migration
choices are inuenced by the economic, social and political context at home and
in other countries. However, such decisions also depend on specic circumstances,
preferences and networks of potential migrants and are often based on imperfect
information.
Early attempts at explaining migration ows focused on economic inequality between
countries or regions as their main driver.
85
Income gaps are indeed considerable
between countries of origin and destination along major migration corridors. Average
per capita income in Central America was about $8,000 in 2018, for example, less
than 15 per cent that of the United States, which is close to $63,000.
86
Turkey’s income
per capita, at just over $10,000, is about one fth that of Germany’s. Similar gaps are
found between Algeria or Morocco and France; Ukraine and the Russian Federation;
Mozambique or Zimbabwe and South Africa; Bangladesh or India and Saudi Arabia;
Indonesia and Malaysia; and between other pairs of major origin and destination
countries. Wage disparities, in particular, are strongly correlated with migration ows.
A recent study suggests that, on average, a migrant is 10 per cent more likely to
choose a specic country of destination if the mean annual wage is $2,000 higher in
that country than in other possible destinations (World Bank, 2018c).
Considering that migration choices respond to a variety of incentives and constraints,
economic inequality alone is insucient to explain the movement of people across
borders. Income inequality among countries has declined since the 1980s, yet the
number of migrants has continued to grow. If migration only responded to income
inequality, it would also be dicult to explain why migrants do not systematically
choose the richest countries, why migration levels differ among countries at similar
levels of income and growth, or why some migrants return to their countries of origin
even when income differentials between origin and destination remain wide.
Models that simply account for economic disparities fail to capture broader differences
in social, political and institutional frameworks. Conict and violence continue to
force people out of their countries – as do, increasingly, natural disasters. But even in
the absence of conict, the functioning of institutions is a key driver of international
migration. An emerging empirical literature nds that factors such as corruption
and poor governance or, conversely, the rule of law and respect for civil and political
rights at points of origin and destination, may have a stronger impact on the desire to
migrate than income differentials (see, for instance, Ashby, 2010; Baudassé, Bazilier
and Issifou, 2018; Naghsh Nejad and Young, 2016). Social protection and labour
market institutions matter as well. Comprehensive, well-functioning social protection
85
See Lewis (1954) for a classic presentation.
86
GNI per capita in current US$ using the World Bank Atlas method, available at: https://databank.worldbank.org/data/
source/world-development-indicators.
ECONOMIC
INEQUALITY IS
INSUFFICIENT
TO EXPLAIN
THE MOVEMENT
OF PEOPLE
ACROSS BORDERS
WORLD SOCIAL REPORT 2020
130
systems contribute to migrants’ desire to stay in their new homes – especially in a
context where social protection benets and rights are not always portable across
countries (United Nations, 2018a).
The relationship between institutions and migration is multifaceted: limited civil and
political rights in countries of origin can increase the costs of migration, especially
if the right to emigrate is formally restricted (Vogler and Rotte, 2000). Similarly,
high levels of corruption may result in liquidity and credit constraints and therefore
prevent all but the wealthy from migrating. Discrimination can also act as a barrier
to the emigration of women and members of ethnic minorities. Under apartheid,
for instance, black South Africans were formally restricted from migrating, even
internally.
87
Naghsh Nejad and Young (2014) highlight the inuence of cultural norms
and legal restrictions (such as diculties obtaining a passport) to explain lower levels
of emigration among women in countries where their rights are most restricted.
Demographic differences between countries have also been associated with migration.
Rapid population growth can put pressure on social services and infrastructure and drive
unemployment up. Even where fertility is declining, large cohorts of youth entering the
labour force may compel some of them to search for jobs in other countries. Population
ageing, together with the growing participation of women in the labour force, may create
a demand for care jobs that is unfullled by the native workforce and therefore provide
opportunities for migrants, especially those with less formal education or skills. Thus,
any effect of demographic trends on migration is mainly indirect – mediated by labour
market trends and access to services. It is ambiguous as well: the propensity to migrate
is not higher in those countries with the highest population growth or greatest density
(De Haas, 2010).
Attempts at explaining migration from poorer to richer countries must also consider
the dynamics of development. Processes of industrialization and urbanization that are
associated with economic growth have traditionally involved massive displacements
of people from rural areas. While many rural residents move internally, to cities, some
migrate to foreign countries at a time when their own countries are growing rapidly. As
countries develop, levels of education rise and household incomes grow, more people
are able to cover the costs of migration in what is known as the “migration transition”
(Zelinski, 1971).
88
Improvements in education bring better access to information and
higher aspirations. They strengthen the ability to migrate and increase the desire to do
so, especially when local economies do not offer enough decent jobs.
87
Pass Laws, a form of internal passport, severely restricted movement among blacks in South Africa – making it dicult for
them to migrate internationally as well. Pass Laws were abolished in 1986.
88
While the original “migration transition” theory primarily linked migration trends to other demographic trends, the concept
has been used broadly to refer to a patterned relationship between migration trends and economic and social change.
De Haas (2010) questions the notion that the migration transition is a one-time event linked to traditional processes of
development, noting that stagnation in one country relative to progress in other countries (that is, increasing economic
or social inequalities) can create repeated cycles of emigration. Some scholars refer to “migration humps” rather than
to a single migration transition (Martin and Taylor, 1996; Olesen, 2002).
PROCESSES OF
INDUSTRIALIZATION,
URBANIZATION AND
RAPID ECONOMIC
GROWTH HAVE
TRADITIONALLY
INVOLVED MASSIVE
MOVEMENTS OF
PEOPLE FROM RURAL
AREAS TO CITIES
AND ABROAD
INEQUALITY IN A RAPIDLY CHANGING WORLD
131
As a result, middle-income countries send more migrants abroad than low-income
countries. Figure 5.1 shows migration abroad (the “emigration ratio”) by each country’s
income. Despite broad variation, the emigration ratio (the ratio of migrants from a
particular country to the total population of that country) of middle-income countries is
more than twice as large, on average, than that of low-income countries. The number of
migrants abroad increases with national income per capita. It only declines with income
among countries with relatively higher incomes per capita (about $8,000 or higher).
Similar relationships are found using multidimensional indicators of development such
as the Human Development Index (see annex gure A.5.1).
89
While gure 5.1 shows emigration by country at one point in time, the pattern is observed
across countries over time as well. Clemens and Postel (2018) show that most of the
countries that have graduated from low- to middle-income status since 1960 have seen
emigration rise. In their seminal work on the topic, Hatton and Williamson (1998) also
described how, historically, European migration to North America usually increased as
wages in origin and destination countries converged.
89
The Human Development Index combines indicators of health, education and income (see http://hdr.undp.org/en/content/
human-development-index-hdi).
FIGURE 5.1
Migrants abroad by national income per capita, 2019
Middle incomeLow income High income
0.0
0.1
0.2
0.3
0.4
5 6 7 8 9 1110 12
Emigrant ratio
GNI per capita (natural logarithm)
Sources: Based on Clemens and Postel (2018) and De Haas (2010), with calculations based on the International
Migrant Stock: The 2019 Revision, available from www.un.org/en/development/desa/population/migration/data/
estimates2/estimates19.asp; The 2019 Revision of World Population Prospects, available from https://population.
un.org/wpp/; and World Development Indicators database of the World Bank, available from https://databank.
worldbank.org/data/source/world-development-indicators. All accessed on 1 October 2019.
Notes:
1. The emigration ratio is obtained by dividing the number of migrants from a particular country by the total
population of that country.
2. GNI per capita in current US$ using the World Bank Atlas method. The World Bank denes low-income countries
as those with an income per capita of $1,025 or less in 2019 (6.93 or lower on a natural logarithm scale);
middle-income countries are those with an income per capita between $1,026 and $12,375 (6.94 to 9.42 on a
natural logarithm scale), and high-income countries as those with an income of $12,376 or higher.
WORLD SOCIAL REPORT 2020
132
In sum, most evidence indicates that the relationship between development and migration
is not linear: greater economic and social inequalities between countries do not necessarily
lead to more migration. In general, emigration takes off once countries have started to
grow economically and develop. Indeed, authors such as Clemens (2017) propose to
approach the analysis of migration as a dimension of the development process.
The fact that migration and development go hand in hand does not imply that the migration
process cannot be managed. It can be managed, without restricting or trying to deter
human mobility, as described in section 5.C. As the United Nations Secretary-General
has noted, “counterproductive policies aimed at restricting migration corrode the ability
of States to (manage migration) and make migrants more vulnerable.”
90
Similarly,
policies aimed at addressing what are identied as the “root causes” of migration
may in some cases encourage migration for the reasons just discussed – namely, the
desire and ability to migrate may increase with development and growth (Parsons and
Winters, 2014; De Haas, 2007; Clemens and Postel, 2018). While domestic policies and
the international community should strive to create the conditions that allow people to
remain in their country, policies should also help shape migration so as to maximize
its benets. In line with the 2030 Agenda’s call to facilitate orderly, safe, regular and
responsible migration, section 5.C discusses policies that will help harness the potential
of this megatrend to promote development and reduce inequality among countries.
2. The potential of migration to reduce inequality among countries
Solid evidence shows that migration raises global economic output, especially when
workers move from poorer countries to countries where they are more productive and
where wages are higher (Clemens, 2011; Clemens and Pritchett, 2019; World Bank,
2005; Biavaschi and others, 2016).
91
Whether migration reduces or increases inequality
among countries, however, depends on how economic and other gains – including
transfers of resources, knowledge, technology and attitudes – are distributed. An issue
of concern is the loss of skilled workers in countries of origin in developing regions.
a. Migration of highly skilled workers
As of 2010, nearly one in six countries, including many in Africa and the Caribbean,
saw more than 20 per cent of their population with tertiary education emigrate abroad
(Kone and Özden, 2017). More than two thirds of these migrants go to just four
developed countries – Australia, Canada, the United Kingdom and the United States
(ibid.). Selective migration policies that promote the movement of highly skilled workers
and raise barriers to the legal entry of less-skilled or educated migrants contribute to
so-called “brain drain”.
THE FACT THAT
MIGRATION AND
DEVELOPMENT
GO HAND IN
HAND DOES NOT
IMPLY THAT
THE MIGRATION
PROCESS CANNOT
BE MANAGED
90
A/72/643.
91
Estimates based on different methodologies suggest that economic gains from modest increases in migration – equivalent
to 3 per cent of developed countries’ labour force, according to some estimates, or about 5 per cent of the population of
developing countries, according to others – would range from billions to trillions of dollars (Clemens, 2011; World Bank,
2005). Clemens (2017) suggests that even allowing 1 in 20 current residents of low- and middle-income countries to
work in the richest countries would raise global economic production by more than would be achieved by eliminating all
remaining policy barriers to international trade and all remaining barriers to capital ows – combined.
INEQUALITY IN A RAPIDLY CHANGING WORLD
133
Countries of destination benet from the inux of skills, as section 5.B describes. In
countries of origin, the emigration of skilled workers may result in an immediate loss of
tax revenue and can negatively affect economic growth. But it can also have positive
feedback effects. Countries of origin may benet from the return of migrants, for
instance, if they bring back skills or capital that they would not have been able to acquire
at home – provided they are able to invest or use their skills productively.
Even when countries are not successful at attracting skilled workers back home,
migrants abroad can invest and generate ows of knowledge, information, foreign direct
investment and trade to and from the home country. In China, India and the Republic
of Korea, both returnees and members of the diaspora have been a driving force for
the growth of the software industry and other high-tech manufacturing sectors. The
diaspora has contributed to these countries’ rapid growth and consequently to the
reduction of inequality between them and high-income countries.
The effects of emigration are not limited to income and assets. The possibility of
obtaining higher wages abroad may motivate people in sending countries to pursue
higher education. Over time, gains in education prompted by the possibility of emigrating
may offset the actual emigration of some of the highly educated – resulting in a “brain
gain” (Beine, Docquier and Rapoport, 2008; Dustmann and Glitz, 2011). India, which has
experienced the large-scale emigration of workers in information technologies, has
been more than compensated for the outow of skills and has even created a signicant
service export industry.
Emigration may result in shortages of professionals with key skills, such as teachers and
health personnel. In some developing countries, more than 50 per cent of native doctors
were working abroad in the mid-2000s (OECD, 2010a). Included among them are small
island States in the Caribbean and the Pacic as well as several countries in sub-Saharan
Africa (Angola, Liberia, Mozambique, Sierra Leone and the United Republic of Tanzania)
(ibid.). Whether the emigration of health personnel has had a negative impact on health
outcomes in low-income countries is a matter of debate. However, studies point out that
many countries are ill-equipped to absorb newly trained doctors and nurses domestically.
The availability of health personnel has little effect on health outcomes if health facilities
are not adequate or the institutional framework is lacking (Clemens, 2007; Bhargava,
Docquier, and Moullan, 2011). In African countries, only a small minority of highly trained
health professionals work in primary health care and in those places where they are most
needed, such as rural areas and slums (Clemens, 2007). Many work entirely outside of the
health sector (ibid.). Even if all migrant health personnel were to return, additional policy
measures would be needed to improve health outcomes.
In sum, whether the emigration of skilled workers constitutes a net gain or loss to the
country of origin depends on the country. The voluminous literature on this topic fails to
reach a clear conclusion. The effect of skilled migration on inequality among countries
IN SOME
COUNTRIES,
RETURNEES AND
MEMBERS OF THE
DIASPORA HAVE
BEEN A DRIVING
FORCE FOR THE
GROWTH OF
THE SOFTWARE
INDUSTRY AND
OTHER HIGH-TECH
MANUFACTURING
SECTORS
WORLD SOCIAL REPORT 2020
134
cannot be easily generalized. Inequality among low-income countries of origin and
high-income countries (which are usually net receivers of highly skilled migrants) increases
if gains of skills to destination countries are larger than gains in countries of origin.
b. Migration of less-skilled workers
Even though the migration of skilled workers brings particular challenges and
opportunities, other types of migration affect inequality among countries through
similar paths. In fact, less-skilled workers in low-income countries who move to
high-income countries can see substantial increases in their income (see box 5.1). In
general, they also remit a larger portion of their income to their home countries than
highly skilled migrants, as discussed in section 5.B. Migrants abroad and those who
return can also invest in their countries of origin, contribute to the transfer of technology
and promote trade. Moreover, returnees and migrants abroad often act as agents of
social or political change, contributing to the spread of democratic values. In countries
with labour surpluses, emigration can also provide relief from unemployment and push
wages upwards.
B. International migration and inequality within countries
The empirical evidence on whether migration helps to reduce inequality within sending
and receiving countries is far from conclusive. Much depends on the characteristics of
each country and on the conditions under which migration takes place. When migration
is an act of desperation or where policies limit migrants’ options, it is dicult for
migrants to realize their full potential.
In countries of origin, much of its impact is felt through remittances and other transfers
by migrant communities abroad. In both countries of origin and destination, the effect
of migration is also felt through changes in wages and employment opportunities for
WHEN MIGRATION
IS AN ACT OF
DESPERATION OR
WHERE POLICIES
LIMIT MIGRANTS’
OPTIONS, IT IS
DIFFICULT FOR
MIGRANTS TO
REALIZE THEIR
FULL POTENTIAL
BOX 5.1
The place premium
In general, workers who move earn higher wages than they would have earned in their countries of origin. Clemens, Montenegro
and Pritchett (2008) found that, on average, the wages of migrant workers in the United States, adjusted for purchasing
power, were four times higher than those of workers with identical characteristics in countries of origin in the mid-2000s.
Workers with a secondary education or less could expect to earn between $10,000 and $15,000 in additional annual income
by moving from a developing country to the United States (ibid.). An urban adult male born and educated in Peru, with nine
years of education and working in the formal sector, for instance, earned an average of $1,714 per month in the United States
in the mid-2000s, but only $452 (adjusted for purchasing power parity) in Peru. These large international differences in wages
are sustained, in large part, by policy barriers to worker mobility (Clemens, Montenegro and Pritchett, 2016). Policy barriers to
migration are, in effect, a major driver of wage discrimination – by preventing workers in poorer countries who are willing to
migrate to richer countries from obtaining higher wages.
INEQUALITY IN A RAPIDLY CHANGING WORLD
135
different groups of workers. While migration may affect many dimensions of inequality,
there are specic concerns regarding the effect of immigration on group-based
inequality in countries of destination – that is, disparities between migrants and natives
of such countries.
1. The impact of remittances on income distribution
While abroad, migrants typically transfer cash or goods to their home country. Given their
magnitude, remittances have gained most attention from Governments in developing
countries. Ocially recorded remittances reached $689 billion in 2018 (World Bank,
2019a). More than three quarters of this amount ($529 billion) was received by low-
and middle-income countries. Excluding China, remittances to these countries are
signicantly larger than ocial development assistance or foreign direct investment
ows in 2018 (ibid.).
A large body of empirical literature has documented how remittances help to reduce
the scale and severity of poverty.
92
Findings on the impact of remittances on income
inequality within sending countries, however, are mixed. The amount of transfers to
richer and to poorer households in the country of origin depends on how different
groups remit and on who migrates. Richer and more educated migrants are less likely to
remit than their less-wealthy counterparts (Faini, 2007). However, the absolute amount
remitted increases with earnings. Bollard and others (2011) nd that educated migrants
living in select major-destination countries remit $300 more annually, on average, than
their less-educated counterparts. Despite this difference, some country-specic studies
suggest that transfers from abroad constitute a larger share of income in poorer
households that receive them than in richer households (Koczan and Loyola, 2018; De
and Ratha, 2012). Whether they help to reduce inequality in countries of origin depends
on the composition of the migrant population abroad.
Contrary to popular perception, migrants do not necessarily come from the poorest
households in their countries of origin. The costs of migration, liquidity constraints,
limited access to information on conditions abroad and skill-selective immigration
policies prevent people living in poverty from moving, especially across borders.
92
See, for instance, Adams and Page (2003); UNCTAD (2012); and McKenzie and Rapoport (2017).
More than 75 per cent of recorded
remittances go to low- and
middle-income countries
WORLD SOCIAL REPORT 2020
136
As a result of these constraints, migrants may initially come from relatively well-off
households. As migrant networks expand and information on opportunities abroad
spreads, the propensity to migrate may increase among lower-income households
(see box 5.2). Thus, remittances may push inequality upwards at rst and contribute to
its reduction once more people emigrate. In practice, however, policies of destination
countries that restrict the migration of less-skilled workers may stave off the potential
inequality-reducing effect of remittances.
Taking Mexico as an example, those households that received remittances in the
1990s – 4 per cent of all households – were mainly from the middle of the income
distribution. Remittances represented 30 to 40 per cent of the total income of
households that received them (Koczan and Loyola, 2018). Over time, as the percentage
of remittance-receiving households grew, households at the lower end of the income
distribution were more likely than others to receive remittances. By 2014, remittances
constituted a greater share of income among households in the poorest 40 per cent of
the population than among wealthier households. This shift of remittance receipts over
time has contributed to reductions in poverty and inequality (Koczan and Loyola, 2018;
BOX 5.2
Lending a helping hand: migrant networks
While migration can bring significant income gains, pioneering migrants often face considerable hurdles in the beginning.
Difficulties in finding employment, for example, can be exacerbated by language barriers and inadequate knowledge of local
customs. Over time, the continuing arrival of migrants from the same country or region results in the creation of networks
between migrants and people in their country of origin. These networks can be a source of valuable information and even
resources for would-be migrants. They reduce the risks of moving and the opportunity costs of migration by facilitating
the transmission of knowledge about employment opportunities, earnings, housing, travel and training. Networks also help
facilitate the settlement of new migrants, with lasting impacts.
Initially, these networks are disproportionately available to households from the middle or upper levels of the income
distribution. At the outset, this can lead to greater income inequality in the country of origin if migrants send home remittances.
As these networks grow, the social capital generated makes migration more accessible to low-income households.
Yet migrants’ networks may or may not facilitate access to well-paying jobs. Informal social networks connect those looking
for employment with employers quickly, but the employment found may be beneath migrants’ abilities in terms of skills
and qualifications. This wasted potential (“brain waste”) can have negative social and economic consequences in the long
term. It can lead to migrants being trapped in particular fields of low-skilled employment or ethnic enclaves (United Nations,
2016a; Filiz and Asad, 2015; Sumption, 2009). In general, there is a significant wage premium to being hired through formal
recruitment mechanisms and a penalty when recruited through informal networks (Chen, Wang and Zhang, 2017, Sumption,
2009; Mosca and Pastore, 2008).
INEQUALITY IN A RAPIDLY CHANGING WORLD
137
McKenzie and Rapoport, 2007). The pro-poor pattern of remittances was even stronger
during the 2008 nancial and economic crisis, helping cushion the effect of this shock
on poverty and inequality.
In addition to affecting income inequality directly, remittances have spillover effects.
They allow increased spending or investment by recipient households in goods or
services produced by other community members. Even when used for consumption,
remittances generate demand and therefore have a positive impact on local employment
and economic growth. Whether the benets of growth go mostly to people living in
poverty or to those who are wealthier depends on the country and the community. In
general, job growth has an inequality-reducing effect, since poorer households suffer
disproportionately from unemployment and underemployment. In addition, remittances
enable households at the lower end of the income distribution to invest in education
or in assets that increase their productivity, thereby pushing inequality downwards
(Rapoport and Docquier, 2006; Ratha, 2007).
While households at the lower end of the income distribution have the most to gain
from remittances, high transaction costs affect how much they actually receive. Target
10.c of the SDGs calls for reducing the transaction costs of remittances to less than
3 per cent and for eliminating remittance corridors with costs higher than 5 per cent
by 2030. As of the second quarter of 2019, the global average transaction cost of
sending remittances was 6.8 per cent, more than double the 3 per cent target (World
Bank, 2019b). Remittance costs across many African corridors and small islands in the
Pacic remain above 10 per cent (ibid.). Achieving SDG target 10.c could contribute to
reducing inequality within remittance-receiving countries.
2. Migrants and the functioning of labour markets
Migration affects the supply and demand of labour and therefore may lead to changes
in wages and employment. The distributional impacts of migration depend on the
relative position of migrants in the labour markets of origin and destination countries.
WHILE POORER
HOUSEHOLDS HAVE
THE MOST TO GAIN
FROM REMITTANCES,
HIGH TRANSACTION
COSTS AFFECT
HOW MUCH THEY
ACTUALLY RECEIVE
The global average transaction cost of
sending remittances is 6.8 per cent, more
than double the SDG target of 3 per cent
WORLD SOCIAL REPORT 2020
138
a. In countries of destination
In countries of destination, the effects of immigration on the labour market are at the
core of often rancorous public debate. In fact, the extensive empirical evidence available
indicates that immigration has a weak impact overall on average wages and employment
(National Academies of Sciences, Engineering and Medicine, 2017; Docquier, Ozden and
Peri, 2014; Bauer, Flake and Sinning, 2013; Castelletti, Dayton-Johnson and Melguizo,
2010). While immigration increases the supply of labour, it also adds to consumer
demand for goods and services and therefore pushes employment demand upwards.
However, immigration may increase competition for certain jobs and can therefore
affect the wages of specic groups of workers. In countries and regions where migrants
cluster in low-skilled jobs, immigration can depress the wages of less-skilled workers
and lead to an increase in income inequality. The empirical evidence available in
developed countries suggests that the negative effect of immigration on the wages
of native workers with low levels of education is moderate. In the United Kingdom, for
example, immigration led to a 0.2 to 0.8 per cent decline in the bottom 10 per cent of
wages between the 1990s and the mid- to late-2010s (Dustmann, Frattini and Preston,
2013; Migration Advisory Committee, 2018). Studies conducted in the United States
indicate that, even in areas with high proportions of lower-skilled migrants, any negative
effects practically disappear over the long term.
93
Concerns over the negative effects of immigration on wages are based on the belief
that all migrants compete directly with native workers. While some of them do in
certain countries and occupations, many migrant workers complement the native
labour force or compete with only some native workers, even at the same skill level.
Less-skilled migrant workers, for instance, often accept jobs that the native labour
force is not performing – often because native workers have access to better paid or
less onerous jobs. In developed countries, many manual jobs – namely in agriculture
and construction – and various jobs in the services sector – childcare and domestic
work, in particular – are no longer wanted by native workers at the existing wage. By
offering skills that are in short supply and services that natives are not willing to provide,
international migrants can contribute to the smooth functioning of the labour market.
The inow of highly skilled migrants brings improvements in productivity as well, mainly
through its role in promoting innovation (National Academies of Sciences, Engineering
and Medicine, 2017). Gains to the receiving country are larger when migrants of all skill
levels use their entrepreneurial expertise to set up new businesses and create new jobs.
In developed countries, foreigners are more likely than nationals to establish their own
businesses (OECD, 2010b; Docquier, Özden and Peri, 2014). The benets of migration
are also larger if migrants can use their skills productively. In some cases, highly skilled
migrants are unemployed or work in unskilled jobs.
WHILE SOME
MIGRANT WORKERS
COMPETE
DIRECTLY WITH
NATIVES, MANY
COMPLEMENT
THE LOCAL
LABOUR FORCE
93
See National Academies of Sciences, Engineering and Medicine (2017) for a comprehensive summary of ndings.
INEQUALITY IN A RAPIDLY CHANGING WORLD
139
In general, highly skilled native workers benet from the presence of immigrants.
A majority of studies nd that immigration has a positive effect on the wages and
employment of highly skilled native workers (National Academies of Sciences,
Engineering and Medicine, 2017; Migration Advisory Committee, 2018; Card, 2009).
In sum, immigration can increase wage inequality, especially if less-skilled immigrants
compete directly with native workers. At the same time, the presence of migrants may
stimulate productivity and “grease the wheels” of the labour market, thereby affecting
employment positively. Policy-wise, an important question is whether migrants cluster
in specic low-wage jobs because native workers no longer want those jobs or, rather,
since wages remain low for certain jobs because they are often performed by migrants.
Martin (2016) notes that, in agriculture, the presence of migrants lowers wage growth.
It also slows down capital investments, including in machinery.
b. In countries of origin
In origin countries in developing regions, emigration can cause a loss of skilled
workers, as discussed in section 5.A. Because migration is often very selective,
declines in the relative supply of highly skilled workers can contribute to widening
the wage gap between highly skilled and other workers and therefore push inequality
upwards. Wage inequality may rise even where the emigration of workers in the
middle of the skill distribution is prevalent. For example, Aydemir and Borjas (2007)
nd that, in Mexico, emigration rates were highest among men with “middle” levels
of education (that is, they completed secondary education) between 1980 and 2000.
International migration pushed the relative wage of workers in the “middle” upwards
and, as a result, widened the gap between the wages of these workers and those of
workers with low levels of education.
In many countries, however, highly skilled workers lack opportunities to use their skills
productively. The emigration of skilled workers should have little effect on wages if
they are unemployed or underemployed in their country of origin. Furthermore, the
presence of migrants abroad and their eventual return can also stimulate the transfer
of technology and capital. Where these transfers improve productivity and generate
employment, they may help to reduce inequality.
3. Group-based inequality and the immigrant experience
While migrants generally benet from moving, they are worse off than their native peers
in countries of destination. As a result, the inux of migrants has pushed group-based
inequality (“horizontal inequality”) upwards.
In the labour markets of developed countries, international migrants work more often in
informal jobs, receive lower wages and endure worse working conditions than natives
(United Nations, 2016a and 2018b). Their jobs are generally more unstable and, as a
result, immigrants are more often unemployed than natives. In the European Union, for
instance, the unemployment rate in 2017 was 6.9 per cent for the native-born population
WORLD SOCIAL REPORT 2020
140
and 13.3 per cent for migrants born outside the European Union.
94
Migrant status carries
a wage penalty as well. In the United States, the earnings of Hispanic, rst-generation
immigrants were more than 50 per cent lower than those of white natives from 2003 to
2013 (National Academies of Sciences, Engineering and Medicine, 2015).
Assessing the situation of migrants in developing countries is particularly challenging
due to the prevalence of irregular migration. What evidence does exist shows that
migrants from other developing countries are overrepresented in the informal sector. In
South Africa, the proportion of migrants working in informal and precarious jobs is twice
that of natives (Fauvelle-Aymar, 2014). In countries of the Gulf Cooperation Council,
international migrants are accepted under temporary guest programmes and have no
avenues to permanent residency. Their temporary visas grant them few rights and have
often resulted in abusive practices by employers, including conscation of passports.
As a result of their labour market situation, migrants are at high risk of poverty. In
OECD countries, immigrants are twice as likely as natives to live in households that
fall within the poorest income decile and below the national poverty threshold, even
at comparable levels of education (OECD, 2015b). Disparities in working poverty are
even greater among highly educated workers. In the European Union, highly educated
migrants who have jobs are three times more likely than their native counterparts to
be poor (ibid.). Low prociency in the country’s language and lack of country-specic
labour market experience has a strong effect on their employment prospects.
The disadvantages that migrants face affect their children’s opportunities as well.
As shown in chapter 1, the educational achievement gap between students with an
immigrant background and non-immigrants is signicant in OECD countries, even when
controlling for their families’ socioeconomic status (OECD, 2019a). The concentration
of children with immigrant parents in disadvantaged schools has a negative impact
on these children, as does widespread discrimination, lack of income security and the
undocumented status of some parents.
To be clear, migration need not result in disadvantage or be a source of division within
countries. Policy measures to uphold the rights of migrants, provide access to basic
services, address discrimination and promote the social integration of migrants can
IN THE LABOUR
MARKETS OF
DEVELOPED
COUNTRIES,
INTERNATIONAL
MIGRANTS WORK
MORE OFTEN
IN INFORMAL
JOBS, RECEIVE
LOWER WAGES
AND ENDURE
WORSE WORKING
CONDITIONS
THAN NATIVES
94
Migrant integration statistics – labour market indicators. Available at: https://ec.europa.eu/eurostat/statistics-explained/
index.php/Migrant_integration_statistics_%E2%80%93_labour_market_indicators#Unemployment.
In OECD countries, immigrants are twice as
likely as natives to live in households which
fall within the poorest income decile and
below the national poverty threshold
INEQUALITY IN A RAPIDLY CHANGING WORLD
141
shape the degree to which migration is associated with inequality in destination
countries. Access to education and the labour market, along with recognition of
qualications acquired abroad, can also protect migrants against disadvantage and
exclusion.
Migration is also linked to group-based inequality in countries of origin. Examples in
section 5.A illustrate that discrimination may curtail the ability of certain groups to
migrate. At the same time, migration can be a way to escape prejudice and discrimination.
The 1951 United Nations Convention relating to the Status of Refugees recognizes
the fear of being persecuted for reasons of race, religion, nationality, membership in
a particular social group or political opinion as grounds for eligibility for asylum and
refugee status.
95
Members of persecuted minorities may be forced to move abroad to
gain political and social or economic rights or simply to seek safety.
Migration may also affect the status of disadvantaged groups in countries of origin.
While abroad, some migrants engage in political activities that affect institutions in their
home countries. Even in the absence of active political engagement, behaviours may
change in response to ideas from abroad. Those who stay behind are exposed to new
values and norms, be it through contacts with returning migrants and relatives abroad or
through diaspora networks. Social movements that have promoted the empowerment
and equal treatment of disadvantaged groups have often been inuenced and even
supported by members of the diaspora (Mullings, 2009). For women, exposure to new
values may mean emancipation from traditional roles. The departure of men from the
household can also foster women’s empowerment (see box 5.3).
C. Maximizing the potential of international migration
The positive effects of migration are far from guaranteed. To a large extent, how much
low-income countries –and migrants, themselves – benet from emigration depends
on economic, social, cultural and political contexts as well as the conditions under
which migration takes place.
Policy plays an important role in shaping these conditions. As the United Nations
Secretary-General has recognized, the main obstacles to migrants maximizing
their economic and social contributions are restrictive or ineffectual policies, laws
and employment customs.
96
While policies alone cannot ensure that migration will
contribute to reducing inequalities between or within countries, they should not support
the maintenance of global inequities.
In many rich destination countries, immigration policies are highly selective. They
facilitate the admission of skilled migrants while providing few pathways for the legal
entry of less-skilled migrants. Yet less-educated migrants from low-income countries
are likely to gain the most, relatively, from working in middle- or high-income countries.
95
United Nations, Treaty Series, vol. 189, p. 137, Article 1.
96
A/72/643, para. 23.
THE MAIN
OBSTACLES
TO MIGRANTS
MAXIMIZING
THEIR ECONOMIC
AND SOCIAL
CONTRIBUTIONS
ARE RESTRICTIVE
OR INEFFECTUAL
POLICIES
WORLD SOCIAL REPORT 2020
142
BOX 5.3
The women that stay behind
Women account for almost half – 47.9 per cent – of all international migrants worldwide (United Nations, 2019c). Much of
the discussion on international migration focuses on migrant men and women in countries of destination. Relatively less
attention is given to the impact of migration on those who remain behind. Emigration can have implications for the division
of labour. It can also change power dynamics within families in countries of origin. Male emigration, in particular, creates
opportunities for women’s employment (Ferrant and Tuccio, 2015).
The number of female-headed households is increasing globally, in part due to male out-migration. Women in such households
have greater decision-making power at home and in the community. Greater autonomy for many women, including control of
remittances and decision-making power over how they are spent, has been tied to improved self-esteem and elevated social
status (World Bank, 2016c; Torres and Carte, 2016). However, increased autonomy does not always lead to empowerment.
Additionally, women living without a spouse or partner have more responsibilities, including, frequently, labour-intensive
agricultural work.
A shared concern of women acting as heads of households in traditional settings is judgement by their communities and
the fear of exclusion. Women in this situation are compelled to balance the need for income and managing the household
with maintaining their traditional role as caregivers for co-resident family members. Even when the number of female-headed
households increases, their acceptance in certain settings may take generations (De Haas and van Rooij; 2010).
Households with the resources to hire workers can reduce the additional burden on women who stay behind. Women in
less well-off households must usually manage the additional workload themselves or with their children, especially when
remittances are not forthcoming. Women can be compelled to undertake insecure, poor-quality jobs or activities to try to
earn additional income.
Migration also impacts family dynamics, gender roles, class and identity. Men and women who migrate bring home new values
and ideas when they travel to countries with greater gender equality and democratic practices. For example, migration from
countries in Northern Africa to Europe has played a role in reducing family size, increasing education and the participation of
women in the labour market as well as in raising the average age of marriage in countries of origin (De Haas and Van Rooij,
2010). In Morocco, for instance, attitudes among migrant families contributed to the acceptance of nuclear families and the
postponement of marriage for young women (De Haas and Van Rooij, 2010). In Nepal, women returning home from Western
Asia took employment in male-dominated industries, postponed marriage and purchased land in rural areas where women
rarely own property (UN Women, 2019, citing Gioli, Maharajan and Gurun 2017).
Even in the absence of legal channels, people compelled by poverty, insecurity or lack
of work will seek opportunities abroad – entering, residing and often working in the
destination country in an irregular manner. Doing so puts migrants at risk, contributes to
their exploitation and hampers their potential contributions. On average, migrants in an
irregular situation work more often in informal jobs, endure worse working conditions
and earn less than migrants with legal status (Borjas, 2017; Hall, Greenman and Farkas,
2010). Almost 25 per cent of all victims of forced labour are international migrants
(ILO, 2017b).
INEQUALITY IN A RAPIDLY CHANGING WORLD
143
Enhancing legal pathways for the migration of less-educated workers would provide
a more solid basis for migrants to make positive contributions to their countries of
origin and destination.
97
By adopting the Global Compact for Safe, Orderly and Regular
Migration, the General Assembly committed to enhancing the availability of pathways
for regular migration.
98
In most countries, there is a demand for labour that native
workers cannot or are not willing to provide. Offering options for regular migration at
all skill levels would help meet labour market demands, reduce irregular migration and
promote the integration of migrants, allowing them to full their potential.
Strengthening pathways for legal migration is necessary but insucient to promote the
inclusion and integration of migrants in countries of destination. Typically, institutional
frameworks and social policies related to health, education, housing, employment and
social protection matter more than targeted migrant integration policies. Equity in access
to basic services, particularly health and education, is not only critical for the integration
of migrants and their families, but has positive effects for societies at large. Similarly,
allowing all migrants to work is vital to promote income security and social inclusion.
These institutional measures can only be effective if discrimination and xenophobia are
addressed in a meaningful way. That said, xenophobic political narratives are on the
rise. Too often, media outlets promote disinformation and incite discrimination rather
than fostering tolerance and supporting evidence-based public discourse.
The potential contributions of migrants are also limited by the fact that educational
credentials are often undervalued in countries of destination. In the European Union, for
example, over one third of all migrants are overqualied for their jobs (OECD, 2015b).
Highly educated migrants with jobs are three times more likely than their native-born
counterparts to live in poverty (ibid.). An increasing number of countries are establishing
mechanisms for the assessment and recognition of qualications earned abroad, but
formal recognition does not necessarily translate into a fair assessment by employers
(IOM, 2013).
In order to address the loss of skills in countries of origin and maximize “brain gain”,
the Global Compact includes a commitment to build global skills partnerships among
countries. The goal is to “foster skills development of workers in countries of origin and
migrants in countries of destination with a view of preparing trainees for employability
in the labour markets of all participating countries.”
99
Similarly, the 2030 Agenda calls
for substantial increases in the recruitment, development, training and retention of the
health workforce in developing countries (target 3.c of the SDGs). The creation of “skills
partnerships” by which employers or Governments in destination countries may fund
the training of experts in countries of origin to ll specic job gaps can help reduce
the loss of skills. Some of the professionals trained may migrate to work abroad, but
others are likely to stay in their countries of origin. Clemens (2015) gives examples of
97
Some countries have recently opened legal migration pathways for less skilled migrants. Japan, for instance, approved a
new scheme on 1 April 2019 to admit 345,000 foreign workers from nine developing countries over a period of ve years (see
www.nippon.com/en/in-depth/a06004/japan%E2%80%99s-historic-immigration-reform-a-work-in-progress.html).
98
A/RES/73/195, 11 January 2019, Objective 5, Annex para. 21.
99
A/RES/73/195, 11 January 2019, Objective 18, para 34.
POLICY MEASURES
TO UPHOLD
THE RIGHTS
OF MIGRANTS
AND ADDRESS
DISCRIMINATION
PROMOTE
THEIR SOCIAL
INTEGRATION AND
HELP REDUCE
GROUP-BASED
INEQUALITY
WORLD SOCIAL REPORT 2020
144
100
See also OECD (2018e).
101
Objective 19 of the Global Compact for Safe, Orderly and Regular Migration calls for the creation of “conditions for migrants
and diasporas to fully contribute to sustainable development in all countries.”
102
A/RES/73/195, 11 January 2019, Objective 22.
nursing schools and training for construction workers in Western Asia and Northern
Africa.
100
Such training partnerships allow destination countries to obtain the skills they
need. They also enable countries of origin to strengthen their human capital and offer
migrants the professional opportunities that migration can bring.
In addition to lifting people out of poverty, remittances can help stabilize national
accounts, provide foreign currency to cover critical imports and support sovereign
credit ratings. As a nancial transfer from mostly high-income countries to middle- and
low-income countries, remittances help reduce inequality among countries. However,
nancial and other barriers along many remittance corridors make sending money very
costly, preventing families from reaping the full benets of migration. Meeting the SDG
target of reducing the transaction costs of migrant remittances to less than 3 per cent
and eliminating remittance corridors with costs higher than 5 per cent by 2030 could
signicantly reduce inequalities both within and among countries.
Emigrants, or diaspora populations, have been recognized as development actors only
recently.
101
Currently, many Governments in developing countries have oces and even
ministries devoted to diaspora engagement. Although many of these institutions provide
services to emigrants, most are focused on encouraging migrants to send remittances
and invest them in the country (IOM and MPI, 2012; Garding, 2018). Greater gains may
be realized over the long run by working with members of the diaspora to promote trade
and help the country of origin gain access to global networks of knowledge. Diaspora
entrepreneurs are best placed to recognize investment opportunities in their countries
of origin and to take advantage of them. They can also play an important role in opening
markets for tourism and trade. Facilitating circular migration between institutions and
companies in countries of origin and destination may also help engage members of
the diaspora. Supporting migrants’ political participation in countries of origin can also
promote their involvement.
The fact that social protection benets and rights are rarely portable across countries
is a key obstacle to the circulation and return of migrants – one that contributes to their
lack of income security. Migrants may contribute to social security schemes in their
countries of destination. However, if their social protection benets are not portable,
they may be unable to preserve or transfer pensions, health insurance and other benets
if they return home. The Global Compact calls for the establishment of mechanisms for
the portability of social security entitlements and earned benets.
102
Many developed
countries have negotiated bilateral and multilateral agreements to ensure the adequate
portability of entitlements, but many developing countries still lack any such agreements
(United Nations, 2018a).
INEQUALITY IN A RAPIDLY CHANGING WORLD
145
D. Conclusions
International migration has a positive effect on global economic output and helps
reduce poverty in countries of origin. The contribution of human mobility to sustainable
development is well recognized, as is the role that migration plays in improving people’s
safety, security and access to opportunity. Its effect on inequality within and among
countries largely depends on the conditions under which migration takes place.
Migration stands a better chance of helping to reduce inequality when migrants of all
skill levels are able to migrate through legal channels, use their skills productively and
send remittances back to their home country at a low cost. With the right policies in
place, lower-skilled workers and their families stand to gain the most from migration.
Against a backdrop of growing interconnectedness, policy attempts at restricting or even
trying to deter international migration are likely to be futile. Migration must be approached
as an important dimension of the development process and governed accordingly.
ANNEX 3
FIGURE A.5.1
Emigration ratio by the Human Development Index of migrants’ countries of origin, 2019
0.0
0.1
0.2
0.3
0.4
0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Emigration ratio
Human Development Index
Sources: Calculation of the emigration ratio based on the International Migrant Stock: The 2019 Revision, available
from www.un.org/en/development/desa/population/migration/data/estimates2/estimates19.asp and The 2019
Revision of World Population Prospects, available from https://population.un.org/wpp/. The Human Development
Index 2017 is available from: http://hdr.undp.org/en/data.
Note: The emigration ratio is obtained by dividing the number of migrants from a country by the total population of
that country. The Human Development Index combines indicators of health, education and income.
WORLD SOCIAL REPORT 2020
146
QUOTE
CHAPTER 6
PROMOTING EQUALITY
AND SOCIAL JUSTICE
IN A CHANGING WORLD
147
INEQUALITY IN A RAPIDLY CHANGING WORLD
KEY MESSAGES
• The megatrends reviewed in this report present opportunities as well as challenges
for the reduction of inequality. A number of countries have managed to protect the
most vulnerable from the negative effects of these powerful trends while ensuring
that the benets arising from some of them are widely shared.
• There is broad agreement on the importance of universal access to quality education
to break the intergenerational cycle of growing inequality and promote inclusive
development. Sadly, the education system has often served to reinforce inequality
rather than help to level the playing eld.
• Changes under way in the world of work are major drivers of rising inequality. In
order to manage these changes, Governments and the international community
must strengthen labour market institutions, including those that represent workers.
• Greater redistribution through taxes and public spending is urgently needed. Yet
emphasis on balancing public budgets has often resulted in declines in social
spending and investments in infrastructure.
• Social protection is a crucial element of national strategies to reduce inequality.
Currently, only 45 per cent of the global population is effectively covered by at least
one social protection benet.
• Mobilizing support for policies that promote more equitable societies can be
dicult. Understanding the political constraints to reducing inequality and devising
ways to overcome them is key to progress.
• High inequalities within and among countries are a global problem. Multilateral
action is essential to address inequality and manage other megatrends – not least
because the consequences of rising inequality do not respect national borders.
CHAPTER 6
PROMOTING EQUALITY
AND SOCIAL JUSTICE
IN A CHANGING WORLD
WORLD SOCIAL REPORT 2020
148
Rising inequalities are holding back progress towards poverty eradication and
other SDGs. They are also contributing to social tensions and political instability.
Technological innovation, climate change, urbanization and international migration
have, in some cases, exacerbated inequality. However, the impacts of these
megatrends are not set. The previous chapters show that they can be managed in an
equitable manner to ensure that their benets are broadly shared and their burdens
do not fall disproportionately on those without the resources to cope and recover.
Climate change, for instance, cannot be stopped or reversed in the short term, but
social considerations can be made part of adaptation and mitigation policies as
countries transition to green economies.
Applying an equality lens to policymaking calls for enhancing the positive impacts of these
megatrends; it also means reconsidering policies that aggravate their harmful effects.
While technological change may be contributing to job polarization and intensied wage
inequality, for instance, nancial and labour market deregulation, reduced corporate tax
rates and declines in income tax progressivity have also contributed to rising inequality.
Redoubling efforts to address the root causes of inequality today will open space to
manage other global trends for the benet of all. Section A points to concrete strategies
to leverage the potential of the megatrends examined to reduce poverty and promote
inclusion. Section B highlights the basic building blocks of an integrated policy strategy
to reduce inequality within countries, based on a review of good practices. Section C
emphasizes the importance of revitalizing multilateralism to address inequality among
countries and other global trends.
A. Managing global trends through an equality lens
In general, new technologies are expanding opportunities for highly skilled workers and
beneting mostly the wealthiest segments of society. Job disruption brought about by
the current wave of automation and articial intelligence is affecting mainly low- and
middle-skilled workers. Furthermore, in many countries, productivity gains generated by
new technologies are being captured by a small number of dominant companies.
An equality lens calls for policies and regulations that leverage the potential of new
technologies to reduce poverty and create jobs, while narrowing technological divides.
Currently, important differences are observed across countries in how jobs are being
redesigned or made redundant in response to technological change. With the right
incentives, businesses can regroup tasks into new jobs, train workers or align their
workows accordingly. The fact that some tasks traditionally performed by workers are
being automated means that job proles may change, but it does not have to lead to a
loss of jobs, as new tasks are also being introduced (ILO, 2018b). Whether changes in
skill needs must lead to the disappearance of jobs is as much a technological question
as an institutional one.
BEYOND
PROMOTING THE
POSITIVE IMPACTS
OF THESE TRENDS,
IT IS IMPORTANT
TO RECONSIDER
POLICIES THAT
AGGRAVATE THEIR
HARMFUL EFFECTS
INEQUALITY IN A RAPIDLY CHANGING WORLD
149
Automation and digitalization may also allow many workers to improve their
productivity and earn higher salaries, provided they are supported in adopting new
tasks and making use of these new technologies. Strategies must also be in place to
ensure a level playing eld for businesses and to maintain a competitive environment,
so that new technologies benet the economy at large instead of reinforcing
“rst-mover” advantages. Without measures to prevent rst-mover businesses from
distorting markets in their favour, productivity differentials between businesses and
workers may widen.
The potential of new technologies cannot be realized if entire segments of the
population lack access to them. Even in contexts of broad access, the use of new
technologies can exacerbate inequalities. Gaps in education, for instance, can widen if
new technologies improve the learning outcomes of children in wealthier households
disproportionately. Reducing inequality calls for closing the digital divide between and
within countries. A number of countries, including some in the developing world, have
made progress in extending the necessary infrastructure to rural and remote areas
and in expanding education and training in the use of digital technologies.
An equality lens also calls for policies that build the resilience of those who are
disproportionately exposed to the risks of climate change. This is even more pressing
for people who lack the resources needed to cope and recover from its effects,
including those living in poverty, small landholders and indigenous peoples. Rising
temperatures and more extreme weather events are affecting both the prevalence
THE POTENTIAL OF
NEW TECHNOLOGIES
CANNOT BE REALIZED IF
ENTIRE SEGMENTS OF
THE POPULATION LACK
ACCESS TO THEM
AN EQUALITY
LENS TO MANAGE
MEGATRENDS
• Leverage new technologies for job creation
• Bridge technological divides
• Build resilience of people in poverty to climate change
• Ensure a just transition to green economies
• Expand legal migration pathways
• Actively promote migrants' integration
• Secure urban housing and land rights for all
• Ensure access to basic services and public transport
WORLD SOCIAL REPORT 2020
150
and depth of poverty, making it harder for people to escape poverty and increasing
the likelihood that they will fall into poverty. The effects of climate change may also
reduce the livelihood opportunities of future generations, especially in the most
affected countries, and exacerbate downward intergenerational mobility.
Climate action and the transition to green economies offer opportunities for
the reduction of poverty and inequality but, like other processes of structural
transformation, also entail challenges. In order to reduce inequality, adaptation
strategies must prioritize people living in poverty and other disadvantaged groups.
As countries undertake the economic restructuring needed for the greening of
economies, training must be readily available to ensure that displaced workers
are equipped to enter new sectors. Making sure that mitigation technologies, such
as renewable energy production, are broadly diffused and adopted will also be of
paramount importance.
The focus on equality should therefore be an essential component of policy
frameworks for a just transition. Such a transition calls for integrating climate
action with macroeconomic, labour and social policies aimed at job creation, skills
development and adequate support for those who will be negatively affected.
Environmental taxation can play a key role in supporting this transition. However,
unless environmental fiscal policies are accompanied by measures to compensate or
protect the most vulnerable, they can aggravate poverty and inequality by increasing
prices of basic goods and services such as food, heating and transportation.
Urbanization brings opportunities for poverty reduction and social mobility, but it can
also lead to increased inequalities and social exclusion. The uncontrolled growth of
many cities has resulted in inadequate provision of public services and a failure
to guarantee a minimum quality of life for all urban residents. The current speed
of urbanization in developing countries makes urban governance and adequate
planning increasingly urgent.
While there is no one-size-fits-all solution to reducing urban inequality, some
Governments have been able to address the spatial, economic and social aspects
of the urban divide and promote inclusive urbanization, including in rapidly growing
cities. Their strategies have four elements in common. First, they have established
land and property rights, paying particular attention to security of tenure for
people living in poverty. Second, they have improved the availability of affordable
housing, infrastructure and basic services and access to these services, since good
transport networks, including between residential and commercial areas, is key to
spatial connectivity and economic inclusion. Third, they have facilitated access to
education and decent employment for all urban residents. Fourth, they have put
INEQUALITY IN A RAPIDLY CHANGING WORLD
151
participatory decision-making mechanisms in place to encourage input from all
stakeholders in the allocation of public funds and in the formulation, monitoring
and evaluation of all policies.
International migration can widen prospects for poverty reduction and social mobility
as well. It can help reduce inequality between countries and does not necessarily
increase inequality within countries. But the positive outcomes of migration are far
from assured. Migration policies have often helped maintain inequalities within and
among countries, rather than contributing to their reduction.
An equality lens calls for opening avenues to the movement of migrant workers at all
skill levels, ensuring that they can use their skills productively and send remittances
to their home country at a low cost. Countries of destination must also do more to
promote the integration of migrants, uphold their rights, provide access to social
services and address discrimination against them. If migrants are adequately
supported and migration is properly managed, its benefits will far outweigh its
challenges.
The megatrends examined in this report interact with each other in multiple ways,
which may have implications for inequality. Advances in technology hold great
potential for reducing carbon emissions and slowing climate change, for instance.
Rapid urbanization can make people more vulnerable to the impacts of climate
change, yet cities have been at the forefront of efforts to combat it. Although
the synergies and trade-offs between these different trends are not the focus of
this report, they make it even more apparent that the substantial challenges and
opportunities they pose cannot be addressed in isolation.
B. Reducing inequality within countries: what experience can teach us
The commitment shown by Governments in adopting the 2030 Agenda for
Sustainable Development and its Goal 10 has not yet been matched with effective
action. Inequalities within many countries continue to rise.
Clearly, no single set of policies is applicable to all countries or in all contexts. Instead,
this report highlights three basic building blocks of a coherent and integrated policy
strategy to reduce inequality in all its dimensions.
103
First, addressing the root causes
of inequality calls for promoting equal access to opportunities. Second, creating
a policy and institutional environment conducive to the reduction of inequality
requires macroeconomic policies and institutions oriented towards this goal. Third,
in order to reduce inequality, countries must address prejudice and discrimination
and promote the participation of disadvantaged groups in economic, social and
political life.
103
In December 2017, the General Assembly encouraged the United Nations Secretary-General to “include best practices in
the reduction of inequalities within and among countries in the Report on the World Social Situation 2019” (A/RES/72/141,
para.71). The ndings and conclusions contained in this section respond to this request.
IF MIGRANTS
ARE ADEQUATELY
SUPPORTED
AND MIGRATION
IS PROPERLY
MANAGED, THE
BENEFITS OF
MIGRATION WILL
FAR OUTWEIGH ITS
CHALLENGES
WORLD SOCIAL REPORT 2020
152
Ample evidence points to what has and has not worked to reduce inequality under each
of these basic pillars. As this section’s policy review suggests, inaction is due not to lack
of sound technical advice or even, in most cases, adequate capacity. Rather, mobilizing
support for many of the policy responses to inequality can be an uphill battle: depending
on how they are designed and implemented, efforts to reduce inequality will inevitably
challenge the interests of certain individuals and groups. At their core, they affect the
balance of power. Understanding the political constraints to reducing inequality and
devising ways to overcome them is key to breaking the current stalemate.
1. Expanding people’s access to opportunity
Ensuring equal opportunity is an aspirational and distant goal. It calls for giving all
children the same chances to advance their capabilities and to reap returns to their
education through decent jobs, regardless of where they live and the conditions
in which they were raised. Education, health and labour market policies affect the
distribution of human capital, skills and wages. In principle, they should foster
intergenerational mobility and affect how incomes are generated, reducing disparities
in market (primary) income.
There is broad agreement on the importance of ensuring universal access to quality
education, in particular, to expand access to opportunity. That said, the education
system has often served to reinforce inequality rather than help to level the playing eld.
a. Education: the great equalizer?
Increasing school enrolment and educational attainment should allow growing shares
of the population to make a decent living and enjoy income security. In its initial stages,
the expansion of education may result in increasing wage and income inequality. But
as the number of people with secondary and higher education grows, wage differences
between more and less educated workers (the “skill premium”) should decline. The
expansion of education should also promote meritocratic systems that primarily reward
skill and effort, rather than wealth, social class or group ascription.
UNDERSTANDING
THE POLITICAL
CONSTRAINTS
TO REDUCING
INEQUALITY AND
DEVISING WAYS TO
OVERCOME THEM
IS KEY TO BREAK
THE CURRENT
STALEMATE
THREE
BUILDING
BLOCKS
TO REDUCE
INEQUALITY
Promote
equal access
to opportunity
Pursue more
progressive
taxation and
strengthen
social protection
systems
Tackle
prejudice and
discrimination
to ensure equal
participation
INEQUALITY IN A RAPIDLY CHANGING WORLD
153
In practice, improving access to education does not always result in lower inequality.
Much depends on how educational policy is designed and implemented. While primary
school enrolment has increased worldwide, many children are still out of school,
particularly those living in poverty. The provision of education and other basic services
remains fragmented and exclusionary in many countries. Moreover, vast differences
are found in the quality of education provided to children in urban and rural areas, or
from more and less wealthy families, even under conditions of near-universal coverage.
Children in middle- and high-income households living in urban areas often benet
more from government spending on education than low-income groups in rural areas
due to the unequal distribution of funding (UNICEF, 2015). At the global level, the
share of government spending on education in national budgets is lower in low- and
middle-income countries than in high-income countries. As a result, the education
system has often served to reinforce inequality rather than give every child an equal
chance of succeeding.
In some cases, increases in education have not kept pace with the changing demands
of the labour market. Goldin and Katz (2008) argue, for instance, that rising inequality
in the United States since 1980 stems, in part, from the fact that the education system
has not supplied the type and amount of skills needed during this period of skill-biased
technological change. The proportion of highly educated workers has grown, but
not enough to keep up with the labour market’s changing needs. As a result, the skill
premium has increased.
In general, ensuring funding for the expansion of quality primary education and
enforcing compulsory schooling up to lower secondary education have helped boost
equitable access, as has the universal provision of pre-primary schooling. In Europe,
the expansion of public pre-primary education has proven more effective in reducing
earnings inequality than any other measures aimed at making educational systems
more inclusive and equitable – such as raising the duration of compulsory schooling,
prescribing standardized tests or strengthening school accountability (Checchi and van
de Werfhost, 2014). Disadvantages faced by children based on their family background
are more likely to manifest in situations where schooling starts at a later age.
In many developing countries, educational policies have prioritized funding for tertiary
education, often to the detriment of funding for primary and secondary education, in
what has been termed the “tertiary tilt” (Carnoy, 2011; Gruber and Kosack, 2014). This
tilt has pushed income inequality upwards, as students from high-income families
are better positioned to enrol in tertiary education and benet from it than students
from low-income families, who benet the most from public investment in primary and
secondary education.
What’s more, the expansion of education has not been accompanied by systematic
improvements in the quality of education. Large proportions of students do not
achieve minimum prociency in reading and, in some cases, learning outcomes
THE EDUCATIONAL
SYSTEM HAS
OFTEN SERVED
TO REINFORCE
INEQUALITY RATHER
THAN HELP LEVEL
THE PLAYING FIELD
WORLD SOCIAL REPORT 2020
154
are deteriorating (UNESCO, 2019). In fact, the data available suggest that improved
access to education has often resulted in increased inequality in learning outcomes
(Torpey-Saboe, 2018). Disparities between schools or programmes based on
geography, socioeconomic status, race and ethnicity can be found in most education
systems. Moreover, better-off families can fund private, supplementary forms of
education for their children. If inequalities in learning outcomes continue unabated,
education will contribute to rising inequality.
Countries that have made progress in improving learning outcomes have invested
in training teachers and have increased their salaries; they have also made efforts
to deploy teachers equitably across regions and areas. These include countries in
developed regions, such as Australia, Finland, Japan and Sweden, as well as those
in developing regions, including Brazil, China, Kazakhstan and the Republic of Korea
(Wei, Andree and Darling-Hammond, 2009, and Global Campaign for Education and
Education International, 2012). Some countries still need to establish minimum levels
of prociency and many must nance national assessments to evaluate learning
outcomes, teacher training and curricula.
b. Investing in work
Improvements in education will have little effect on inequality without successful
school-to-work transitions and decent job prospects. In its recent report, the Global
Commission on the Future of Work noted the stark contrast between the transformative
changes under way in the world of work and the level of preparedness of Governments
and the international community to manage them (ILO, 2019). An initial step towards
addressing this disconnect is to increase investments in labour market institutions,
including those that represent workers, and policies such as minimum-wage laws and
active labour market policies.
Growing vulnerability in the world of work has taken place alongside declines in
membership in trade unions. The percentage of employees who are members of trade
unions declined in 60 out of 88 countries with data between 2004 and 2016.
104
In OECD
countries, where the collective representation of workers has traditionally been highest,
trade union membership is half of its 1985 level (OECD, 2017a).
IMPROVEMENTS
IN EDUCATION
WILL HAVE
LITTLE EFFECT
ON INEQUALITY
WITHOUT
SUCCESSFUL
SCHOOL-TO-
WORK TRANSITIONS
AND DECENT
JOB PROSPECTS
104
ILOSTAT database, trade union density rate (%). Available at: https://ilostat.ilo.org/data/. Accessed on 1 August 2019.
The percentage of employees who
are members of trade unions declined
in 60 out of 88 countries with data
between 2004 and 2016
INEQUALITY IN A RAPIDLY CHANGING WORLD
155
On average, unionized workers earn higher wages than their non-unionized counterparts,
with the union-wage effect being greater among less-skilled workers than among skilled
workers, especially in the public sector (Card, Lemieux and Riddell, 2018; Herzer, 2016;
Freeman, 2009). However, unions organized around the traditional employer-employee
relationship are not well-suited to giving voice to those who are self-employed or in
informal employment.
The growing incidence of non-standard forms of employment and the persistence
of informal employment have created momentum for different forms of collective
representation. Associations of self-employed workers or cooperatives – two different
types of membership-based organizations – have improved the terms on which workers
in vulnerable employment engage in the labour market. Some of these associations
represent members’ interests with local authorities, rather than their employers, and so
resemble social movements more than conventional trade unions (World Bank, 2012;
Agarwala, 2013). The main limitation of these forms of organization is that they usually
do not have a legal mandate to participate in collective bargaining directly. Supporting
laws can make new forms of association t for collective representation. For now, they
cannot substitute for traditional trade unions.
Unions are also adjusting to changes in the world of work. Some have expanded
membership to workers under non-standard contracts or have lobbied to promote
their rights (OECD, 2019c). In the United Kingdom, for instance, drivers for the platform
Uber were reclassied from independent contractors to workers covered by minimum
wage laws and other basic provisions after a union took their case to an employment
tribunal in 2018.
105
Ireland is considering a bill to prohibit “bogus self-employment” –
when workers for a company are classied as independent contractors while working
regularly for one business. There is also scope to expand union membership to workers
in informal employment. Considering the ongoing changes in the world of work, unions
will also have to nd ways to connect with workers outside traditional workspaces,
advocate for new forms of decent employment that ensure worker protection and offer
new services, such as the sharing of information about portable benets.
Wage-setting mechanisms must also be strengthened. Well-designed minimum-wage
policies are key to ensuring income security. They have helped reduce wage inequality
without reducing employment levels, partly because minimum wages are set at very
low levels.
106
While these policies only cover workers in formal employment, evidence
from developing countries indicates that minimum wages can drive increases in
earnings in the informal sector as well, mainly because they are taken as a reference for
less-skilled workers throughout the economy (Rani, 2017; Dinkelman and Ranchhod,
2012; Khamis, 2008).
105
The state of California, in the United States, has recently reclassied Uber drivers from individual contractors to company
workers as well.
106
See, for instance, Bourgignon (2015), Godoy and Reich (2019), Freeman (2009) and Betcherman (2012).
WORLD SOCIAL REPORT 2020
156
All workers, regardless of wage or skill, will experience an increasing number of job
transitions over the course of their lives. Active labour market policies can support
these transitions by improving job matching and fostering new job opportunities. Such
policies are well recognized and accepted by Governments. However, their ability to
reach the poorest is contingent on how the programmes are designed and implemented.
Often, they are not located in the neediest areas and not enough mechanisms are put
in place to effectively target the poorest households. Traditional job search assistance,
for instance, has not been effective in countries with large informal sectors, where most
workers are self-employed and engaged in agriculture. New technologies can extend
the reach of mediation and improve information on job opportunities.
Despite their signicance during this time of transition, labour market policies alone
will not bring about the structural transformations necessary to create decent work
for all and promote inclusive economic growth. A policy environment conducive to the
creation of more and better jobs requires macroeconomic policies oriented towards
such goals.
2. Promoting redistribution and strengthening social protection
The strategies highlighted in the previous section should help curb disparities in market
income and thereby reduce the burden on redistributive policies. However, the evidence
available indicates that disparities in market income have risen in most countries in
recent decades, including those that have seen inequality in disposable incomes decline.
Fiscal and monetary policies affect inequality not only because they have a direct
bearing on income distribution, but also through their role in mobilizing resources for
social policies, including social protection. Choices regarding taxes and spending are, in
fact, at the heart of the social contract. Trust in Governments and institutions is higher
where taxes and social transfers are perceived to be effective and equitable (OECD,
2019d). At the same time, condence in public institutions is essential to ensuring scal
performance and preserving the social contract.
Macroeconomic and social policies have often had opposing effects on the creation
of decent work and the reduction of inequality. When aimed at short-term stability,
macroeconomic policies have focused narrowly on keeping ination at low levels
and controlling scal decits. Emphasis on balancing public budgets has resulted in
declines in social spending and public investment in infrastructure and technologies, all
of which are critical to reducing inequality. There is now global agreement on the need
to enhance policy coherence.
107
A sustained reduction of inequality calls for aligning
macroeconomic policy frameworks with social goals.
A SUSTAINED
REDUCTION OF
INEQUALITY CALLS
FOR ALIGNING
MACROECONOMIC
POLICY FRAMEWORKS
WITH SOCIAL GOALS
107
Target 17.13 of the SDGs is to enhance global macroeconomic stability, including through policy coordination and policy
coherence. Target 17.14 is to enhance policy coherence for sustainable development.
INEQUALITY IN A RAPIDLY CHANGING WORLD
157
a. The potential of progressive taxation
The effect of scal policy on inequality depends on how progressive the tax system
is and on how much people living in poverty benet from social protection transfers
and public services. Taxes and transfers play an important role in reducing income
inequality in developed countries, yet they have failed to correct the trend towards rising
inequality, as shown in chapter 1. Fiscal redistribution is much more limited in developing
countries given their stronger reliance on indirect taxes, which are usually regressive. In
fact, consumption taxes often increase the prevalence of poverty (Inchauste and Lustig,
2017). Their negative effect can be stronger than the poverty-reducing impact of public
transfers and services.
Broadening the redistributive impact of taxation calls for increasing direct taxation,
raising taxes at the top of the income distribution and lessening the tax burden on
people at the bottom.
Narrow tax bases, high levels of informality, capital ight, illicit nancial ows and weak
tax administrations have typically limited the ability of Governments in developing
countries to collect personal income taxes. Adjusting exemptions and deductions can
help expand the tax base and improve the redistributive impact of income taxation
in many of them. Despite a global commitment to enhance revenue administration,
non-compliance with income tax requirements and tax evasion remains high.
108
Given the increasingly globalized nature of trade and business, there are limits to
what countries can achieve on their own. As global rms grow, production becomes
more fragmented and the relevance of intangible assets such as intellectual property
increases, making the taxation of capital increasingly challenging. International tax
cooperation is essential to ensure sustained tax revenues. The United Nations Committee
of Experts on International Cooperation in Tax Matters provides an inclusive venue for
cooperation and standard-setting on international taxation with special attention given
to developing countries.
109
Recent multilateral initiatives aimed at improving coherence
and transparency in addressing tax avoidance are also steps in the right direction.
They include the Global Forum on Transparency and Exchange of Information for Tax
Purposes, the OECD/Group of 20 Base Erosion and Prot Shifting (BEPS) Project and
the Inclusive Framework on BEPS, as well as the Addis Tax Initiative and the Platform
for Collaboration on Tax.
110
Yet progress has been very slow.
111
108
In the Addis Ababa Action Agenda, Governments agreed to enhance revenue administration through modernized, progressive
tax systems, improved tax policy and more ecient tax collection as well as to work to improve the fairness, transparency,
eciency and effectiveness of our tax systems (General Assembly resolution 69/313, para. 22).
109
The Committee of Experts on International Cooperation in Tax Matters is a subsidiary body of the United Nations Economic
and Social Council tasked to develop policy and practical guidance on international tax matters.
110
The Platform for Collaboration on Tax is a joint effort launched in 2016 by the International Monetary Fund, the OECD, the
United Nations and the World Bank Group to intensify the cooperation among these organizations on tax issues.
111
The Inclusive Framework on BEPS currently has 135 members and 14 observers, including over 70 per cent of non-OECD and
non-Group of 20 countries. They are now designing new international tax rules, including to address tax challenges arising
from digitalization (OECD, 2019c). The Addis Tax Initiative coordinates technical assistance among its members, including
24 partner countries in the developing world, 19 developed countries and several supporting organizations, and broad-based
capacity building in partner countries.
MORE
REDISTRIBUTION
CALLS FOR
INCREASING DIRECT
TAXATION, RAISING
TAXES AT THE TOP
OF THE INCOME
DISTRIBUTION AND
LESSENING THE TAX
BURDEN ON PEOPLE
AT THE BOTTOM
WORLD SOCIAL REPORT 2020
158
In countries of the OECD, top income tax rates fell from 66 per cent in 1981 to 43
per cent in 2018 (OECD, 2019e). However, there is no empirical evidence to suggest
that the top marginal rates common in the 1980s have been harmful for economic
growth (IMF, 2017b; OECD, 2015a). In addition, the share of market income earned by
the top percentiles has grown, and there may be scope for increasing top marginal
tax rates. Enhanced tax collection and enforcement are also needed with respect to
top earners who often escape taxation altogether.
Taxes on wealth and property can play an equally important role in increasing
redistribution and have gained traction in recent political debates. Income from wealth
(profits, interest and capital gains, in particular) is generally taxed at lower rates than
labour income. This is in part because wealth income is more responsive to taxation –
that is, there are more options to avoid taxation and savings can be invested abroad –
and its measurement is more challenging. However, given the amount of revenue
that can be raised through wealth and property taxes, Governments should consider
devoting resources to their enforcement.
Addressing inequality also calls for lessening the tax burden on people at the bottom
of the income distribution. Raising minimum income tax thresholds and reducing
the burden of indirect taxation can help make tax systems more progressive. Lower
tax rates on basic goods, such as staple foods, may be warranted.
b. Strengthening social protection
The value of social protection to shield individuals and families from shocks and
alleviate poverty has been broadly recognized. A system combining contributory social
insurance and tax-funded social assistance programmes to cover unemployment and
disability benets, child benets, old-age pensions and access to health care offers
basic income security at all stages of the life cycle.
Coverage by at least one social protection scheme ranges from close to 90 per cent of
the population in Europe to less than 15 per cent in Africa (ILO, 2017a). As a result, its
impact on income inequality varies by region, as shown in gure 6.1. Among the regions
shown, the combination of social insurance and social assistance has the greatest
equalizing effect in countries of Eastern Europe and Central Asia. In countries and
regions where informal employment is widespread and overall institutional capacity
In countries of the OECD, top income
tax rates fell from 66 per cent in
1981 to 43 per cent in 2018
43
%
INEQUALITY IN A RAPIDLY CHANGING WORLD
159
is weak, including many countries in Asia and sub-Saharan Africa, tax-funded social
assistance programmes have the most impact on inequality as measured by the Gini
coecient. However, the situation varies considerably by country. Social protection
transfers have had a strong equalizing effect in countries such as Brazil, Mongolia
and South Africa, where expenditure in social protection is relatively high (United
Nations, 2018a).
Countries often use a variety of universal and targeted social protection schemes.
Social assistance schemes are usually means-tested or targeted to groups with
observed disadvantages. Under perfect schemes, targeting can bring efficiency
gains. However, accurate targeting requires administrative capacities that many
countries lack. Inaccurate means targeting leads to significant undercoverage,
excluding many potential beneficiaries (Brown, Ravallion and van de Walle, 2016).
In general, simpler tests that exclude only the most auent from accessing benets
reduce errors of exclusion and do not cause excessive leakage to those not living in
poverty (United Nations, 2018a; Kidd and others, 2018).
FIGURE 6.1
Impact of social insurance and social assistance programmes on the Gini coefficient
of income in selected regions
Percentage reduction
in Gini coefficient
0
6
12
18
24
30
Latin America and
the Caribbean
Eastern Europe
and Central Asia
Asia
(other)
Middle East and
Northern Africa
Sub-Saharan
Africa
Social assistance
Social insurance
Source: World Bank, The Atlas of Social Protection Indicators of Resilience and Equity (ASPIRE) database. Available
from http://datatopics.worldbank.org/aspire/home. Accessed on 30 July 2019.
Note: The gure shows weighted regional averages of the Gini coecient reduction owing to social protection
programmes as a percentage of the Gini coecient of market (pre-transfer) income. The estimates are based on
data from the most recent household surveys, conducted between 2000 and 2016, for 35 countries in Sub-Saharan
Africa (Benin, Botswana, Burkina Faso, Cabo Verde, Cameroon, Central African Republic, Chad, Comoros, Congo, Côte
d’Ivoire, Democratic Republic of the Congo, Eswatini, Gabon, Gambia, Ghana, Kenya, Liberia, Madagascar, Malawi,
Mali, Mauritania, Mauritius, Mozambique, Niger, Nigeria, Rwanda, Senegal, South Africa, South Sudan, Sudan, Togo,
Uganda, United Republic of Tanzania, Zambia, Zimbabwe), 6 countries in Middle East and Northern Africa (Djibouti,
Egypt, Iraq, Jordan, Tunisia, Yemen), 23 countries in Asia (other) (Afghanistan, Bangladesh, Bhutan, Cambodia, Fiji,
Kiribati, Lao People’s Democratic Republic, Malaysia, Maldives, Marshall Islands, Micronesia (Federated States of),
Mongolia, Nepal, Palau, Papua New Guinea, Philippines, Samoa, Solomon Islands, Sri Lanka, Thailand, Timor-Leste,
Tonga, Viet Nam), 24 countries and areas in Eastern Europe and Central Asia (Albania, Armenia, Azerbaijan, Belarus,
Bosnia and Herzegovina, Bulgaria, Croatia, Georgia, Hungary, Kazakhstan, Kosovo, Kyrgyzstan, Latvia, Lithuania,
Montenegro, Poland, Republic of Moldova, Romania, Serbia, Slovakia, Tajikistan, Turkey, Ukraine, Russian Federation),
and 21 countries in Latin America and the Caribbean (Argentina, Belize, Bolivia (Plurinational State of), Brazil, Chile,
Colombia, Costa Rica, Dominica, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica,
Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay).
WORLD SOCIAL REPORT 2020
160
Even in contexts of universal coverage, some groups of the population may face
barriers to accessing benefits. For example, in many countries, persons with
disabilities confront physical and administrative hurdles in having their eligibility
assessed (United Nations, 2018a). For migrants, benefits earned in one country are
rarely portable to other countries. Lack of information and discrimination can limit
access to social protection by these and other groups.
Removing barriers and promoting the effective coverage of disadvantaged groups can
help reduce group-based inequality. Linking entitlement to unemployment benefits
to individuals rather than jobs, for instance, can improve coverage for workers under
non-standard contracts. Improving migrants’ coverage calls for ensuring access to
social protection in countries of destination and the adequate portability of benefits
across borders. Multilingual and accessible information campaigns about eligibility
can help increase coverage among people who are not fluent in the official national
language/s. In all cases, beneficiary involvement in design and implementation is
crucial to identifying and addressing barriers to access.
Measures to increase coverage will have little impact on reducing inequality and
poverty if the benefits received fail to guarantee basic income security. Tax-funded
transfers often fall short. In countries with data, the median level of benefits provided
through tax-funded pensions, for instance, represents less than 40 per cent of the
minimum wage, on average.
112
If social protection systems are to have a meaningful
impact, many countries will need to increase investments in social protection and
sustain such investments through economic cycles.
A growing number of countries in developing regions already spend significant
proportions of their GDP on social protection. Brazil, for instance, spent over 18
per cent of its GDP in 2015 on social protection;
113
Mongolia spends over 15 per
cent and Egypt over 11 per cent of GDP. Many countries have space to mobilize
additional domestic resources. Some least developed countries will, however,
need substantial development assistance to close gaps in social protection floors
(Bierbaum and others, 2016). Dismantling administratively complex and costly
targeted schemes would also help reduce costs. This is one argument used by
proponents of a universal basic income, as discussed in box 6.1.
The right to social security is set forth in the Universal Declaration of Human Rights.
Lack of comprehensive, well-functioning social protection systems challenge social
solidarity and, as the next section argues, weaken public support for redistribution.
112
Calculations based on the International Labour Organization’s World Social Protection database. Available at: www.
social-protection.org/gimi/Wspr.action. Accessed on 31 July 2019.
113
Following the general elections in 2018, there is uncertainty concerning the future state of social protection and other social
policies as described in chapter 1 (box 1.3).
EVEN IN CONTEXTS
OF UNIVERSAL
SOCIAL PROTECTION
COVERAGE, SOME
GROUPS OF THE
POPULATION
FACE BARRIERS
TO ACCESSING
BENEFITS
INEQUALITY IN A RAPIDLY CHANGING WORLD
161
3. The political economy of redistribution
In 2014, 60 per cent of respondents to a survey across developed and developing
countries agreed with the statement that “the gap between the rich and the poor is a
very big problem” (Pew Research Center, 2014). With changes in emphasis, the policy
prescriptions summarized in this chapter have been recommended for decades.
Despite widespread concern about inequality, mobilizing support for these policies
has often proven challenging.
Inequalities in political power and inuence can hinder action in this regard. Some
groups have more power, knowledge, resources and capacity to organize than others.
When groups are well organized, they are more effective at blocking policy measures
that undermine their interests or lobbying for those that promote those interests.
Wealthy individuals, corporations and, in some countries, members of certain ethnic
groups have more access than others to political institutions such as political parties
as well as the media. Numerous historical examples can be found of economic elites
ensuring that the policies and institutions that benet them are maintained (see, for
instance, Acemoğlu and Robinson, 2002 and 2012).
INEQUALITIES IN
POLITICAL POWER
AND INFLUENCE
HINDER EFFECTIVE
ACTION TO
REDUCE INEQUALITY
BOX 6.1
The viability of a universal basic income: the jury is still out
Interest in a universal, unconditional cash transfer, or universal basic income (UBI), has been growing globally in the context
of ongoing debates on changes in the world of work. Proponents see its potential to compensate workers for increasingly
insecure employment and to avoid overly bureaucratic social protection systems. Opponents argue that it would discourage
workers from finding or remaining in jobs. Concerns that recipients would spend funds unproductively are also widespread.
Pilot trials of the UBI, including in Finland, in Ontario, Canada, in the Otjivero-Omitara area of Namibia and in the Indian state
of Madhya Pradesh have been short-lived and politically contentious (Henley, 2018; Gollom, 2018; Banerjee, Niehaus and Suri,
2019). Their long-term effects are therefore unknown.
The feasibility of financing a UBI that would substitute for other public transfers and the trade-offs it would entail depend on
the country context. Even in countries of the OECD, current spending on social protection would not be enough to cover a UBI
at or even close to the poverty line – estimated at 50 per cent of the median disposable income (OECD, 2017b). For example,
a basic income for working-age adults that would cost the same as existing transfers and tax exemptions would reach
21 per cent of the poverty threshold in Italy, 33 per cent in the United Kingdom and 50 per cent in France (ibid.). People living in
poverty stand to lose the most from the dismantling of current, progressive transfers and services. Without targeting or much
higher spending, the risks of falling into poverty can increase as current recipients of social protection lose out.
Proposals have been made for “partial” UBIs that would complement, rather than replace, existing schemes (IMF, 2017b;
OECD, 2017b). Indeed, most developed countries and some developing countries already have a vast number of universal
schemes, such as child and family benefits and social pensions. These countries should first focus on improving the coverage
of these schemes, rather than replacing them.
WORLD SOCIAL REPORT 2020
162
The failure of taxes and transfers to reduce the gap between the rich and those living
in poverty may also have undermined the legitimacy of scal systems and trust
in institutions. Two thirds of the population in the Group of 20 countries distrust
politicians when it comes to the tax system (IFAC and ACCA, 2019). Lack of trust
in institutions, in turn, hinders action to address inequality. Political institutions that
fail to curb inequalities disenfranchise those segments of the population that may
otherwise push for greater redistribution, including lower- and middle-income groups,
as discussed in chapter 1.
In an historical review of social spending and economic growth, Lindert (2004)
argues that as democracies matured and people were given the right to vote, the
middle classes came to oppose targeted tax spending on programmes for people
living in poverty. Instead, they gave support to social services, social pensions and
comprehensive social insurance that, in principle, addressed the needs of most
members of society. Targeting schemes at people living in poverty can indeed erode
political support for redistribution and result in low funding (Gelbach and Pritchett,
2002). Korpi and Palme (1998) labelled this trend “the paradox of redistribution”,
noting that the more countries targeted redistribution, the less likely they were to
reduce poverty and inequality.
114
Under a universal social policy framework, demand tends to rise for well-functioning
public services and good-quality programmes. Universal policies therefore enjoy
broader public support in the long term. In addition, the empirical literature has failed
to demonstrate that targeted programmes are more cost-effective at reducing poverty
and inequality than universal ones (Ravallion, 2007b; Coady, Grosh and Hoddinott,
2004; Murgai and Ravallion, 2005). Clearly, even in policy frameworks grounded in
universalism, certain segments of the population face greater challenges than others
in overcoming poverty and exclusion. Targeted and other special measures may be
necessary to reach these groups. However, targeted measures work best when they
complement – rather than replace – universal policies (United Nations, 2018a).
Historically, the creation of political coalitions among groups with common
interests helped garner support for redistributive policies. Yet coalitions that proved
essential in the past may be eroding. Piketty (2018) argues that global integration
and the expansion of education have eroded traditional class-based coalitions for
redistribution and have opened new cleavages, namely between groups that support
global integration and those that do not, as well as between educated and wealthy
elites, on one hand, and between different groups of less skilled workers, on the other.
He argues that new egalitarian-internationalist political platforms will be necessary to
unite low-income groups with low education from different backgrounds in support
of redistribution.
INCLUSIVE AND
PARTICIPATORY
POLITICAL
INSTITUTIONS
CREATE CHECKS
AND BALANCES
THAT PREVENT
THE ABUSE
OF POWER
114
Lack of funding for measures targeted at people living in poverty led the American politician and social scientist Wilbur
Cohen to state that “programmes for the poor will most likely be poor programmes” (American Enterprise Institute for
Public Policy, 1972).
INEQUALITY IN A RAPIDLY CHANGING WORLD
163
While broad support for policies that reduce inequality has often followed periods
of social upheaval or economic transformation, political action should not require
extreme circumstances. Institutions and norms that promote open and inclusive
processes create the conditions needed for the reduction of inequality, as do
accountable Governments that encourage such processes. Inclusive and participatory
political institutions create checks and balances that prevent the abuse of power.
They are necessary to avoid violent expressions of social discontent. Although
a comprehensive account of the institutional transformations required is beyond
the scope of this report, an essential rst step is to actively address prejudice
and discrimination.
4. Tackling prejudice and discrimination
Discrimination remains a pervasive driver of inequality. As shown in chapter 1, societies
continue to make distinctions based on ethnicity, race, sex and other characteristics
that should have no bearing on people’s achievements or on their well-being.
The 2030 Agenda calls for eliminating discriminatory laws, policies and practices
and for promoting appropriate legislation, policies and action in this regard
(target 10.3, Goal 10).
Historically, many laws and policies have explicitly limited or denied rights to specic
groups. Democratization and the demand for equal rights have led many Governments
to repeal discriminatory laws and policies that sustain unfair treatment. Most
constitutions now enshrine the principles of equality and non-discrimination. However,
formal discrimination persists. In 2006, for instance, 196 ethnic or religious minorities
worldwide faced some form of overt political discrimination (University of Maryland,
2015; see also box 6.2). According to the World Bank, 104 countries have laws restricting
the types of jobs that women can perform (World Bank, 2018d).
Governments are increasingly implementing legislation designed to prevent
discrimination in areas such as employment, education, health, housing and political
participation. However, the impact of this legislation is mixed, particularly in the case
of measures intended to address discrimination in the labour market (United Nations,
2016a; Marcus Mdee and Page, 2016). Enforcement of anti-discrimination laws is
challenging and often inadequate. Ministries of justice, the police force and other
law enforcement institutions must have signicant administrative capacities, as well
as thorough knowledge of the law and resources, to respond. Meanwhile, acts of
discrimination are grossly underreported. Many people do not know that they are legally
protected against such acts and may not know how to report them.
Beyond repealing discriminatory laws and introducing preventive measures, many
countries have resorted to armative action to favour groups that were discriminated
against in the past. This includes quotas or reservations to improve the representation
of women or minority ethnic groups in decision-making roles, quotas and scholarships
to improve access to education, and preferential treatment in hiring for certain jobs.
115
115
As of 2015, 130 countries had some form of electoral quotas for women (Hughes and others, 2019).
WORLD SOCIAL REPORT 2020
164
Armative action campaigns have been effectively carried out in both developed and
developing countries, especially to increase the responsiveness of Governments to the
needs of women and ethnic minorities (Chattopadhyay and Duo, 2004; Beaman and
others, 2012). However, the implementation of such campaigns can be challenging.
They can generate stigma and, at times, raise tensions among groups rather than
dissipating them. In some cases, quotas have opened opportunities only for women or
members of ethnic minorities of higher socioeconomic status, while leaving those living
in poverty underrepresented (Marcus, Mdee and Page, 2016). The preferential treatment
of some groups over others has also been questioned on the grounds that it violates
the principles of non-discrimination and equal protection for all. Under the international
human rights framework, armative action measures are justied when they present
“reasonable, objective and proportional means to address discrimination”.
116
Beyond these special measures, addressing the root causes of discrimination calls
for structural reforms, starting with the justice system and other national institutions.
Even though justice is fundamental to a fair and inclusive society, most people living
in poverty and those who suffer from discrimination are denied access to it. Ensuring
equal access to justice for all will involve, among other things, promoting campaigns
to enhance legal awareness and literacy, scaling up services to provide advice and
assistance, developing alternative dispute resolution mechanisms and, ultimately,
improving the institutional framework for resolving disputes, conicts and crimes
(United Nations, 2016a; Manuel and Manuel, 2018).
ADDRESSING THE
ROOT CAUSES OF
DISCRIMINATION
CALLS FOR
STRUCTURAL
REFORMS,
INCLUDING
PROVIDING
EQUAL ACCESS
TO JUSTICE FOR
ALL AND REMOVING
OBSTACLES
TO POLITICAL
PARTICIPATION
116
Committee on Economic, Social and Cultural Rights, General Comment No. 20, para. 9.
BOX 6.2
The Rohingya in Myanmar: citizenship denied on the basis of ethnicity
In Myanmar, the Citizenship Law of 1982 states that, in order to become a citizen, an individual
must belong to one of 135 recognized national ethnic groups or prove that their ancestors
settled in the country before 1823 (Minority Rights Group International, n.d.). Citizenship is
therefore based on ethnicity, which is prohibited by numerous international human rights
agreements. Members of the Rohingya minority and other Muslim groups are not included
in the list of recognized ethnic groups and could not document the date of their ancestors’
arrival in the country. As a result, most members of these groups are effectively stateless.
Since 1982, the primary documents held by stateless persons, including the Rohingya, to
conrm their legal residence in Myanmar had been temporary identity certicates. Those
certicates expired in 2015 and the “identity card for nationality verication” that replaced
them has been widely viewed with suspicion. Take-up has been very low and, as a result,
most Rohingya today have no valid identity document. This discriminatory treatment has led
to the denial of other rights, including the right to social security and basic social services.
INEQUALITY IN A RAPIDLY CHANGING WORLD
165
Discrimination challenges the ability of those affected to have their voices heard and
their concerns translated into meaningful action. A key and basic step to promote their
inclusion is to remove obstacles to political participation, including the right to vote.
Creating an enabling environment for social movements and local associations that give
disadvantaged groups a voice and agency to articulate their interests is also important.
These grass-roots movements have traditionally raised and advanced issues that have
subsequently become important priorities for Governments. They have helped avoid
violent expressions of discontent and opened space for dialogue.
C. Reducing inequality in an interconnected world
While the role of Governments and other national stakeholders remains key, high
inequalities within and among countries are a global problem, as are the other
megatrends examined in this report. One country’s action on climate change or
international migration – or lack thereof – has costs and benets for other countries.
The imbalance, for example, between top greenhouse-emitting countries and those
suffering the most from the impacts of climate change, has been well documented.
Decisions taken by one country can also have ramications for other countries through
trade, nance and investment. None of these issues can be addressed unilaterally.
Moreover, in an interconnected world, national policymaking is increasingly constrained
by the decisions of other countries. For instance, Governments have little leeway
in taxation policy when attempts at increasing taxes can be easily undermined by
illicit nancial ows and transnational tax competition. Cross-border trade, nance,
intellectual property rights and ocial development assistance also affect inequality
and require international cooperation.
At this critical time, multilateralism is under attack in many countries and trust in
public institutions is lacking. Although the multilateral order could be more t for
purpose, the current world challenges call for strengthening it, rather than dismissing
its value.
1. A crisis in multilateralism?
In his speech to the General Assembly in September 2018, United Nations
Secretary-General António Guterres stressed that: “Trust is at a breaking point. Trust
in national institutions. Trust among states. Trust in the rules-based global order…
We must repair broken trust. We must reinvigorate our multilateral project.”
117
The
rise of nationalism in various countries, aring trade tensions as well as the diculty
Governments face in reaching global agreements on trade and other issues are
frequently cited as features of this crisis.
118
117
The full speech is available at: https://www.un.org/sg/en/content/sg/speeches/2018-11-09/strengthening-multilateral-
ism-and-role-un-remarks-security-council . Christine Lagarde, former managing director of the International Monetary Fund,
also gave a speech in 2018 in which she called for a “new multilateralism . . . more inclusive –open to diverse views and
voices. It must be more people-oriented – putting human needs rst. And it must be more effective and accountable –
delivering results for all.” This speech is available at https://www.imf.org/en/News/Articles/2018/10/11/sp101218-new-eco-
nomic-landscape-new-multilateralism .
118
For example, see speeches from over 50 national representatives at the United Nations General Assembly’s commemorative
meeting observing the United Nations International Day of Multilateralism and Diplomacy for Peace in 2019 (GA/12140).
Available at: www.un.org/press/en/2019/ga12140.doc.htm .
GLOBAL
CHALLENGES
CALL FOR
STRENGTHENING
THE MULTILATERAL
ORDER, RATHER
THAN DISMISSING
ITS VALUE
WORLD SOCIAL REPORT 2020
166
Empirically, the information available suggests some decline, even within a 10-year
period, in levels of trust or condence in international actors and cooperation at
the global level. According to data from the World Values Survey, the percentage of
respondents who do not have condence in the United Nations, for instance, increased
from 41 per cent in 2000-2004 to 49 per cent in 2010-2014 – while the percentage of
those who trust the institution has remained close to 40 per cent (see gure 6.2).
Recent political trends in many countries indicate that growing sectors of the population
have grievances with political institutions – and those who have them are voicing them
louder, affecting political systems. Research has also shown that people’s level of trust
or condence in national institutions and their trust in international ones go hand in hand
(Armingeon and Ceka, 2014; Dellmuth and Tallberg, 2015; Brewer, Gross and Vercellotti,
2018). Growing concerns that national institutions are not representing the interests of
the majority may be contributing to the sense that global institutions are only serving
powerful economic interests (United Nations, 2019d). Decrease in general support
for the European Union, for instance, has been linked to a decline in trust in national
governments following the 2008 economic and nancial crisis and its negative impact
on the most vulnerable communities (Armingeon and Ceka, 2014; Algan and others,
2017). Indeed, in recent years, populist politicians in various countries have attacked
globalization and multilateralism as an elitist package that has failed to promote the
interests of voters.
An alternative view, however, is that multilateralism is simply undergoing a
transformation due to shifts in relative global economic power and political inuence
in past decades. Grabel (2018) argues that the system governing global nance has
become decentralized since the 2008 nancial crisis. Gradual changes – including
FIGURE 6.2
Percentage of the global population with confidence in the United Nations
0
10
20
30
40
50
60
Percentage
2000-2004 2010-2014
48
40
41
39
16
10
Confident
Not Confident
Don’t know
Source: World Values Survey Wave 4 (2000-2004) and Wave 6 (2010-2014). Available at: www.worldvaluessurvey.org/
wvs.jsp. Accessed on 30 August 2019.
INEQUALITY IN A RAPIDLY CHANGING WORLD
167
the proliferation of bilateral and regional investment treaties – have left global nance
more fragmented and multipolar. This transition may be perceived as a crisis, but it
may also bring opportunities for reform.
The emergence of new multilateral development banks has been interpreted as a
response to the lack of representation of developing countries at the highest levels of
decision-making in established multilateral institutions (Wang, 2017; Suchodolski and
Demeulemeester, 2018).
119
The multilateral framework is indeed likely to change with
the emergence of new economic powers. Whether this leaves multilateral institutions
in crisis will depend largely on how able they are to adapt to the new reality.
2. Revitalizing multilateralism to reduce inequality
Cooperation among countries remains essential for ensuring equitable and inclusive
development – not least because the consequences of rising inequality and
unsustainable growth do not respect national borders.
For many years, the United Nations system has been calling attention to the
asymmetries between the pace of global integration and the prevailing regulatory
framework.
120
Progress in strengthening the international regulatory framework has
been lacking. Yet the multilateral system has been able to galvanize commitment on
important issues and reach ground-breaking global agreements in recent years.
In 2015, world leaders agreed to a sustainable development agenda that is far-reaching
and tackles issues on which there had not been prior consensus. Key among them
is the reduction of inequality, including within countries. In 2013, the World Bank also
adopted “promoting shared prosperity” as one of its twin overarching goals – the
other being to end extreme poverty.
The Addis Ababa Action Agenda – also agreed to in 2015 – set out the means to
implement the SDGs and commits countries to inclusive and equitable development
through global cooperation in various areas.
121
This includes a pledge to enhance
domestic tax systems, combat tax evasion and corruption and reduce opportunities
for tax avoidance and international tax competition that undermines domestic
resource mobilization efforts. It also contains commitments to ensure that borrowing
and lending are sustainable and equitable and lays out the obligations of wealthier
countries regarding ocial development assistance.
The Paris Agreement laid out a global framework to combat climate change and adapt
to its effects through national actions, with enhanced support to assist developing
countries in doing so. Developed-country parties to the United Nations Framework
119
For example, the New Development Bank is a joint venture among Brazil, Russian Federation, India, China and South Africa
to support infrastructure and sustainable development in developing countries. The Asian Infrastructure Investment Bank,
initiated by China and jointly founded by 57 member countries from Asia and elsewhere, focuses on mobilizing resources to
invest in infrastructure in Asia.
120
The International Labour Organization established the World Commission on the Social Dimension of Globalization in 2002
and issued its Declaration on Social Justice for a Fair Globalization in 2008.
121
The Addis Ababa Action Agenda of the Third International Conference on Financing for Development (General Assembly
resolution 69/313).
COOPERATION
AMONG COUNTRIES
REMAINS ESSENTIAL
– NOT LEAST
BECAUSE THE
CONSEQUENCES
OF RISING
INEQUALITY AND
UNSUSTAINABLE
GROWTH DO
NOT RESPECT
NATIONAL BORDERS
WORLD SOCIAL REPORT 2020
168
Convention on Climate Change committed to jointly mobilize $100 billion annually
by 2020 to support the climate nancing needs of developing countries. Multilateral
development banks have also stepped up their efforts to support climate action.
The European Investment Bank recently pledged to shift 35 per cent of its lending
towards sustainable economic activity; the New Development Bank, established by
Brazil, Russian Federation, India, China and South Africa, pledged 66 per cent; and
the Asian Development Bank 75 per cent (Larsen, 2018). These institutions have also
effectively stopped nancing upstream oil and gas, and coal-red power plants. Last
year development banks provided upwards of $35 billion in climate nance.
Most recently, in agreeing to the 2018 Global Compact for Safe, Orderly and Regular
Migration, countries recognized that a cooperative approach is needed to optimize
the overall benets of migration for sustainable, equitable development. The Compact
was also an acknowledgement that addressing the risks and challenges for individuals
and communities in countries of origin, transit and destination will require intensive
multilateral efforts.
Finally, progress has also been made in fostering concerted efforts by international
organizations to support more equitable growth through tax cooperation, as discussed
in section 6.B.
122
Moving from commitments to a sustained reduction in inequality and an equitable
sharing of the benets of development requires concerted efforts and political will.
Despite successes in reducing extreme poverty and infant mortality and expanding
access to education, large regional disparities – as well as disparities among groups –
persist, and many countries are off track on a range of SDGs (United Nations, 2019a).
Recent estimates suggest an additional $2.6 trillion in funding annually would be
required for 155 developing countries to meet the Goals in ve areas – education,
health, roads, electricity, and water and sanitation – by 2030 (Gaspar and others,
2019). The United Nations (2019e) recently called for governments to recommit to
the Addis Agenda and strengthen collective action to address global challenges to
sustainable development. This includes reforming the rules of global trade, addressing
the sustainability of international borrowing and lending, as well as increasing levels
development assistance.
The need for greater international cooperation to broaden and strengthen technology
transfer and diffusion mechanisms remains clear. Bridging the persistent technological
divide among countries will require a more exible approach to international property
rights to enable an easier transfer of technology. It will also require multilateral efforts
to craft new regulatory mechanisms for managing frontier technologies in ways that
do not exacerbate inequalities. These efforts should bring together all stakeholders:
122
A global nancial registry has also been suggested to support progressive taxation (World Inequality Lab, 2017). Tax
and regulatory agencies would be able to check that taxpayers properly report assets and capital income independently
of whatever information offshore nancial institutions are willing to provide. This would also allow Governments to close
corporate tax loopholes by enforcing a fair distribution of tax revenue globally for corporations with increasingly complex
overseas operations.
INEQUALITY IN A RAPIDLY CHANGING WORLD
169
Governments, companies and scientists, as well as civil society and academia. They
must strike a balance between fostering innovation and eciency on the one hand,
and fairness, equality and ethics on the other (United Nations, 2018b). Finally, despite
the efforts of some countries, the world is currently off track in meeting the targets
of the Paris Agreement (UNEP, 2019). Concerted multilateral efforts are required
to avoid the worst consequences of climate change, including rising inequalities.
These efforts may be less forthcoming, however, after the 2017 announcement by
the United States of its withdrawal from the Agreement. Developing countries still
require greater nancial and technological support for adaptation and mitigation. This
will involve the provision of dedicated climate nance to support disaster resilience
and incentivize disaster risk reduction, among other things. It will also mean ensuring
that new technologies to combat climate change are available equitably through
green technology transfer and rethinking the rules on intellectual property rights – to
give Governments the leverage to disseminate these technologies more broadly in
the larger public interest (United Nations, 2019e). All countries need to nd ways to
decouple economic growth from unsustainable production and consumption.
The evidence presented in this report arms the critical role of multilateral action to
address the driving forces of inequality under the global social contract provided by
the 2030 Agenda. Moving from commitment to action requires concerted political
will from national Governments. Multilateral institutions must themselves be fully
committed to government efforts to reduce inequalities. Effectively supporting those
countries that need it the most calls for a more inclusive multilateralism, giving
adequate voice to all regions and to different stakeholders within countries. It means
setting global rules that people can trust – rules calibrated towards shared prosperity
and social, economic and environmental sustainability.
MULTILATERAL
INSTITUTIONS
MUST THEMSELVES
BE FULLY
COMMITTED TO
GOVERNMENT
EFFORTS
TO REDUCE
INEQUALITIES
WORLD SOCIAL REPORT 2020
170
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QUOTE
Copyright © United Nations 2020
All rights reserved
Despite extraordinary economic growth and widespread
improvements in well-being over recent decades,
inequality remains high within and across countries.
Today, powerful economic, social and environmental
forces are affecting inequality. The World Social Report
2020 examines the impact of four such global trends:
technological innovation, climate change, urbanization
and international migration.
Rising inequality is not inevitable, according to the report.
National policies and institutions can help ensure that
the benets of these global trends are broadly shared
and their negative effects do not fall disproportionately
on those who lack the resources to cope and recover.
How these trends are addressed will largely determine
the shape of our common future.
