This working paper: (i) provides an overview of global, regional and national income inequalities based on the latest distribution data from the World Bank, UNU-WIDER and Eurostat; (ii) discusses the negative implications of rising income inequality for development; (iii) calls for placing equity at the center of development in the context of the United Nations development agenda; (iv) describes the likelihood of inequalities being exacerbated during the global economic crisis; (v) advocates for urgent policy changes at national and international levels to ensure a “Recovery for All”; and, (vi) to serve as a general reference source, Annex 2 provides a summary of the most up-to-date income distribution and inequality data for 141 countries.
Using different estimation models, we find a world in which the top 20 percent of the population enjoys more than 70 percent of total income, contrasted by two paltry percentage points for those in the bottom quintile in 2007 under PPP-adjusted exchange rates; using market exchange rates, the richest population quintile gets 83 percent of global income with just a single percentage point for those in the poorest quintile. While there is evidence of progress, it is too slow; we estimate that it would take more than 800 years for the bottom billion to achieve ten percent of global income under the current rate of change. Also disturbing is the prevalence of children and youth among the poorest income quintiles, as approximately 50 percent are below the $2/day international poverty line.
Middle-income countries appear the most unequal. Gini index trends show that Eastern Europe/former Soviet Union and Asia had the largest increases between 1990 and 2008. Latin America remains the region with the highest level of income inequality, although the region is marked by significant improvement since 2000. Low-income countries show mixed results; Sub- Saharan Africa is highly unequal but appears to have reduced its Gini index by almost five points, on average, since 1990.
Overall, the extreme inequality in the distribution of the world’s income should make us question the current development model (development for whom?), which has accrued mostly to the wealthiest billion. Not only does inequality slow economic growth, but it results in health and social problems and generates political instability. Inequality is dysfunctional, and there is a grave need to place equity at the center of the development agenda. As an alternative, the paper summarizes the United Nations development agenda, which aims to strike the right balance between growth and equitable development progress.
In the context of the global economic crisis, the paper argues that the urgency for equitable policies has never been greater. In particular, current trends in employment, commodity prices and government spending suggest that income inequalities are likely to be exacerbated during 2011. The paper concludes by advocating for urgent policy actions at national and international levels to ensure a “Recovery for All” that is focused on pushing up the bottom billions.