The global inequality rise is a myth.

[Petrolheadia]

Many people say that the income inequality is rising around the world. To these claims, I raise this image:

(Yes, I know it's from 2008, but there has not been a significant enough change in the global economy since then to heavily change the figures).

As you can see, it disproves the theory that the richest few percent of people have increased their income disproportionately more. Over 4/10s of all people had higher income growth than the richest 1%, and nearly 2/3s of people had higher income growth than the second-richest 1%.

So,,why does the aforementioned theory persist?

1. The people in the slowest-growing and losing percentiles are the poor of developed "Western" nations. The purveyors of the theory are often Westernocentric and assume that the trends happening to the "Western" poor are happening to the global poor.

2. Supporters of the theory have their thoughts heavily infuenced by the "x people have as much as half of all people". However, the x is currently at best less than 1/100,000 of a percent, and these people are complete statistical outliers that have no ability of saying anything about large-scale trends.

So, what do you think? Is the theory really debunked?

[Tinhampton]

(Yes, I know it's from 2008, but there has not been a significant enough change in the global economy since then to heavily change the figures).

Erm... Great Recession, anyone? Eurozone Crisis? Post-Brexit pound devaluation? Are you absolutely sure that the shit the global economy's been in as of late is "not significant enough" a change?

[Petrolheadia]

(Yes, I know it's from 2008, but there has not been a significant enough change in the global economy since then to heavily change the figures).

Erm... Great Recession, anyone? Eurozone Crisis? Post-Brexit pound devaluation? Are you absolutely sure that the shit the global economy's been in as of late is "not significant enough" a change?

It has only heavily affected the higher percentiles (the Westernocentrism I mentioned).

Especially unimportant is the pound devaluation, which affected only one currency, used on an island housing less than 1% of the global population and much less popular than the dollar in international trade.

[Maineiacs]

Erm... Great Recession, anyone? Eurozone Crisis? Post-Brexit pound devaluation? Are you absolutely sure that the shit the global economy's been in as of late is "not significant enough" a change?

It has only heavily affected the higher percentiles (the Westernocentrism I mentioned).

So I'm sure you'll have no trouble sourcing that claim, right?

[Minoa]

The world always craves for more growth. Always more.

[Petrolheadia]

It has only heavily affected the higher percentiles (the Westernocentrism I mentioned).

So I'm sure you'll have no trouble sourcing that claim, right?

Here is the chart for economic growth for some of the largest non-Eurozone or North American economies:


No real long-lasting impact.

[Jamilkhuze]

[region-tag=][/region-tag]The global Gini coefficient (which measures disparities in income) has been decreasing since the start of the 21st century but is still much higher than it was for most of the 20th century.



The calculated Gini index from this source is much higher but displays a similar trend. Their Gini coefficient decreased from 68.7 to 64.9 between 2003 and 2013.

[Petrolheadia]

[region-tag=][/region-tag]The global Gini coefficient (which measures disparities in income) has been decreasing since the start of the 21st century but is still much higher than it was for most of the 20th century.

(Image)

The calculated Gini index from this source is much higher but displays a similar trend. Their Gini coefficient decreased from 68.7 to 64.9 between 2003 and 2013.

The thing is, in the 60s, the Gini was low, because many people were exactly as dirt poor.

Now, a lot are escaping poverty, and the median global income is in the $170-250 range (depending who you ask), which lets one live a decent no-frills life.

[Democratic Mongol Popular State]

You maybe forgot the global market crash that happened right after this graph ended.

[Tule]

Global income is becoming more equal after rising in the 80's and plateauing around the turn of millennium.

However there is no excuse for the dip among the lower classes in the developed world. I suspect the reason is the decline of unions in the English-speaking world and the general change in attitudes there towards civic responsibility.

[Calladan]

As with all things, there are multiple points of view, and multiple ways to present the information.

https://en.wikipedia.org/wiki/International_inequality

In 2014, Oxfam reported that the 85 wealthiest individuals in the world have a combined wealth equal to that of the bottom 50% of the world's population, or about 3.5 billion people

To me, that sounds a tad unequal. But what do I know?

"The top 10% of the U.S. population has an aggregate income equal to income of the poorest 43 percent of people in the world, or differently put, total income of the richest 25 million Americans is equal to total income of almost 2 billion people." (Milanovic 2002, p. 50)

With regard to wealth inequality (researchers defined wealth as the value of physical and financial assets minus debts), a 2006 report with data from 2000 concluded that:
"the top 10% of adults own 85% of global household wealth, so that the average member of this group has 8.5 times the global average holding. The corresponding figures for the top 5%, top 2%, and top 1% are 71% (14.2 times the average), 51% (25 times the average) and 40% (40 times the average), respectively. This compares with the bottom half of the distribution which collectively owns barely 1% of global wealth. Thus the top 1% own almost 40 times as much as the bottom 50%. The contrast with the bottom decile of wealth holders is even starker. The average member of the top decile nearly 3,000 times the mean wealth of the bottom decile, and the average member of the top percentile is more than 13,000 times richer." (Davies et al. 2006, p. 26)

In 2015, figures estimated that 71% of the adults owned under $10,000 in wealth, which accounted for 3% of the global wealth share. At the other end of the scale, 0.7% of the adults owned over $1m in wealth, which accounted for just over 45% of the world's wealth.

https://inequality.org/facts/global-inequality/

So yeah. I think that the claim that global inequality is decreasing really depends on your point of view.

[Petrolheadia]

You maybe forgot the global market crash that happened right after this graph ended.

To be fair, probably every country had some kind of crisis in the 1988-2008 timespan.

And the recent one... well, it's not an economy-totally-torn-down situation, save for a few countries.

[The Widening Gyre]

2. Supporters of the theory have their thoughts heavily infuenced by the "x people have as much as half of all people". However, the x is currently at best less than 1/100,000 of a percent, and these people are complete statistical outliers that have no ability of saying anything about large-scale trends.

It absolutely does matter, since your graph is measuring percent growth after all. That a Chinese middle class is able to increase its income from $5000 to $7500 is great, but those 95th through 99th percentilers are also getting growth from, say, $750 000 to $1 130 000 (just to throw out numbers for comparison) during that same period. Which is the crux of the issue - those Chinese middle class people and the global poor could (and that's another thing) keep their incomes growing at a rapid rate for a very long time and still never catch up to those upper percentiles.

[Petrolheadia]

As with all things, there are multiple points of view, and multiple ways to present the information.

https://en.wikipedia.org/wiki/International_inequality

In 2014, Oxfam reported that the 85 wealthiest individuals in the world have a combined wealth equal to that of the bottom 50% of the world's population, or about 3.5 billion people

To me, that sounds a tad unequal. But what do I know?

"The top 10% of the U.S. population has an aggregate income equal to income of the poorest 43 percent of people in the world, or differently put, total income of the richest 25 million Americans is equal to total income of almost 2 billion people." (Milanovic 2002, p. 50)

With regard to wealth inequality (researchers defined wealth as the value of physical and financial assets minus debts), a 2006 report with data from 2000 concluded that:
"the top 10% of adults own 85% of global household wealth, so that the average member of this group has 8.5 times the global average holding. The corresponding figures for the top 5%, top 2%, and top 1% are 71% (14.2 times the average), 51% (25 times the average) and 40% (40 times the average), respectively. This compares with the bottom half of the distribution which collectively owns barely 1% of global wealth. Thus the top 1% own almost 40 times as much as the bottom 50%. The contrast with the bottom decile of wealth holders is even starker. The average member of the top decile nearly 3,000 times the mean wealth of the bottom decile, and the average member of the top percentile is more than 13,000 times richer." (Davies et al. 2006, p. 26)

In 2015, figures estimated that 71% of the adults owned under $10,000 in wealth, which accounted for 3% of the global wealth share. At the other end of the scale, 0.7% of the adults owned over $1m in wealth, which accounted for just over 45% of the world's wealth.

https://inequality.org/facts/global-inequality/

So yeah. I think that the claim that global inequality is decreasing really depends on your point of view.

You are talking about wealth of the top percentiles, which is going to be disproportionate, as they are rich enough to buy, not rent, own large companies, as opposed to lower percentiles' work for other companies, and had time to accumulate wealth, as opposed to a lot of the global population only recently getting income above subsistence level.

Also, 25 million is 1/3rd of a percentile. And I'm not even going to talk about 85...

[New haven america]

(Yes, I know it's from 2008, but there has not been a significant enough change in the global economy since then to heavily change the figures).

I stopped reading there.

[Petrolheadia]

2. Supporters of the theory have their thoughts heavily infuenced by the "x people have as much as half of all people". However, the x is currently at best less than 1/100,000 of a percent, and these people are complete statistical outliers that have no ability of saying anything about large-scale trends.

It absolutely does matter, since your graph is measuring percent growth after all. That a Chinese middle class is able to increase its income from $5000 to $7500 is great, but those 95th through 99th percentilers are also getting growth from, say, $750 000 to $1 130 000 (just to throw out numbers for comparison) during that same period. Which is the crux of the issue - those Chinese middle class people and the global poor could (and that's another thing) keep their incomes growing at a rapid rate for a very long time and still never catch up to those upper percentiles.

Except that the graph shows that if you are above the 7th percentile, but below the 72nd, you are easily outrunning the 99th in income growth.

(Yes, I know it's from 2008, but there has not been a significant enough change in the global economy since then to heavily change the figures).

I stopped reading there.

You might have never heard about it, but, surprise, surprise, the 2008 crisis wasn't the only one in the last 30 years.

[The Widening Gyre]

Except that the graph shows that if you are above the 7th percentile, but below the 72nd, you are easily outrunning the 99th in income growth.

In percent growth of their existing incomes, not amounts of money. Again that Chinese middle class family is going from $5000 to $7500... but that 99th percentile group is going from $750 000 to $1 130 000. In real terms this means that the vast majority of the wealth generated by that growth between the 80's and 2008 is not going towards those Chinese middle class families, but rather into the hands of those 95th+ percentiles. This is why use amounts of money rather than percent growth to measure inequality, since growth rates can be misleading by themselves.

[Cannot think of a name]

You know what goes great with graphs? Context.

[Calladan]

You know what goes great with graphs? Context.

And the last decade.

[Neu Leonstein]

And the last decade.

I think all this complaining about the last decade is missing the point the OP was trying to make. On a global scale, if you didn't worry about borders and just lined up every person in the world from poorest to richest, inequality is down by most measures (with a caveat discussed below). That's because poorer countries have grown faster and in a more inclusive way than they had over most of the second half of the 20th century.

If there have been crises in the past decade in the countries in which most of the richer folks live, then if anything the overall inequality ought to have been brought down by that. Because we know that growth in places like China, India, South East Asia and Africa hasn't been affected by the GFC or the euro area sovereign debt crisis in such a lasting way. For them it was a short shock to global trade that hurt, but it didn't cause the sort of structural lasting damage that some of the developed economies saw. You can sort of see that here.

Hammar & Waldenström (2017)

As you can see on the graph, the question of inequality within any given country is a separate one. The implications and policy responses are different ones, and so it makes sense to separate the two debates.

The caveat:
I'm talking relative income inequality here. So how many times do you need the poor person's income to get the rich person's income. As discussed in more detail here, that misses the absolute difference between incomes a little bit. Their example is this:

As one of us (Finn Tarp) recently explained in an interview, take the case of two people in Vietnam in 1986. One person had an income of US$1 a day and the other person had an income of $10 a day. With the kind of economic growth that Vietnam has seen over the past 30 years, the first person would now in 2016 have $8 a day, while the second person would have $80 a day. So if we focus on ‘absolute’ differences, inequality has gone up, while a focus on ‘relative’ differences suggests that inequality between these two people has remained the same.

Which is more important? I'm not sure. Which one you care about probably depends on your underlying philosophical outlook.

[Constantinopolis]

In addition to what everyone else has said, the graph in the OP does actually show that the incomes of the rich have grown faster than the incomes of the poor. It's only the ultra-rich and ultra-poor who have gone in the opposite direction from this trend.

[Autenon]

The others have made my points for me well enough, so I just want to address this one graph in particular.

So I'm sure you'll have no trouble sourcing that claim, right?

Here is the chart for economic growth for some of the largest non-Eurozone or North American economies:


No real long-lasting impact.

Your chart conveniently caps at 2011. Since then... well, I'm Russian and I can assure you we have meteoric inequality. All the other countries bar China and India have gone into recession for one reason or another.

[Frank Zipper]

I don't think one graph can show enough to accurately capture what is happening. Overall there has been some catching up; there are a lot fewer extremely poor people in the world, there are still poor people but their incomes have risen to bring them closer to the US and Europe. In the developed world there is a squeeze on the middle, as shown in the OP's graph.

The problems faced in the newly industrialising countries is that the gains they have made, through following the traditional development route of being cheap labour for manufacturing, may disappear abruptly with automation. In the US and Europe the problem will be whether the benefits of automation are kept within a small group, or whether they are shared more widely. If they are not shared, the very wealthy, with $50 million or more, will make rapid gains while everybody else gets left behind.

That's my interpretation anyway.

[Calladan]

How is GDP helpful? Does it show you the beggers scrabbling about in the rubbish tips looking for food and going back to their piece of tarpaulin when it starts raining, staring up at the sky scrapers where someone throws away an entire plate of food because one shrimp was "slightly funny looking?"

Of course if you look on a global scale things might look as if they are getting better, because you can ignore all the piddling little inconsistencies as "statistically unimportant".

But how about you look at the gaps in each country. Say - the gap in America between the richest 10% and the poorest 10%, then in India, then in Brazil. Not at whether EVERYONE has got richer, but the gap between how much MORE rich the richer have got, and how much MORE rich the poorer have got.

Then (and while I don't know the figures, I would be surprised if I am wrong on this) tell me that the global inequality rise is a myth.

[Neu Leonstein]

Your chart conveniently caps at 2011. Since then... well, I'm Russian and I can assure you we have meteoric inequality. All the other countries bar China and India have gone into recession for one reason or another.

Yeah, but you've gotta look at that in perspective: https://fred.stlouisfed.org/graph/?g=etus

That graph shows real GDP by countries, indexed to 100 in 2000 to make it easier to see relative performance. Every country starts with 100, and if country A grows at 6% in between years 0 and 1, it'll show up with 106 in year 1. By 2016 the US is at 116, Europe and Japan at 112. Russia is at 171, India is at 244, Ethiopia at 260 and China at 389. Even real disappointments like Brazil are at 123, so well ahead of the developed countries.

As I said above, what happened to inequality within those countries is a different story. But on average, incomes in the developing world and middle income economies have improved at a faster rate than in developed countries.