Pandemic-fueled inequality shows world’s top 10% owning 190 times that of poorest 50%

Posted on : 2021-12-09 17:18 KST Modified on : 2021-12-09 17:18 KST
The World Inequality Report 2022 shows the pandemic has led to a greater disparity in wealth and income across the world
Cover of the World Inequality Report 2022 (courtesy of the World Inequality Lab)
Cover of the World Inequality Report 2022 (courtesy of the World Inequality Lab)

Inequality has worsened around the world since the COVID-19 pandemic erupted last year.

Research shows the wealthiest 10% accounting for 75.5% of total global wealth, compared with just 2% owned by the bottom-earning 50%. The proportion of wealth owned by the top-earning 10% has risen by 0.4 percentage points from its 2019 pre-pandemic level, while the wealth of the bottom-earning 50% has remained stagnant.

An examination Wednesday of the “World Inequality Report 2022” published by the World Inequality Lab, with participating authors including professor Thomas Piketty from the Paris School of Economics, showed that global inequality has grown even more pronounced — with wealth inequality showing an even more severe trend than income inequality.

The top 1% were found to account for 37.8% of total global wealth, while the top 10% accounted for 75.5% of it. The proportions were up by 0.7 and 0.4 percentage points, respectively, when compared with 2019 figures.

In contrast, the proportion of wealth owned by the bottom 50% remained stagnant at 2%.

The wealth of the top 10% averaged around 550,900 euros (US$771,300), while the poorest half of the population averaged just 2,900 euros (US$4,100) — a roughly 190-fold difference.

The world’s ultra-wealthy were found to have enjoyed particularly huge growth in their wealth over the period under examination. While global wealth as a whole grew by an annual average of just 1% between 2019 and 2021, the wealth of the top 0.01% rose by an annual average rate of over 5%.

The top 0.01% were found to own an average of 81.7 million euros (US$92.6 million) in assets, accounting for 11.2% of the global total.

According to the report, the state of wealth inequality stems from differences in the respective rates of increase for the top and bottom segments — a disparity that has deepened during the pandemic.

“In fact, 2020 marked the steepest increase in global billionaires’ share of wealth on record,” it noted.

It is for this reason that Oxfam and other international civic groups have taken to referring to COVID-19 as the “inequality virus.”

South Korea has been no exception. According to the report, the top 1% accounted for 25.4% of wealth there, while the top 10% accounted for 58.5%.

Both proportions were up by 0.1 percentage point from their levels two years earlier in 2019. The bottom 50% in South Korea remained in place at 5.6%.

For 2021, the top 1% was calculated as owning an average of 4.57 million euros (US$5.18 million) in assets, while the top 10% owned an average of 1.05 million euros (US$1.19 million).

For the bottom 50%, the average was just 20,200 euros (US$22,897).

“Inequality levels have increased in the last 30 years, with the middle class and working classes recording a slight decline in their share of total wealth, to the benefit of the top 10%,” the report observed for South Korea.

Income inequality also worsened at the global level. In 2021, the top 10% took in 52.2% of global income. In contrast, the bottom 50% accounted for just 8.5% of income.

While there was no change in the portion of income represented by the top 1% and 10% between 2019 and 2021, the portion represented by the bottom 50% fell by 0.1 percentage points.

The poorest 50% were found to make 2,800 euros (US$3,920) per year, compared with 87,200 euros (US$122,100) for the wealthiest 10%.

When measured at purchasing power parity, the average income for adults this year came out to 16,700 euros (US$23,380).

The report noted that the global T10/B50 income gap ratio stood at 38 as of 2020, meaning that the average income of the top 10% is 38 times higher than the average income of the bottom half.

“Global inequalities seem to be about as great today as they were at the peak of Western imperialism in the early 20th century,” the report said.

In South Korea, the situation was found to be better than the global average, but with a pronounced skewing of income toward the top earners. The top 1% had an average income of 485,200 euros (US$550,040), representing 14.7% of income, while the average for the top 10% was 153,200 euros (US$173,669), accounting for a 46.5% share of the total.

The average income for the top 10% was 14 times higher than for the bottom 50% — an even bigger gap than in France (seven times), Italy (eight), the UK (nine), or Germany (10).

“South Korea is one of the four ‘Asian Tigers’ which underwent rapid industrialization and economic development between the 1960s and the 1990s. This development came with liberalization and deregulation economic policies in a context of weak social protection,” the report said.

“As a result, inequality grew substantially over the period, the top 10% share rising from 35% to 45% since 1990, at the expense of the bottom 50% which dropped from 21% to below 16%,” it continued.

The report stressed the importance of progressive taxation policies, concluding that the worsening inequality in South Korea and around the world was “a political choice, not an inevitability.”

“Given the large volume of wealth concentration, modest progressive taxes can generate significant revenues for governments,” it said, adding that “global incomes could be generated and reinvested in education, health and the ecological transition.”

Stressing that “addressing the challenges of the 21st century is not feasible without significant redistribution of income and wealth inequalities,” the report observed that the “rise of modern welfare states in the 20th century [. . .] played a critical role in order to ensure the social and political acceptability of increased taxation and socialization of wealth.”

“A similar evolution will be necessary in order to address the challenges of the 21st century,” it suggested.

By Lee Jeong-hun, staff reporter

Please direct questions or comments to [english@hani.co.kr]

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