In the 10 year period between 2003 and 2013, the Gini coefficient, a measure used to represent income distribution, of the entire world fell from 69 in 2003 to 65 in 2013. In addition, the world’s average income rose from $1,000 to $2,000. These statistics reveal that income inequality is shrinking overall.
A new paper called, “The Future of Worldwide Income Distribution,” by economists Tomas Hellebrandt and Paolo Mauro of the Peterson Institute for International Economics found that not only has the world’s distribution of wealth become more evenly spread, but even more global equality can be expected in the next 20 years.
By surveying household incomes of over 100 countries that make up the majority of the entire world’s economy, Hellebrandt and Mauro were able to estimate the reduction of poverty by 2035. “To make the comparison fair, incomes in each country are converted into U.S. dollars using PPP (Purchasing Power Parity) exchange rates that take into account differences in the cost of living across countries and so ensure that a dollar of income in India or China can purchase the same value of goods and services as a dollar of income in the United States,” said Hellebrandt.
Hellebrandt and Mauro believe that “rapid growth in emerging-market economies” will be the main force pulling nations out of poverty. As the economy grows in sub-Saharan Africa and China, and with China and India’s residents beginning to have more westernized consumption habits, the gap between the poor and the rich is expected to decrease.
This improvement is much needed as the economists also calculated that around 80 percent of the entire world’s population is below the U.S. poverty line. This is the equivalent of 5.5 billion people. In other words, most people are actually poorer than the poorest living in the U.S.
“With rising incomes in developing and emerging-market economies, hundreds of millions of people will be lifted from abject poverty to ‘working poor’ levels where they can afford a more adequate and varied diet and basic consumer goods, and additional hundreds of millions will move from modest consumption levels to a degree of affluence currently associated with advanced economies,” Hellebrandt and Mauro explain in their paper.
If Hellebrandt and Mauro’s hypothesis is correct, we could be in for an equal, fair and sustainable future.
– Melissa Binns