Global Trends 2020

Growing inequality and opportunity

Despite rising global prosperity over the last few decades, division between wealthy and poor is growing. Rising living, housing and education costs are also making middle-class expectations difficult to accessin the west. Millennials are 10 percentage points less likely to sit in the same economic bracket than Baby Boomers were at their age.20 This trend is changing the world: while in the west the middle class is shrinking, in Asia and Africa the trend is reversed. By 2030, two-thirds of the middle-class population will live in Asia.21

Automation will change the labour market, and it is unlikely to benefit the poor. While technology may change work-life patterns, facilitating more flexibility and freedom, it will remove jobs from the economy in the medium term. Academics have predicted that on average, each new robot will remove 1.6 jobs.22 Indeed, the World Economic Forum states that some studies suggest 50% of workers risk losing jobs to automation; with the less educated and minorities at highest risk.23

In the west, the ‘loss of future’ is dramatic. In Britain in 2003, only 12% expected their children to be poorer than them, now it is 45% – a massive change. And Britain is less pessimistic than some other European countries!

Automation triggers a larger issue: the benefits of technology are not trickling down. We are more likely to work into our twilight years and, in some countries, the twilight hours. The move away from final-salary pensions to defined contribution schemes has made early retirement less feasible – delaying it for many.24 State retirement ages have also increased. In America and Britain, hours worked have increased since the 2000s – particularly among higher-income workers.25 In Japan, where working hours are some of the longest in the world, there is a term for death by overwork: ‘karoshi’.26 Long days are not necessarily translating into high productivity; Japan’s productivity is the lowest among G7 countries.27

However, there is growing opportunity. More liberal values globally are providing opportunities for women, and the world has made progress on cutting the education gap between men and women.28 While women remain at a disadvantage, particularly in developing countries and in tertiary education, there has been significant improvement. In south Asia, girls can now expect to receive twice as many years of education as in 1990.29 Improving education for women has a direct economic impact; it is projected that, in India, if one per cent more girls enrolled in secondary school, it would result in a $5.5 billion increase in GDP.30

‘Leapfrogging,’ the theory that emerging markets may be able to rapidly grow their economies through capitalising on existing technological innovations, also represents opportunity. The United Nations hopes that frontier technologies may represent an even playing field for all countries.31 Investment will be necessary to ensure the infrastructure exists to support this technology, but whether rapid or not, economies are likely to grow.

Long days are not necessarily translating into high productivity; Japan’s productivity is the lowest among G7 countries

Around the world, the living standards of many of the poorest have been improved through globalisation, yet wealth remains concentrated among the few. This is particularly concerning in countries such as India, where extreme poverty still exists and state systems of support are not comprehensive. Healthcare costs push almost two Indians into poverty every second, while it is estimated that there will be 70 new millionaires every day until 2022.32

Technology has changed the fabric of our world, but it has not changed the structure of it. The lines of income inequality are deepening. While Asia and Africa enter their prime, the west continues to wrestle with its productivity paradox – and social consequences of the loss of an expected future of rising prosperity.

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