There are several reasons for this growing problem according to Deborah Hardoon, Sophia Ayele, and Ricardo Fuentes-Nieva, the study’s authors. The first is the disconnect between work and earnings. The share of national income going to workers has been falling while the share of income given to owners and top executives is rising, a phenomenon that can be seen in the stagnant wage figures of workers around the world despite growing corporate profits and productivity.
Persistent patterns of wage inequality, especially among the poorest workers, can seriously damage global efforts to eradicate poverty.
Taxes also play a pretty big role in the discrepancies, according to the report. Wealthy clients can hire financial advisors, accountants, and other pricey professionals to help them navigate the tax system, using loopholes to sock their money away in tax havens. Such efforts have helped keep nearly $8 trillion of money untaxed in offshore accounts, the study finds. Taxing that money isn’t just a matter of fairness, the report argues: The lost public revenues means less money for government programs that aid the poorest and neediest, allowing gaps in education, health care, and quality of life to persist and even grow.
To build an economy that distributes its wealth more evenly, the researchers suggest creating a stronger system of taxation that prevents trillions of dollars from being pulled out of circulation via offshore accounts and allows companies to reduce their tax liabilities via loopholes. The report also suggests that politics needs to change, diminishing the power that companies exercise through tools like lobbying and patents, which can decrease competition and raise prices.
It’s in everyone’s interest to fix the problem of economic inequality, even those who are thriving amid the increasing inequality. The study notes that prolonged periods of a widening wealth gap are bad for entire countries, as they can stunt overall economic growth. In a still-fragile global economy, that threat’s a problem for everyone, not just those suffering at the bottom.