Global wage inequality is expected rise, and economic growth is expected to slow, between now and 2060, according to a new report form the OECD.
The report points out that widening earnings gap, “rising capital incomes (which tend to be highly concentrated), less redistributive tax and benefit systems, and changing household formation patterns,” have all contributed to rising inequality in recent decades.
“Rising inequalities threaten growth, most notably by blocking economic opportunities,” according to the press release. The OECD projects that earnings inequality could grow between 17-40% by 2060.
“Assuming that historical trends and relationships prevail – while GDP and educational attainment grow in line with the long-term growth projections — the widening of earnings dispersion would accelerate slightly to 0.6% in the central scenario over the coming 50 years, as the moderating effects of improvements in educational attainment on inequality will further diminish due to progressively slower human capital accumulation.”
Global GDP growth is expected to grow by an annual average rate of 2.7% in 2030-2060, according to the report. This is much lower than the annual average 3.6% growth from 2014-2030, “owing to decreasing potential for catching-up, slower increases in human capital stocks, and shrinking labour forces.”
The report argues that there need to be significant changes in policy to help workers learn key skills in order to lower inequality. Without these changes OECD countries could see inequality levels close to what we have in the U.S. today.