Abu Dhabi, UAETuesday 31 March 2020

Fixing inequality can provide 4.4% boost to global economic growth by 2030, WEF says

China, US, India, Japan and Germany have the most to gain from boosting social mobility

The World Economic Forum 50th Annual Meeting in Davos is held from January 21 to 24, 2020. WEF's latest report shows that few economies have adequate conditions to foster social mobility. AFP. 
The World Economic Forum 50th Annual Meeting in Davos is held from January 21 to 24, 2020. WEF's latest report shows that few economies have adequate conditions to foster social mobility. AFP. 

Increasing social mobility, a major driver of income equality, can boost the global economy's growth by almost 4.5 per cent over the next decade, according to the World Economic Forum.

Five countries that stand to benefit most from upward social mobility—defined as providing people with equal opportunities to raise their living standards regardless of socio-economic background -- are China, the US, India, Japan and Germany, according to WEF's Social Mobility Report 2020 on January 20.

“The social and economic consequences of inequality are profound and far-reaching: a growing sense of unfairness, precarity, perceived loss of identity and dignity, weakening social fabric, eroding trust in institutions, disenchantment with political processes, and an erosion of the social contract," Klaus Schwab, founder and executive chairman of WEF, said. "The response by business and government must include a concerted effort to create new pathways to socioeconomic mobility, ensuring everyone has fair opportunities for success."

The report measures 82 economies against five key criteria that are required for creating social mobility: Health, access to and quality of education, technology, work conditions and inclusive institutions. The findings come as protests against economic hardship and inequality recently rocked countries from Lebanon to Chile.

Developed and emerging economies are particularly lagging in four key areas: low wages, lack of social protection, inadequate working conditions, and poor lifelong learning systems for workers and the unemployed, according to the report.

If these economies lift their social mobility score by 10 points, global GDP would increase 4.4 per cent by 2030.

This requires a new set of public investments paired with a shift in business practises that includes merit-based hiring, providing vocational education, "reskilling", "upskilling", improving working conditions and paying fair wages.

The top 10 most socially-mobile countries in the world are all European countries, according to WEF's Global Social Mobility Index Ranking 2020. The top five spots are led by Scandinavian countries Denmark, Norway, Finland, Sweden and Iceland.

Among G7 countries, Germany is the most socially mobile, followed by France and Canada.

China will benefit the most from increasing social mobility, with its economy potentially gaining an additional $103 billion (Dh378bn) a year, or $1 trillion in a decade.

The US economy would make the second-largest gains, at $87bn a year. Next is India, followed by Japan, Germany, Russia, Indonesia, Brazil, the UK and France.

More importantly, intangible benefits include social cohesion, stability and better opportunity for more people to fulfil their potential, the report said.

To boost social mobility, WEF called for "stakeholder capitalism" whereby countries focus on effective social policies that benefit communities and provide a platform for competitive economies.

The report urged countries to adopt a new financing model that includes policies addressing wealth concentration and broadly rebalancing the sources of taxation, as well as a mix of public investment and policy incentives focused on social spending.

WEF also called for improvements in the availability, quality and distribution of education programmes as well as promoting skills development throughout people's working life.

Finally, it advocated for a social contract that offers protection to all workers irrespective of their employment status, particularly at a time of technological change and industry transitions, requiring greater support for job transitions in the coming decade.

Updated: January 19, 2020 04:08 PM

SHARE

SHARE

Most Popular