The UK’s House of Commons library has produced projections claiming that the world’s richest 1% are on course to control as much as two-thirds of the world’s wealth by 2030. From The Guardian:
Since 2008, the wealth of the richest 1% has been growing at an average of 6% a year – much faster than the 3% growth in wealth of the remaining 99% of the world’s population. Should that continue, the top 1% would hold wealth equating to $305tn (£216.5tn) – up from $140tn today.
Analysts suggest wealth has become concentrated at the top because of recent income inequality, higher rates of saving among the wealthy, and the accumulation of assets. The wealthy also invested a large amount of equity in businesses, stocks and other financial assets, which have handed them disproportionate benefits…
The research was commissioned by Liam Byrne, the former Labour cabinet minister, as part of a gathering of MPs, academics, business leaders, trade unions and civil society leaders focused on addressing the problem…
World leaders are being warned that the continued accumulation of wealth at the top will fuel growing distrust and anger over the coming decade unless action is taken to restore the balance…
Danny Dorling, professor of geography at the University of Oxford, said the scenario in which the super-rich accumulated even more wealth by 2030 was a realistic one.
“Even if the income of the wealthiest people in the world stops rising dramatically in the future, their wealth will still grow for some time,” he said. “The last peak of income inequality was in 1913. We are near that again, but even if we reduce inequality now it will continue to grow for one to two more decades.”
The growing concentration of income and wealth into the hands of the few is likely to be augmented by rising automation, which is expected to make many lower-skilled working and middle-class jobs obsolete, while enriching those with specialist skills, as well as the owners of capital. As noted by Bain & Company’s Macro Trends Group last month:
Our analysis shows automation is likely to push output potential far ahead of demand potential. The rapid spread of automation may eliminate as many as 20% to 25% of current jobs—equivalent to 40 million displaced workers—and depress wage growth for many more workers… hitting middle- to low-income workers the hardest…
The benefits of automation will likely flow to about 20% of workers—primarily highly compensated, highly skilled workers—as well as to the owners of capital. The growing scarcity of highly skilled workers may push their incomes even higher relative to lesser-skilled workers. As a result, automation has the potential to significantly increase income inequality and, by extension, wealth inequality…
As automation technologies spread, we expect employment and wage growth to be concentrated in jobs that require high social and analytical skills—jobs that are already relatively highly compensated today. Workers in mid- to low-skill roles who rely on physical labor or analytical skills vulnerable to automation are at higher risk of losing their jobs or facing pressure on wages…
In addition to job loss and wage suppression, automation may also increase income inequality by increasing the share of income going to profits vs. wages. The share of income produced by labor already is declining, and with automation, it likely will fall further (see Figure 36)…
Automation eliminates or replaces many routine tasks performed by people at work. Research shows a growing polarisation in the job market, where highly skilled and educated workers are commanding good jobs, while those in unskilled roles or positions with lower levels of education required are low paid.
Given that highly skilled workers are in high demand, these workers are more likely to receive the financial gains from automation or others in mid or senior level managerial roles. Indeed, CEO compensation has been growing much faster than average workers’ wages.
The ratio of CEOs’ pay to workers’ average pay in large US corporations was 20:1 in 1965, and it rose to a whopping 271:1 in 2016. What these signs point to is that those with less bargaining power are less likely to reap the rewards from productivity gains from automation.
Without action by governments to spread the gains more evenly, fringe political movements like Brexit, Donald Trump, and One Nation at home will likely continue to rise. It’s a class war.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
