Overview

  • The World Bank Group has two clear goals: to end extreme poverty globally and to boost shared prosperity in every country. Promoting shared prosperity means that we will work to increase the incomes and welfare of the poorer segments of society wherever they are, be it the poorest of nations or thriving middle- or high-income countries. This indicator departs from the traditional focus on growth of the average income of the population—an approach that implicitly assumes that economic growth automatically trickles down to the poor.

    The latest data show that in 60 of the 83 countries studied, the bottom 40 percent of the income distribution experienced positive income growth between 2008 and 2013, representing 67 percent of the world’s population. In 49 countries, the income growth of the bottom 40 exceeded that of the top 60. East Asia and Pacific and Latin America and Caribbean tended to perform better, but, there was large variance, especially in Europe and Central Asia and among industrial countries.

    The shared prosperity goal reflects the fact that as developing countries grow their economies and lift millions out of poverty, they may also experience growing inequality. We now know that nations with a widening gap between those who can and cannot access opportunities in life have difficulty sustaining economic growth and social stability over time. To date, no country has managed to transition beyond middle-income status while maintaining high levels of inequality. Inequality reduction today matters for opportunity and mobility tomorrow, and for the next generation.

    Without a significant reduction in inequality, especially in countries with high poverty and inequality, the world will not meet its goal to end extreme poverty by 2030. Inequality between all people in the world has declined since 1990, and although within-country inequality is still higher today than 25 years ago, in the last number of years, for every country in which inequality widened, there were two countries in which inequality narrowed.

    In far too many places, however, inequality remains unacceptably high, and the increasing share of income going to the top 1 percent of earners is of great concern. Inequality is not an inevitable consequence of economic growth. In fact, long-term growth and social stability are two important reasons to focus on equity. A stronger focus on faster inequality reduction, especially in countries with high inequality and large numbers of poor people, will further enhance the power of economic growth to translate into poverty reduction and better opportunities for all. 

    Last Updated: Sep 24,2018

  • To reduce inequality and promote shared prosperity, progress must be sustained over time and across generations. Progress over the last 25 years shows us that inequality is not inevitable and that countries can make deliberate policy decisions to combat inequality and improve the lives and opportunities of the poorest. In many cases, this will require fiscal, social, and labor market reforms that help create a more inclusive and prosperous society.

    While there is not just one way to reduce inequality, some common lessons from successful countries and several interventions are proven to help. Countries under widely different circumstances have shown that a combination of good policy choices – sound macroeconomic foundations, sustaining growth, and strong labor markets – and favorable external factors have contributed to progress in reducing inequality.

    Six policy areas have shown to be effective in reducing inequality. They offer very few trade-offs between equity and efficiency and have worked repeatedly in different settings around the world. They are by no means the only paths to reduce inequality, but they are those for which researchers have the most compelling body of evidence.

    • Early childhood development and nutrition interventions 
    • Universal health coverage 
    • Universal access to quality education 
    • Cash transfers to poor families 
    • Rural infrastructure -- especially roads and electrification 
    • Progressive taxation

    At the World Bank Group, we are particularly concerned with inequality of opportunity, which reflects differences in circumstances outside an individual’s control. Inequality of opportunity is both unfair and inefficient. It prevents people from reaching their aspirations and can threaten social cohesion, while also having real consequences for growth and poverty reduction in countries at all levels of development.

    Recently, findings from a World Bank report, which looks at data covering most of the developing world and about 95 percent of the world’s population, notes that the social status of one’s parents is as influential today as it was 50 years ago in determining what run of the economic ladder a person will occupy. The report finds that increases in education from generation to generation have stalled over the last half-century and low levels of upward mobility are particularly pronounced in the developing world, especially in Sub-Saharan Africa.

    That is why the World Bank’s work to support governments in fostering more equitable and inclusive societies cuts across all our program areas. It touches on the policy areas listed above along with others including gender, governance, and improved access to basic services and jobs, among others.

    It is crucial to work closely with our country clients to ensure that the projects the Bank finances benefit the less well-off and provide equalizing opportunities where there are few or none.

    We anchor all of our country engagements in the latest available evidence, laying out clearly the opportunities for and barriers to poverty reduction and shared prosperity in each of our partner countries through the Systematic Country Diagnostic. We use empirical data and conduct poverty and social impact analyses (PSIA) to assess how projects affect vulnerable groups in society. The Bank’s Human Opportunity Index (pdf), initially developed for the Latin American and Caribbean region, is now used to measure gaps in access to basic services in Africa and beyond.

    Last Updated: Sep 24,2018

  • Here are a few examples of projects we support to help nations become more inclusive:

    • In one of the poorest provinces in Lao PDR, a project is improving basic health care services for women and children and in five years, it is expected to benefit one million women and children 
    • One in four Latin Americans identify themselves as people of African descent. Even though there have been significant gains over the past decade, Afro-descendants still are overrepresented among the poor. A new World Bank report aimed to deepen the understanding of the drivers behind the persistent exclusion of the Afro-descendants and improve opportunities and access to services and markets for excluded groups in ways that respect their views and aspirations.
    • A World Bank program in El Salvador has focused on ensuring social inclusion of the vulnerable segments of the population while building foundations for inclusive growth. The program has helped provide income support to more than 40,000 beneficiaries in poor urban areas and has also included activities to promote opportunities for the urban poor by providing skills training and organizing employment fairs, among others.   
    • Namibia’s current fiscal policies have made an impact on inequality, lifting about 118,000 people out of extreme poverty in 2009-2010, according to a joint report by the Namibia Statistics Agency and the World Bank. Although Namibia’s spending on health and education drove the reduction in poverty, it could do more through better targeting and consolidation of social programs.  
    • South Africa is facing the triple challenge of high poverty, inequality, and unemployment, despite much progress made by the government in tackling this challenge. A new World Bank report found that accelerating poverty and inequality reduction in South Africa will require a combination of policies that promote inclusive growth through boosting access to education and skilled jobs creation.
    • Chile faced the challenge of unequal access to quality education. Students of lower socioeconomic status were occasionally denied admission to primary education in better-quality schools and poor students weren’t able to afford tertiary education. Working with the government, the World Bank designed a project that promoted equal opportunities in education and strengthened institutions for poverty measurement. As a result, nearly 49,000 students received full scholarships for their tertiary education. And the lowest grade in each school receiving public funding rolled out a centralized, regulated admission system that saw 75 percent of applicants receiving their first preference for school admission.

    Last Updated: Sep 24,2018

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1818 H Street, NW Washington, DC 20433
Elizabeth Howton
ehowton@worldbankgroup.org