The goals of the World Bank Group are to end extreme poverty and promote shared prosperity. Promoting shared prosperity means that we will work to increase the incomes and welfare of the bottom 40 percent of society wherever they are, be it the poorest of nations or thriving middle- or high-income 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 rates of poverty and inequality, the world will not meet its goal of ending extreme poverty. While living standards of the bottom 40 percent in countries all over the world have improved in the last decade, the latest data show the picture is mixed at best. Out of 91 economies for which data was available for 2012-2017, 74 had positive shared prosperity, meaning that growth was inclusive and the incomes of the poorest 40 percent of the population increased. 53 had a positive shared prosperity premium, meaning that growth benefited the poorest more than the entire population. Average global shared prosperity (growth in the incomes of the bottom 40 percent) was 2.3 percent for 2012-2017. But the gains are uneven: Shared prosperity and shared prosperity premiums are lower on average in fragile and low-income economies than in middle-income economies. The global pandemic is likely to reduce shared prosperity and the shared prosperity premium.
COVID-19 (coronavirus) has led to a massive collapse in growth as economies around the world have imposed severe containment measures to control the spread of the virus. These demand and supply shocks have spilled across borders, hampering trade and shrinking economic activity globally. A preliminary outlook projects that the global COVID-19 pandemic will reduce shared prosperity and the shared prosperity premium for most countries in coming years with the likely consequence, based on the patterns of shared prosperity from recent years, of increases in poverty and inequality in the near future. There is considerable uncertainty about how long the current recession will last, and thus how large the reduction in shared prosperity will be. Moreover, existing evidence indicates the least well-off and most vulnerable members of society are disproportionately affected.
Across all 124 economies assessed, about 40 percent of females and males are in the bottom 40, and 60 percent are in the top 60, meaning that the gender distribution is fairly even. In every country with available data, over 40 percent of children aged 0-14 are in the bottom 40, meaning they are overrepresented in the bottom of the distribution.
Larger shares of the bottom 40 live in urban areas in high-income countries than in low-income countries. In low-income countries, about 18 percent of urban residents belong to the bottom 40, compared to 37 percent of urban residents in high-income countries. From Sub-Saharan Africa to Europe and Central Asia, children, less educated people and the rural population are more likely to be in the bottom 40.
The ability to measure shared prosperity has improved, but substantial gaps in data coverage remain. The 91 economies for which the analysis was able to calculate shared prosperity between 2012 and 2017 represent just 59.9 percent of the world’s population. This number still marks a meaningful advance over initial efforts to measure this indicator, in 2014, when adequate data were available for only 65 countries. However, with limited data, shared prosperity is hardest to measure in the very settings where tracking it is most important, often in poorer, fragile, and small countries. Shared prosperity can be measured for only about a quarter of all low-income economies, covering 37.7 percent of the population in this income group.
Last Updated: Oct 07, 2020