Promoting shared prosperity is one of the goals of the World Bank Group, along with ending extreme poverty. It means increasing the incomes and welfare of the bottom 40 percent of society wherever they are, be it in the poorest of nations or thriving middle-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.
Without a significant reduction in inequality, especially in countries with high rates of poverty and inequality, the world will not meet the goal of ending extreme poverty. While living standards of the bottom 40 percent in countries all over the world have improved, 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 — the difference in growth rates between the bottom 40 and the overall average — are lower on average in fragile and low-income economies than in middle-income economies.
The COVID-19 pandemic, which hit the world’s poorest hardest, has contributed to widening inequality between countries and within countries. In 2021, the average incomes of people in the bottom 40 percent of the global income distribution were 6.7 percent lower than pre-pandemic projections, while those of people in the top 40 percent were down 2.8 percent. The reason for this large difference: The poorest 40 percent had not started to recover their income losses, while the top 40 percent had recovered more than 45 percent of their initial income losses. Between 2019 and 2021, the average income of the bottom 40 percent fell by 2.2 percent, while the average income of the top 40 percent fell by 0.5 percent.
The diverging economic recovery caused between-country inequality to increase for the first time in a generation. And emerging evidence indicates that inequality within countries may also have worsened. Surveys in 2021 showed that poorer households lost incomes and jobs at slightly higher rates than richer households, a trend that contributes to the worsening of global poverty and inequality.
Last Updated: Apr 26, 2022