Income inequality is sadly on the rise, with the poorest 10 percent earning only two to seven percent and the wealthiest 10 percent holding onto up to 40 percent of global income. Income inequality in developing countries has also increased by 11 percent when population growth is considered.
Few people realize that only four cents on every tax dollar globally come from taxes on the wealthy. In the past, income taxes on the rich used to be significantly higher. Still, with governments slashing taxes on the highest earners and increasing taxes on services and goods, it has disproportionately negatively impacted low-income people, exacerbating gender inequality and causing economic growth to stagnate.
One of the key Sustainable Development Goals outlined by the UN is reducing inequalities and ensuring no individual is left behind. Unfortunately, tax disparities are not the only problem affecting inequality. With the rise of the COVID-19 pandemic, the progress seen by countries toward achieving this goal has diminished and been reversed. At the current projection rate, it's unlikely that most countries will reach the goal of reducing inequality, which is why inequality is a persistent cause for concern.
It's been determined that developing countries and emerging markets are experiencing widening disparities and slow income recovery between countries. These economic woes are causing significant problems. For example, rising inequality transfers income from low-saving households to higher-saving households at the top of the income distribution. This redistribution drags demand growth downwards because it reduces consumer spending.
Moreover, according to data released by the Sustainable Development Goals initiative, inequality has become a central issue. The growing body of evidence outlines the fact that inequalities in income and wealth are a significant cause of economic instability in addition to causing a variety of health and social problems.
However, data has shown that if inequality can be reduced, it can help countries boost economic growth, but it will require global solutions. More sustainable, regulated, and monitored financial markets can help bridge the gap and help nations, communities, and individuals flourish.
In addition, sound economic policies that promote economic inclusion and empower low-income earners will also help boost economic growth and reduce inequality. The encouragement of foreign direct investment in regions showing a need and the safe facilitation of people will also help bridge the divide.
While income inequality remains a persistent and concerning issue, there is hope for a brighter future. It is crucial for governments and policymakers to recognize the detrimental impact of tax disparities, economic disparities, and the COVID-19 pandemic on inequality. By prioritizing the Sustainable Development Goals, particularly SDG 10, reducing inequalities, and implementing global solutions, we can pave the way for economic growth, social harmony, and a future where no one is left behind.