The McKinsey Global Institute recently released a report entitled ‘Poorer than their Parents? A new perspective on income inequality’.
The report states that “The real incomes of about two-thirds of households in 25 advanced economies were flat or fell between 2005 and 2014.”
This is more than 540 million people.
This contrasts to the period between 1993 and 2005, when all but 2 percent of households in 25 advanced economies saw real incomes rise.
While government transfers and lower tax rates mitigated some of the impact, up to a quarter of all households still saw disposable income stall or fall between 2005 and 2014.
The report states that debate in advanced economies about income inequality has largely focused on income and wealth gains going disproportionately to top earners. But the analysis in the report details the sharp increase in the proportion of households in income groups that are simply not advancing—a phenomenon affecting people across the income distribution. The hardest hit is the cohort of young, less-educated, workers raising the spectre of a generation growing up poorer than their parents.
Causes include the slow recovery after the 2008 global financial crisis, demographic trends of aging and shrinking household sizes, as well as labor-market shifts such as the falling wage share of GDP.