1.5% of the world’s adults hold 47.5% of the wealth (the “rich”), while 40% of the global population (the “poor”) hold only 0.5%, and the gap continues to widen each year (see image).
The UBS Global Wealth Report 2024 presents several findings on the increasing social inequality and its impact on the future of the welfare society. Here are the main observations and analyses:
Growing Social Inequality
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Inequality in Fast-Growing Markets:
- Inequality has risen in many rapidly growing economies, particularly in Latin America and much of Eastern Europe and Asia, with exceptions like South Korea and Hong Kong.
- In Singapore, for example, inequality has increased by nearly 23% since 2008.
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Decrease in Developed Economies:
- In contrast, several developed economies have seen a decrease in inequality. For instance, in Germany and Austria, inequality has fallen by about 5%, while in Switzerland it has decreased by 4.5%.
- In the United States, inequality has shown a slight decline since 2008.
Impact on the Welfare Society
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Impact on Different Wealth Strata:
- As inequality has increased in certain markets, higher wealth segments benefit more from economic growth, while middle and lower segments experience slower growth.
- This disparity can lead to a concentration of wealth among a minority, negatively affecting social cohesion and equitable access to resources and opportunities.
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Wealth Mobility:
- While upward wealth mobility is more likely than downward mobility, the probability of significantly improving one’s economic position decreases over time.
- The report highlights that, although rare, there are extreme movements in the wealth ladder, including jumps from the lowest to the highest quintiles in certain cases.
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Horizontal Wealth Transfer:
- A significant wealth transfer is expected within the same generations, especially among spouses, before moving to the next generation. This horizontal wealth transfer is substantial and could influence future wealth distribution.
Forecast and Future
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Wealth Projection:
- The proportion of adults in the lowest wealth bracket is expected to continue decreasing in the coming years, while the number of dollar millionaires will increase in most of the markets studied.
- By 2028, the number of adults with wealth exceeding one million dollars is projected to rise in 52 of the 56 markets analyzed.
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Impact on Social Welfare:
- Increasing inequality could threaten the sustainability of the welfare society by creating broader disparities in access to resources, education, and economic opportunities.
- Social cohesion may be negatively affected, leading to greater polarization and potential social conflicts if disparities are not effectively addressed.
In summary, while global wealth is increasing, social inequality continues to thrive, posing significant challenges to social equity and the sustainability of the welfare society in the future.
It is urgent for companies to recognize the flaws in our economic model and to equally prioritize economic performance and value generation alongside positive social impact. Similarly, regulators and governments should reward and incentivize the purpose-driven economy—those companies that place social and environmental impact at the core of their strategy—as engines of well-being and social justice.
Source: [global-wealth-report.pdf (ubs.com)]
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