American inequality is on the rise. But global inequality is falling.

December 13, 2013
Source: World Bank
Source: World Bank

If you wonder where your Christmas bonus went, it may just be in the pockets of a worker in one of China’s cities who, until 20 years ago, was struggling to feed the kids.

Boiled down to brass tacks, that’s the finding of a major new World Bank study on global income inequality. The researchers have found that over the last two decades China and some other parts of the world have enjoyed upward income mobility while developed countries have seen comparative stagnation.

The middle-class citizens of the more affluent parts of the globe may not have been particularly interested in sacrificing jobs and incomes to give the rest of the world a fighting chance. But that is what in effect happened from 1988 to 2008, according to data that break down where incomes have risen or fallen.

On a global scale, inequality appears to have declined as tens of millions of formerly poor people in China, India and Brazil moved toward and into the middle class. (That finding is subject to an interesting qualification: The researchers try to correct their data for what they suspect is an underrepresentation of the richest individuals in national economic statistics around the world; it doesn’t take much of an adjustment in that class to offset what otherwise appears to be a more equal distribution of income around the world).

But at the same that this “bulge” of people has been doing better in the global economy, some groups – those who earn a lot by global standards but would be middle class in the richer countries – have been sliding lower.

As researchers Christoph Lakner and Branko Milanovic write, “China has ‘filled up’ the relatively hollow part of the global income distribution.”

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Dividing national populations into 10-percentage point chunks, they even charted the world’s biggest winners and losers. These are the income “deciles” around the world where earnings grew the fastest or contracted the most in the period of time from the fall of the Berlin Wall until the pre-crash peak in 2008. That was a 20-year span when globalization really took hold. Here is the chart of winners and losers:

Of the 20 income subgroups where income grew the fastest, 11 were in China. Among developed nations, only the poorest in the United Kingdom managed to make the leader board, while the bottom 40 percent of Ireland did well.

The losers? Groups of people in the former Soviet Bloc nations of Romania, Estonia, and Lithuania suffered annualized income losses of 4.5 percent to more than 7 percent over the 20 years covered by the study. That outcome is a bit misleading, since the bulk of that decline came in the years after the Berlin Wall fell. Change the baseline year to 1993, and the biggest losers are in places like Japan, Burundi and the Central African Republic, while Eastern Europe staged a recovery.

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Ezra Klein · December 13, 2013