Inequality is on the rise in several of the world’s developed economies.
To calculate their inequality indicator (known as the MSII), Morgan Stanley uses a variety of factors, moving beyond the commonly used GINI coefficient to include measures of wage dispersion, workplace inclusion, health status and digital access. The report argues that this multifaceted approach allows for a more nuanced view of inequality.
The following chart shows scores across these variables for the countries assessed in the report, and highlights performance across all these indicators. A score of 1 indicates the highest levels of inequality.
Southern European nations and the United States have the highest levels of inequality, according to this chart. It also reinforces the traditional view that inequality is lowest in the Nordic countries, with Norway, Finland and Sweden being named the most equal societies.
These new scores emphasize the complex nature of inequality, and the potential importance of looking beyond just the GINI coefficient. For example, if we consider the case of the United Kingdom, based on the coefficient alone it would be the second most unequal society. However, Morgan Stanley would argue that this isn’t representative of the bigger picture; when other factors are considered the UK comes in at number 12.
The report also addresses the complex relationship between economic growth and inequality, concluding that long-term, entrenched inequality can cause poor economic performance. According to OECD data, inequality has indeed slowed economic growth: the report estimates that there was a reduction in potential growth of 4.7 percentage points between 1990 and 2010 (in developed economies) and by as much as 10 percentage points in the US.
