Page 87 - The Fourth Industrial Revolution

3.4.1 Inequality and the middle class

The discussion on economic and business impacts highlighted a number of
different structural shifts which have contributed to rising inequality to date,

and which may be further exacerbated as the fourth industrial revolution
unfolds. Robots and algorithms increasingly substitute capital for labour,
while investing (or more precisely, building a business in the digital
economy) becomes less capital intensive. Labour markets, meanwhile, are

becoming biased towards a limited range of technical skill sets, and
globally connected digital platforms and marketplaces are granting outsized
rewards to a small number of “stars”. As all these trends happen, the
winners will be those who are able to participate fully in innovation-driven

ecosystems by providing new ideas, business models, products and
services, rather than those who can offer only low-skilled labour or
ordinary capital.

These dynamics are why technology is regarded as one of the main reasons
incomes have stagnated, or even decreased, for a majority of the population
in high-income countries. Today, the world is very unequal indeed.

According to Credit Suisse’s Global Wealth Report 2015, half of all assets
around the world are now controlled by the richest 1% of the global
population, while “the lower half of the global population collectively own
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less than 1% of global wealth”. The Organisation for Economic Co-
operation and Development (OECD) reports that the average income of the
richest 10% of the population in OECD countries is approximately nine
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times that of the poorest 10%. Further, inequality within most countries is
rising, even in those that have experienced rapid growth across all income

groups and dramatic drops in the number of people living in poverty.
China’s Gini Index, for example, rose from approximately 30 in the 1980s to
over 45 by 2010. 55

Rising inequality is more than an economic phenomenon of some concern –
it is a major challenge for societies. In their book The Spirit Level: Why

Greater Equality Makes Societies Stronger, British epidemiologists
Richard Wilkinson and Kate Pickett put forward data indicating that unequal
societies tend to be more violent, have higher numbers of people in prison,
experience greater levels of mental illness and obesity, and have lower life
expectancies and lower levels of trust. The corollary, they found, is that,

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