Global growth to slow as wage inequality rises over coming decades, says OECD


02/07/14 - A slowdown in global economic growth and a continuing rise in income inequality are projected for the coming decades, according to a new OECD study which looks beyond the crisis at what the world could look like by 2060.

Ageing populations in many OECD countries and the gradual deceleration from current high rates of growth in the large emerging economies will bring global rises in GDP down from an annual average 3.6% in the 2010-2020 period to an estimated 2.4% in 2050-2060. Innovation and investment in skills will be the predominant drivers of growth.

Policy Challenges for the Next 50 Years says unless CO2 emissions are reduced, climate change could curb global GDP by 1.5% by 2060 and by nearly 6% in South and South-East Asia. Technical advances will raise demand for high-skilled workers. Without a change in policy, OECD countries would face a further large increase in earnings inequality by 2060, bringing them close to the level seen in the United States today. Rising inequalities threaten growth, most notably by blocking economic opportunities.

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In the OECD’s scenario, shrinking income gaps between advanced and emerging economies will lower incentives for economic migration into advanced countries. A fall in immigration will add to demographic pressures caused by ageing populations. This double pressure could reduce the labour force compared with the baseline of current trends by 20% in the US and by 15% in the Euro area by 2060.

The report shows shifting patterns of trade and industrial specialisation. The share of trade with and among the emerging economies will increase dramatically. Technological catch-up and better skills will help emerging economies develop high value-added manufacturing and services activities.

Faced with such challenges policies-makers will need to inject dynamism into labour and product markets and sustain innovation, productivity and employment.

Widening inequalities will require effective redistributive policies, a strong focus on equality of opportunity and a review of the funding systems of public services and of tax structures.

The report says rising economic interdependence will require international cooperation in areas such as basic research, intellectual property rights, competition policy and climate change mitigation. Cooperation will also be crucial in the area of taxation, particularly to combat corporate tax avoidance.

Presenting the report in Tokyo, OECD Deputy-Secretary General and Acting Chief Economist Rintaro Tamaki said “The OECD’s Policy Challenges for the Next 50 Years highlights three areas: sustaining strong growth, tackling rising income inequality and reducing climate change costs”

“The study shows we face a globalisation paradox – countries will be more integrated than ever before, but it may become increasingly difficult to organise the required international cooperation in a more complex multipolar system.”

Policy Challenges for the Next 50 Years, part of a series of Economics Policy Notes from the OECD, is available here : For further information about the OECD’s work on long-term scenarios please visit : or contact the OECD Media Division (; tel: + 33 1 4524 9700).


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