Selected Country Summaries
Australia ranks 9th among the 30 advanced economies covered in the Inclusive Development Index 2018 (IDI) and first among non-European nations. Yet the country’s performance across the 12 components of the Index is uneven. Within its peer group, Australia boasts the seventh- highest level of income. This, combined with a high level of employment (61% of total population), contributes to a solid performance in the Growth and Development pillar of the IDI. Yet the country ranks only in the middle of the pack for labor productivity and health-adjusted life expectancy. The picture is more mixed on the Intergenerational Equity and Sustainability pillar. In particular, Australia’s carbon intensity is one of the highest among advanced economies (25th). On the other hand, Australia’s demographic trends look slightly more favorable than for most peers, with 51 dependents for every 100 among the working-age population. Significant room for improvement exists in the third pillar of the IDI, Inclusion, where Australia ranks 18th. While wealth inequality is less than in most advanced economies (8th), income inequality is one of the highest with a Gini coefficient value of 33.2 (22nd). This is well above the group’s average and nearly 10 points more than Iceland’s score, the country with the best income equality based on this measure. Furthermore, the data suggest that both income and wealth inequality have increased since 2012. Finally, at 13% (21st), poverty incidence is high, and almost twice as high as the average rate observed in Scandinavian countries, though it has declined slightly since 2012.
Canada’s IDI score, ranking 17th overall among advanced economies, brings to light its challenges with income inequality and long-term environmental and economic sustainability. Similar to the United States, its performance in the rankings is largely driven by its Growth and Development factors (12th), while lagging behind on Inclusion (17th) and Intergenerational Equity and Sustainability measures (21st). At 12.6%, Canada’s poverty rate is dropping but still disproportionately affects vulnerable groups such as single-parent households, indigenous populations, and newly arrived immigrants and refugees. Income and wealth inequality scores are high in comparison with other advanced countries that perform better on the IDI, and have remained relatively stable. Nonetheless, Canada situates itself in the top quintile among advanced economies in terms of median household income, and has been trending positively in recent years. Canada’s low score on Intergenerational Equity and Sustainability is partly driven by its high levels of carbon intensity, with the country’s oil and gas sector and transportation together accounting for more than half of its emissions. Despite ranking among the bottom quartile on sustainability measures (24th), Canada shows signs of improvement here.
France places 18th on this year’s IDI. The country struggles with low employment and a high dependency ratio, high public debt, and a low adjusted net savings rate. At the same time, it boasts high levels of labor productivity, a high and rising health-adjusted life expectancy, a comparatively low and falling poverty rate, and relatively high and rising median living standards. France further stands out on the carbon intensity dimension, which is one of the lowest among advanced countries, and has been following a downward trend until 2014, the last year of available data. The country occupies the middle ground among advanced countries when it comes to income and wealth inequality, and both have been increasing over the last five years.
Germany places 12th on this year’s IDI, improving its score over the last five years. Over this period, the greatest boosts to Germany’s inclusive growth performance have come from the Intergenerational Equity and Sustainability dimension, with rising net adjusted saving rates, significant falls in public debt, and only a fairly small increase in the dependency ratio. Carbon intensity has also been falling, although it is still one of the highest among the group of advanced economies (note that the latest available data is from 2014). Problematic from an Inclusion perspective is the fact that Germany has one of the highest levels of wealth inequality among high-income countries. Furthermore, the poverty rate is fairly high at 9.5% and has been following a rising trend between 2012 and 2016.
Italy ranks 27th among the 29 advanced economies evaluated by the IDI, and is on a declining trend. This performance shows a country characterized by low Growth and Development and little Intergenerational Equity and Sustainability. In fact, Italy is aging, shifting the political weight in favor of elder cohorts. This is echoed by the difficulty to lower public debt, which stakes a claim on Italy’s future resources in return for current gains, and by a high unemployment rate especially among the younger population. At the same time, income inequality and poverty are higher than in most advanced economies, and are increasing. Driven by slow growth, the future economic prospects of Italy are less positive than of other comparable countries. While Italy has managed to build shared wealth in the past (as measured by the wealth Gini index), increasing income inequality and low growth have started to erode such prosperity, calling for action in favor of more inclusive growth policies. Italy is, however, achieving a good performance on carbon intensity and health, as it has low carbon emissions and better health conditions (73 expected healthy years) than most economies.
Ireland ranks 8th among advanced economies, demonstrating solid performance in Growth and Development and Intergenerational Equity and Sustainability. The country benefits from a high GDP per capita, 4th in its peer group, and the second-highest level of labor productivity. A favorable business climate has allowed Ireland to drastically decrease its public-debt level by 43% over the past five years, the largest improvement by any advanced economy. Although median living standards have risen modestly, Ireland is faced with high income inequality and soaring wealth inequality, as its wealth Gini score has increased by over 10 points in the past five years. Ireland performs above average on Intergenerational Equity and Sustainability, driven by relatively low carbon emissions, strong human capital investment, and low levels of environmental damage.
Japan ranks a low 24th among the 30 advanced economies covered in the IDI. Japan features in the top 10 of only two of the 12 key performance indicators included in the Index. The country does well in terms of wealth concentration, placing 5th among its peers. Its Gini coefficient has decreased slightly to 61, some 10 points lower than the peer average. The performance is less flattering in other measures of Inclusion: 16% of the population earns less than half the median income. This rate, which has not changed since 2012, is the third highest among advanced economies and almost twice the group average. Japan ranks 15th in the Growth and Development pillar as a result of a mixed performance. The country boasts the longest health-adjusted life expectancy (74.9 years) in the world, but is relatively low on labor productivity (22nd) and employment rate (17th), owing to the weak participation of women in the labor force. An aging population, coupled with an extremely low fertility rate and negligible immigration, means that there are now 66 dependents for every 100 working-age people, posing a formidable economic challenge going forward. These negative demographic trends and the high public debt explain Japan’s mediocre performance in the Intergenerational Equity and Sustainability pillar, where the country ranks second to last, ahead of only Greece.
Korea, Rep. ranks 16th among advanced economies on the IDI as a result of a mixed performance across the three main dimensions of the Index. It ranks a mediocre 22nd (out of 30) in the Growth and Development pillar. In particular, relatively weak labor productivity (24th) and a low median income level contribute to this result. The country also ranks 22nd in the Inclusion pillar. Of particular concern is the incidence of poverty. Although the rate has fallen since 2012, almost 14% of the population still earns less than half the national median income (5th highest). In contrast, South Korea is among the best in terms of Intergenerational Equity and Sustainability (3rd, behind Norway and Luxembourg), thanks to a low level of public indebtedness, the lowest dependency ratio of all advanced economies, and one of the highest adjusted net savings rates – a measure of resource use sustainability – among advanced economies. But the performance in this pillar is tarnished by the country’s ecological footprint: its carbon intensity (CO2 emissions per unit of GDP) is one the highest among advanced economies (27th) and twice the group’s average.
Norway tops the Inclusive Development Index as the world’s most inclusive economy for the second year in a row, displaying strong performance across the board. In light of fluctuating oil and gas production, the country administers tight fiscal policies to boost economic growth in the non-petroleum sector, as it has the second-highest GDP per capita, fourth-highest labor productivity, and the fifth-highest employment rate among advanced economies. Norway’s long-term vision for a sustainable and inclusive economy is evidenced by low income inequality (2nd), high median living standards (1st), and low carbon emissions (3rd). Although it has one of the highest levels of wealth inequality in its peer group, this is explained by Norway’s robust and generous social safety programs on pensions, education, and public housing, which creates a disparity in personal financial assets. Overall, Norway performs exceptionally well at promoting inclusive growth and development despite sliding slightly on this measure over the last five years.
The United Kingdom places 21st among advanced countries in this year’s IDI. The numbers suggest that the country is lagging behind its peers on many dimensions of inclusive growth, placing only in the fourth quintile for seven of the 12 indicators (GDP per capita, labor productivity, healthy life expectancy, income inequality, wealth inequality, public debt, and dependency ratio) and in the fifth/bottom quintile for the adjusted net savings rate. In particular, wealth inequality has been increasing over the past five years. Income inequality, on the other hand, has declined slightly over the last five years on average. The country is also showing a positive longer-term trend in terms of falling carbon intensity of economic activity.
The United States’ performance, ranking 23rd on the IDI, is rather uneven. Indicators relating to Growth and Development are driving the country’s performance in the Index. The country performs relatively better on measures of GDP per capita, labor productivity and employment, all of which have improved over the last five years. Though following a positive trend, the average healthy life expectancy is among the lowest in advanced economies, pointing to the need to tackle broader challenges with regard to access to healthcare, education, and economic opportunity. The United States is lagging behind most other advanced economies in economic inclusion (28th). Poverty rates in the country have been falling but remain among the highest in advanced economies at 16.3%, surpassed only by Israel (19.3%). In parallel, the median household income level has also declined, which may be the result of the economy generating a larger number of low-wage jobs, thereby increasing the number of working- poor households. The United States also displays the highest levels of economic inequality among advanced economies, a trend that has continued to rise over the last years. Though the country also ranks low on measures of Intergenerational Equity and Sustainability, its score has improved, notably due to higher net saving rates and a decline in carbon intensity. Unfortunately, the recent tax reforms put forth by the current administration are likely to increase the size of the country’s public debt and further widen economic and social inequalities in the long run.
Ranking 23rd, Argentina’s overall score is supported by its performance on Inclusion and Intergenerational Equity and Sustainability. The indicators of economic growth and labor productivity are on the decline as the IDI data predate the current recovery. While Argentina’s income and wealth inequalities are relatively low compared with other Latin American countries, these disparities have been shrinking in recent years. The net income and wealth Gini indicators have dropped nearly 5% and 10%, respectively, over the last five years. Furthermore, the median household income in Argentina ranks in the top quintile of emerging economies in the sample. Though the employment rate is relatively lower compared with the regional average, it has increased slightly despite the recent recession.
Brazil ranks 37th out of 74 emerging economies on this year’s IDI. Brazil’s overall score in the Index is pulled up by its performance on Intergenerational Equity and Sustainability. The country currently benefits from a highly favorable dependency ratio and relatively low carbon intensity. With the IDI data reflecting the period preceding the economic recovery, , Growth and Development indicators, such as GDP per capita growth, labour productivity, and employment rates, are trending negatively. Nonetheless, median house- hold income levels appear to have improved throughout this period. Wealth concentration in Brazil is among the highest in both Latin America and emerging economies and has increased slowly over the past five years. With the Brazilian economy slowly recovering, Growth and Development factors in the IDI are expected to improve, while future trends may also be impacted by the growth-enhancing reforms proposed by the government to fight its current fiscal constraints.
China ranks 26th among the 74 emerging economies featured in the IDI. Despite rapid growth over the past two decades, , China still exhibits high levels of inequality, as evident from its 55th place among emerging economies in the Inclusion pillar of the Index. In particular, China comes last in terms of income inequality. The Gini coefficient stands at 51, some 20 points above the peer group average, and has barely changed since 2012. Over the same period, wealth inequality has increased by 10% from an already elevated level, ranking China a low 59th. On a much more positive note, the country has made impressive strides in its fight against poverty. Whereas in 2012 a third of the population lived on less than $3.20 a day (at purchasing power parity) – an international measure of poverty – the proportion is now just 12% (36th). This explains the 12 percentage-point increase in the pillar score since 2012, despite the negative trends in terms of inequality. China’s performance in the Intergenerational Equity and Sustainability pillar (17th) is bolstered by its low population dependency ratio (39 dependent people for every 100 working-age population, the second-lowest in the IDI sample), and high adjusted savings representing 23% of gross national income (GNI), the seventh highest. But China still ranks 65th for carbon intensity though emissions per unit of GDP have declined by 38% since 2012, as manufacturing plays a lesser role to the profit of less carbon-intense services. In the Growth and Development pillar of the IDI, China ranks a remarkable 9th, thanks to a high level of employment, with over two-thirds of the population employed (20th among emerging economies), and relatively long health-adjusted life expectancy (68.5 years, sixth longest).
India, with an improving trend, ranks 62nd out of 74 emerging economies. The country performs best (44th) in terms of Intergenerational Equity and Sustainability, profiting from a low dependency ratio that is set to further decline as the economy reaps the dividends of an extremely young population (28% of the Indian population was younger than 14 years in 2017). Though the incidence of poverty has declined in India over the past five years, 6 out of 10 Indians still live on less than $3.20 per day. Given the prevalence of inequality both in terms of both income and wealth, there is substantial scope for improvement for India in this aspect. Both labor productivity and GDP per capita posted strong growth rates over the past five years, while employment growth has slowed. Healthy life expectancy also increased by approximately three years to 59.6.
Indonesia ranks 36th among the 74 emerging economies featured in the IDI. Its performance across the three pillars of the Index is one of great contrast. Indonesia ranks a low 61st in the Inclusion pillar. Despite a remarkable reduction in poverty since 2012, from approximately 50% of the population to 33% today, wealth remains highly concentrated. Indonesia’s wealth Gini coefficient – 84 on a 0-to-100 scale – is among the highest in the world and has gone up since 2012. Income disparity is comparatively almost as severe (62nd) and has deepened since 2012. Much more positive is Indonesia’s performance in the Intergenerational Equity and Sustainability dimension of the Index, thanks to low levels of public debt, a relatively low dependency ratio, and a high adjusted net savings rate. Yet the Indonesian economy’s carbon intensity is very high (55th) and almost twice the median value for emerging economies.
Mexico’s performance, ranking 24th among emerging economies, is driven by its higher score on Intergenerational Equity and Sustainability. Through the lens of the IDI framework, this is in part due to a higher savings rate and low carbon intensity in national production. The country performs comparatively well across the board on Growth and Development factors, ranking 13th out of 74 emerging economies. It performs in the top quintile among Latin American countries in terms of labor productivity. In contrast, Inclusion measures illustrate high levels of economic disparities, though they have shrunk over the last five years. With the future of the North American Free Trade Agreement hanging in the balance, the outcome of the negotiations may have some impact on Growth and Development factors in Mexico.
Nigeria, ranked 63rd, faces significant challenges in achieving inclusive Growth and Development. Although economic growth has increased steadily in previous years, in spite of receding oil production, such growth has not benefitted Nigerians, as the poverty rate stands at 77.6% and the daily median income level is $1.80. Despite having the second- lowest level of public debt among emerging economies (18.6%), geopolitical instability due to ethnic and religious factions will impede the government’s efforts to translate investments in infrastructure into inclusive growth. Moreover, addressing high informal employment is critical for Africa’s most populous country. Harnessing Nigeria’s entrepreneurial environment could provide major opportunities for sustainable growth.
The Russian Federation is ranked 19th, and on a positive trend compared with five years ago. Russian performance is, however, uneven across the three dimensions of the Index: it scores relatively better in terms of Economic Development than Inclusion and Intergenerational Equity and Sustainability. Russia has recently recovered from a recession, and although its productivity growth is still low, it has now overcome the hardship of 2015. In terms of Inclusion, Russian provides decent living conditions to most of its population but concentrates wealth in a few hands. In fact, the poverty rate is low (0.3%), and median living standards are relatively good in the context of emerging countries, though the wealth Gini (at 82.6) is high. At the same time, income inequality (as measured by the net Gini index) is also relatively high and has increased from five years ago. In terms of Intergenerational Equity and Sustainability, Russia has low debt and a positive dependency ratio, yet is depleting its natural resources and, despite recent improvements, has a carbon intensive economy.
South Africa is 69th, but has improved slightly from five years ago. Despite South Africa’s economy being more advanced than that of most emerging economies, its low employment levels, subpar health conditions, and high inequality drive its low overall IDI. More specifically, despite some improvements, South Africans have a healthy life expectancy of only 54 years, one of the lowest levels among countries with a GDP per capita of at least $5,000. When it comes to inequality, the South African economy is quite concentrated in terms of both wealth (86.7) and income (57.7). At the same time almost 36% of the population is poor and lives with a median consumption level of about $5 per day. In addition, South Africa’s economy is also relatively carbon intensive. On a more positive note, South Africa is more productive than the average emerging country, has better control of public finance (debt is roughly 50% of GDP), and has a good balance between elder and younger populations, with a dependency ratio of 52.4. Being particularly penalized by its employment, health, and inequality levels, South Africa has yet to develop a more inclusive growth model, providing better employment opportunities to a larger share of its population.
Turkey places 16th among emerging countries on this year’s IDI. Its economy continues to grow strongly in GDP per capita terms, with the International Monetary Fund revising its forecast for 2017 from 2.5% to 5.1% (and from 3.3% to 3.5% for 2018). Furthermore, the absolute poverty rate is low, placing Turkey in the top quintile among emerging countries on this dimension. However, challenges emerge when taking the broad lens. Employment has declined to 45%, placing Turkey in the bottom quintile among emerging economies. The most recent Organisation for Economic Co-operation and Development country survey emphasizes the importance of employment creation in formal wage-earning occupations, supported by more investment in human capital. More fundamentally, health-adjusted life expectancy has dropped by two years over the 2011-2015 period. Furthermore, income and, more strikingly, wealth inequality, remain very high.
Vietnam, ranked 33rd overall among emerging economies, displays modest performance across all three pillars. Although the country has weak performance in Growth and Development, Vietnam boasts modest improvement in this area, with GDP per capita growth increasing by 4.8% and labor productivity growth improving by 4.7% since 2012. Despite a high employment rate (76.7%) and declining income inequality, policies to tackle Vietnam’s high wealth inequality are necessary, as the level remains higher than the average for emerging countries and has risen significantly throughout the past five years. Improvements can be made on Intergenerational Equity and Sustainability indicators, such as carbon emissions and public debt.