Why is inequality a problem for everyone?

Sometimes mistakenly viewed as a problem only for the world’s poorest, inequality and its effects can reverberate right across society.

Disparity in income, wealth, and unequal access to basics such as food and water are among inequality measures. By way of example, median incomes grew more slowly than top incomes in the three decades to 2016, according to average data for 17 OECD countries.

Exhibit 1: median incomes grow more slowly than top incomes

Real disposable income growth by income position, average for 17 OECD countries, 1985 2016 (1985 = 100%)

Note: Unweighted average for 17 countries for which long-term data are available: Canada, Germany, Denmark, Finland, France, United Kingdom, Greece, Israel, Italy, Japan, Luxembourg, Mexico, Netherlands, Norway, New Zealand, Sweden and United States. Incomes are disposable incomes, corrected for household size

Source:?Chapter 2, OECD calculations?from OECD Income Distribution Database. Data as at April, 2019.

But inequality can also manifest itself in other ways.

Think about the recent financial crises and increasingly regular extreme weather events. Inequalities undermine our capacity as a society to mitigate and overcome the impact of major crises like these, and as such they are a concern for everyone:

• Covid-19 showed how the economy relies on global and tight supply chains and exposed the lack of resilience in the “just in time” model. Broken and delayed supply chains affect everyone.
• Consider the repercussion of a dock workers’ strike on the global supply of goods. Or the effect on the price we would have to pay if the “fair” cost of these goods was applied that includes the social and environmental costs.
• Sustained inequalities often result in heightened political or even geopolitical risks. This environment is typically negative for economic growth since it raises costs and limits the availability of capital. In many regions of the world, this has led to large-scale refugee crises.

There’s also growing recognition that social issues are firmly interconnected with the “E” in ESG – namely the environment and climate change – and that all these themes should be addressed together. As a result, in the years ahead, far more focus will be placed on the “S”.

Local environmental resources are crucial for a high proportion of the poorest populations, and these resources are affected by global warming. For instance, under the medium scenario for population development, the Intergovernmental Panel on Climate Change estimates that at 1.5°C warming 178 million people – including a high proportion of women, children and the elderly – will be affected by water stress, drought intensity and habitat degradation by 2050. At 2°C warming this figure rises to 220 million people.[1]

Tackling social problems today – in concert with environmental and other issues – can help minimise the effect of inequality on ever larger segments of society in the future.

[1] ?Summary for Policymakers – Special Report on Climate Change and Land (ipcc.ch)

Investing involves risk.?The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

This material has not been reviewed by any regulatory authorities. In mainland China, it is used only as supporting material to the offshore investment products offered by commercial banks under the Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication’s sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of his document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional/professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP (Australian Registered Body Number 160 464 200) is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws. This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors U.S. LLC, an investment adviser registered with the U.S. Securities and Exchange Commission; Allianz Global Investors Distributors LLC, distributor registered with FINRA, is affiliated with Allianz Global Investors U.S. LLC; Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments BusinessOperator), No. 424, Member of Japan Investment Advisers Association and Investment Trust Association, Japan]; and Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan.

2003482 | 5992