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In this contribution to the on-going debate about the relationship between income inequality and growth, UNCTAD argues that rising inequality is neither a necessary condition for sound economic growth, nor its natural result. By contrast, full participation of all citizens in the proceeds of the economy as a whole in indispensable for successful and sustained development.

The Report further discusses what are widely perceived to be the main structural causes of recent changes in income distribution, including trade, technological change, and finance-led globalization. It argues that the impacts of globalization and technological change on domestic income distribution are not uniform. Rather, they depend on initial conditions and on how macroeconomic, financial and labour market policies interact with the forces of globalization and technological development. Structural changes do not necessarily lead to greater inequality if appropriate employment, wage, and income distribution policies are in place

Finally, the Report examines how labour-market institutions and policies, together with an appropriate macroeconomic framework, can respond to current challenges and lead to sustained growth and more inclusive development. It starts with the proposition that slow growth has a strong impact on inequality, due to high unemployment, which weakens the bargaining power of labour.

Jayati Ghosh says aid from Britain benefits the UK more than it does India, and makes a negligible difference to relieving poverty. She discusses India's rapid growth and its social and economic inequality, and calls for an economic strategy that focuses on secure employment

Over the past three decades, as developing economies industrialized and began to compete in world markets, a global labor market started taking shape. As more than one billion people entered the labor force, a massive movement from “farm to factory” sharply accelerated growth of productivity and per capita GDP in China and other traditionally rural nations, helping to bring hundreds of millions of people out of poverty. To raise productivity, developed economies invested in labor-saving technologies and tapped global sources of low-cost labor.

Today, the strains on this market are becoming increasingly apparent. In advanced economies, demand for high-skill labor is now growing faster than supply, while demand for low-skill labor remains weak. Labor’s overall share of income, or the share of national income that goes to worker compensation, has fallen, and income inequality is growing as lower-skill workers—including 75 million young people—experience unemployment, underemployment, and stagnating wages.