Business and Ethics

“The trend of flat and falling real incomes merits bold measures on the part of government and business alike” Richard Dobbs et al, McKinsey Global Institute

McKinsey Global Institute article “Poorer than their parents? A new perspective on income inequality” analyses the problem of income inequality in the world market. As the economy constantly develops and new innovations are introduced, each generation is supposed to have better cost of living than their parents.

Despite the expectations, the household faces the decline of the income curve. The report states that young undereducated employees suffer the most among the employees who face income inequality. The results are opposite, as the title of the article declares: the children are poorer than the parents. What could be the reason of this reality?

First of all, the reason could be the financial crisis, – the global economic recession, which has caused the income growth stagnation. Another reason, according to the article, is less economic, but demographic, as the household size is reducing because of the decreasing proportion of the wage in the GDP.  The world is facing a halo effect, as the workers facing trouble to achieve higher income than their parents, have the expectations of their children to be poorer than they are.

According to the authors of the article, there could be some hope for solving this closed circle issue. The government could have the positive effect by implementing proper, well-analyzed regulations, like lowering tax rates. But what works for one country could have the opposite result for the other one. This is the reason, why the regulations should be analyzed and customized to fit the society.

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