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Global income inequality may fall as emerging markets skill up

January 10, 2018 GMT

Emerging-market economies will drive skill gains in the global labor force in the coming decades, potentially reducing inequality between nations in the process.

The world will see the number of skilled workers - those with nine or more years of education - rise 30 percent to 2.16 billion by 2040, up from 1.66 billion in 2011, according to a new World Bank report. Thanks to their growing populations and investments in education, developing countries are expected to contribute all of those additional educated workers.

“The next big wave of change in the global labor market, the rising share of educated workers in emerging and development economies, will likely lift global potential growth and be accompanied by a further decrease in global income inequality,” according to the report.

The number of skilled workers in developed economies will actually shrink, falling to 594 million in 2050 from 603 million in 2011 as the population ages, based on the projections. The result? While one advanced-economy skilled worker competed with two developing economy skilled workers in 2012, that ratio is expected to climb to 1 to 3 by 2030.

That shift “could constitute a shock to global labor markets,” according to the World Bank report. “Since better skills are associated with higher income, the world under the baseline scenario will continue to become more equal.”

And there’s room for an upside surprise. If improvements in education accelerate, the skilled labor supply could expand more than assumed.Still, conflicts, droughts, recessions or labor market frictions all present risks to the outlook.