Slow progress in living standards and widening inequality have contributed to political polarization and erosion of social cohesion in many advanced and emerging economies. This has led to the emergence of a worldwide consensus on the need for a more inclusive and sustainable model of growth and development that promotes high living standards for all.
To help narrow the gap between aspiration and action, the World Economic Forum System Initiative on Shaping the Future of Economic Progress last year introduced a new economic policy framework and performance metric in its Inclusive Growth and Development Report 2017 The framework identifies 15 areas of structural economic policy and institutional strength that have the potential to contribute simultaneously to higher growth and wider social participation in the process and benefits of such growth.
The structural policies and institutions in these domains collectively represent the system through which modern market economies diffuse gains in living standards. Governments often fail to appreciate the potential of policy in these areas to increase the rate of growth and spread its benefits more widely, particularly in demand-constrained and low-productivity contexts. Underemphasis of these policies relative to macroeconomic, trade, and financial stability policies is a key reason for many governments’ failure in recent decades to mobilize a more effective response to widening inequality and stagnating median income as technological change and globalization have gathered force.
This policy imbalance is reinforced by the prevailing metric of national economic performance, the gross domestic product (GDP), which measures the aggregate amount of goods and services produced in an economy. Most citizens evaluate their respective countries’ economic progress not by published GDP growth statistics but by changes in their households’ standard of living — a multidimensional phenomenon that encompasses income, employment opportunity, economic security, and quality of life. And yet, GDP growth remains the primary focus of both policymakers and the media, and is still the standard measure of economic success.
What gets measured gets managed, and the primacy of GDP statistics tends to reinforce the amount of attention paid by political and business leaders to macroeconomic and financial stability policies, which influence the overall level of economic activity, relative to that paid to the strength and equity of institutions and policy incentives in such areas as skills development, labor markets, competition and rents, investor and corporate governance, social protection, infrastructure, and basic services. These play an important role in shaping the pattern of economic activity and particularly the breadth of social participation in the process and benefits of growth.
GDP growth is best understood as a top-line measure of national economic performance, in the sense that it is a means (albeit a crucially important one) to the bottom-line societal measure of success: broad-based progress in living standards.As many countries have experienced and the Inclusive Development Index data illustrate, growth is a necessary but not sufficient condition for robustly rising median living standards. Accordingly, policymakers and citizens alike would benefit from having an alternative, or at least complementary, bottom-line metric that measures the level and rate of improvement in shared socioeconomic progress.
Designed as an alternative to GDP, the Inclusive DevelopmentIndex (IDI) reflects more closely the criteria by which people evaluate their countries’ economic progress (Figure 1).
Table 1 presents the updated 2018 results and global rankingsof 103 economies for which data are available. It ranks economies in two groups – advanced and emerging. Individual indicator scores are compared in a traffic-light shading format in quintiles in Tables 4-7. Additional data and tools can be found on the interactive web page: wef.ch/igd18
Results and Key Findings:
Norway is the best performing advanced economy in 2018, with a consistently strong performance: it ranks second on one of the Index’s three pillars (Intergenerational Equity and Sustainability) and third on each of the other two (Growth and Development, and Inclusion). Small European economies dominate the Index, with Australia (9) the only non-European economy in the top 10.
Of the G7 economies, Germany (12) is ranked highest, followed by Canada (17), France (18), United Kingdom (21), United States (23), Japan (24), and Italy (27). In many countries, there is a stark difference between individual pillars: for example, the US ranks 10th out of the 29 advanced economies on Growth and Development, but 26th on Intergenerational Equity and Sustainability and 28th on.
Inclusion; France, meanwhile, ranks 12th on Inclusion, 21st on Growth and Development, and 24th on Intergenerational Equity and Sustainability. Low scores on the latter pillars suggest an economy may be storing up problems for the future.
In the ranking of emerging economies, six European economies are among the top 10: Lithuania (1), Hungary (2), Latvia (4), Poland (5), Croatia (7), and Romania (10). These economies perform particularly well on Growth and Development,benefiting from EU membership, and Inclusion, with rising median living standards and declining wealth inequality. Latin America accounts for three top 10 economies: Panama (6), Uruguay (8), and Chile (9).
Performance is mixed among BRICS economies: the Russian Federation (19) is ahead of China (26), Brazil (37), India (62), and South Africa (69). Although China has ranked first among emerging economies in GDP per capita growth (6.8%) and labor productivity growth (6.7%) since 2012, its overall score is brought down by lackluster performance on Inclusion. Turkey (16), Mexico (24), Indonesia (36), and the Philippines(38) are among economies which show potential on
Intergenerational Equity and Sustainability, but lack progress on Inclusion indicators such as income and wealth inequality.As for recent performance, 64% of the 103 economies for which data are available have seen their IDI scores improve over the past five years, attesting to recent efforts by policymakers to broaden socioeconomic progress. This has been largely driven by gains among upper-middle-income economies, while low-income economies have fallen further behind (Figure 2). In 27% of the economies, however, IDI scores have decreased even as GDP per capita has increased.
Income inequality has risen or remained stagnant in 20 of the 29 advanced economies, and poverty has increased in 17. Most emerging economies have improved in these respects, with 84% of them registering a decline in poverty, though their absolute levels of inequality remain much higher. In both advanced and emerging economies, wealth is significantly more unequally distributed than income. This problem has improved little in recent years, with wealth inequality rising in 49 of the 103 economies. Figure 3 shows the level and evolution of income inequality over the past 10 years for selected economies.
In Intergenerational Equity and Sustainability, the trend is discouraging, with a decline in 56 of the 74 emerging economies. This is largely driven by growing fiscal and demographic pressures and a decline in adjusted net savings,which measures the true rate of savings in an economy, after taking into account investments in human capital, depletion of natural resources, and damage caused by pollution.
Most economies perform poorly on this indicator, with most emerging economies recording deterioration. Notable exceptions include Brazil, China, and India, though these are mainly driven by strong human capital investment, while reporting high levels of resource depletion.
Tables 2 and 3 depict examples of economies that have done particularly well at making their growth processes more inclusiveand sustainable: Czech Republic, Iceland, New Zealand, Nicaragua, Rwanda, South Korea, and Vietnam. Other economies have significantly lower IDI rankings than GDP percapita rankings, indicating that their growth has not translated well into social inclusion; these include Brazil, Japan, Nigeria, South Africa, and the United States.
A more granular look at the data shows that GDP per capita is rather weakly correlated with performance on IDI indicators other than labor productivity and healthy life expectancy1, (and poverty rates in advanced economies). This highlights a key finding that relatively strong GDP growth cannot in and of itself be relied on to generate inclusive socioeconomic progress and broad-based improvement in living standards.
This finding is even more striking when IDI trends over the past five years are considered. All but three advanced economies have seen GDP expand over this period, but only 10 of 29 have registered clear progress on the IDI’s Inclusion pillar.2A majority, 16 of 29,3have seen Inclusion deteriorate, and the remaining three have remained stable.4 This pattern is repeated in the relationship between performance on GDP growth and the Intergenerational Equity and Sustainability pillar.
Part of the reason for the weak recent performance of advanced economies on Inclusion has been the rather anemic pace of economic growth during this period. If growth had been significantly faster, there might have been stronger improvement in other areas of the Index. But this possible
explanation is undercut by the fact that a majority of economies with the best GDP growth performance (the top two quintiles) have failed to improve on Inclusion.
Emerging economy data show a similar disconnect between GDP growth and Inclusion. Of the 30 economies in the top two quintiles of GDP growth performance during the past five years, only six have scored similarly well on a majority of Inclusion indicators, while 13 have been no better than mediocre, and 11 have registered outright poor performances 5
This analysis suggests that GDP growth is a necessary but not sufficient condition for achieving the broad-based progress in living standards on which polities ultimately judge their countries’ economic success.This message is particularly important to bear in mind at a time when global economic growth is finally rebounding to a more robust level. Policymakers should not expect higher growth to be a panacea for the social frustrations that have roiled the politics of many countries in recent years.
Indeed, inclusive economic progress is correlated with higher levels of interpersonal trust (Figure 4); economies where survey respondents agree that “most people can be trusted” tend also to perform well on the IDI. This points to the need for a more human-centric approach to improving the cohesion of increasingly fractured societies. Nonetheless, several Asian economies show it is possible to maintain high levels of trust despite only average levels of inclusive development.
Conclusion: Bridging the gap between aspiration and action
Despite recent progress, many economies have significant unexploited potential to simultaneously increase economic growth and social inclusion. But activating the virtuous circle
of inclusive growth more fully will require them to:
- Reconceive and prioritize structural economic reform as a systemic effort to strengthen the institutions and structural features of an economy that play an importantrole in driving both wider social inclusion and higher growth.
- Adopt a broader metric of national economic success that corresponds better to society’s bottom-line measure of economic progress: broad-based living standards
The implicit income distribution system within many economies is in fact severely underperforming or relatively underdeveloped,but this is due to a lack of attention to and investment in key areas of policy rather than to an iron law of capitalism.
Socioeconomic inequity is largely an endogenous rather than an exogenous challenge for policymakers. It needs to be recognized, prioritized, and measured as such in order tosustain public confidence in the capacity of technological progress and international economic integration to support rising living standards for all.
A new growth model that places people and living standards at the center of national economic policy and international economic integration is required to transform inclusive growth from aspiration into action in the Fourth Industrial Revolution. Such an effort to reshape the assumptions and priorities of the way modern market economies organize themselves to generate socioeconomic progress can only be realized with the engagement of all stakeholders. The World Economic Forum System Initiative on Shaping the Future of Economic Progress is intended to serve the international community as a platform for such public-private cooperation
Selected Country Summaries
Australiaranks 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 dependentsfor 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 inequalityand 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 improvedover 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 laborproductivity 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.
TheRussian Federationis 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 deb.
Technical Notes and Sources
Full indicator list and descriptions
The data in this Update represent the best available estimates from various national authorities, international agencies, and private sources at the time the Update was prepared. It is possible that some data would have been revised or updated by the sources after publication of this Update.
“N/A” denotes that a value is not available or that the available data are unreasonably outdated or not from a reliable source.Dashboard of National Key Performance Indicators
1). Growth and Development
- GDP per capita 2016Gross domestic product per capita in constant 2010 dollars (2016) is used for value. The trend is the annual percentage growth rate of GDP per capita. Aggregates are based on constant 2005 US dollars. GDP per capita is gross domestic product divided bymid-year population. GDP at purchaser’s price is the sum of gross value added by all resident producers in the economy plus any product taxes and minus any subsidies not included in the value of the products. The five-year average is based on the authors’ calculations between 2012 and 2016 or the most recent year.Source: World Development Indicators, Worl
- Labor Productivity| 2016This refers to the output per unit of labor input. GDP per person employed is GDP divided by total employment in the economy. Purchasing power parity (PPP) GDP is GDP converted to 1990 constant international dollars using PPP rates. The five-year trend is based on the average annual percentage growth rate of labor productivity, per person employed, percentage change between 2012 and 2016.Source: World Development Indicators, World Ban.
- Healthy Life Expectancy 2015 Average number of years that a person can expect to live in “full health” by taking into account years lived in less than full health due to disease and/or injury. The five-year trend is based on the change in the number of years of life expectancy between 2011 and 2015.Sour ce: The Global Burden of Disease Database, Institute for Health Metrics and Evaluation.
- Employment 2016 Employment-to-population ratio is the pr oportion of a country’s population that is employed. Ages 15 and older are generally considered the working-age population.The five-year trend is based on the absolute difference in the employment rates between 2012 and 2016. Sources: World Development Indicators, World Bank; Key Indicators of the Labour Market database, International Labour Organization (ILO).
- Net-Income Gini 2016 or most recent This indicator measures the extent to which the net distribution of income (that is, post-tax, post-transfers), among individuals or households within an economy deviates from a perfectly equal distribution. A Gini index of 0 represents perfect equality, while an index of 100 implies perfect inequality. The five-year trend is basedon the absolute difference in net-income Gini over the last five most recent years available.Sources: F. Solt, 2016, “The Standardized World Income Inequality Database,” Social Science Quarterly 97; SWIID Version 6.0, October 2017.
- Poverty Rate 2016 or most recent For advanced economies, relative income povertyis defined as less than half of the respective median national income (after taxes and transfers, and adjusted for size of household). For emerging economies, it is defined as the percentage of the population living on less than $3.20 a day at 2011 international prices. The five-year trend is based on the absolute difference in the poverty rates between 2012 and 2016 or the most recent year.Sources: Organisation for Economic Co-operation and Development (OECD); World Development Indicators Online, World Bank.
- Wealth Gini| 2017 This indicator measures the differences in the distributionof wealth – higher Gini coefficients signify greater inequality in wealth distribution, with 1 signaling complete inequality and 0, complete equality. The five-year trend is based on the absolute difference in wealth Gini between 2013 and 2017.Source: Credit Suisse Global Wealth Databook 2017
- Median Income 2012 or most recentThis is the median of daily per capita income/consumption expenditure in 2011 purchasing power parity dollar (USD PPP). The data are drawn from nationally-representative household surveys, which are conducted by national statistical offices or by private agencies under the supervision of government or international agencies, and are obtained from government statistical offices and World Bank Group country departments. The per capita income/consumption used in PovcalNet is household income/consumption expenditure divided by the household size. The author has converted the data from monthly to daily median income. The trend, median income growth, is based on the absolute difference in median income between 2008 and 2012 or the most recent year and represents the total growth over the period, which in the majority of cases has covered a five-year span (+ or – one year). In a few cases, historical data is lacking and the trend is displayed as “n/a”.Source: PovcalNet, World Bank
III) Intergenerational Equity and Sustainability
- Adjusted Net Savings, Excluding Carbon Damage(% of GNI)| 2015 or most recenNatural Capital Accounts measure the total stocks and utilization of natural resources in a given ecosystem, clarifying the real difference between production and consumption by capturing depreciation of fixed capital, depletion of natural resources, and damage from pollution. It is expressed as a percentage of Gross National Income (GNI). Adjusted net savings are equal to net national savings plus expenditure on education and minus depletion of energy, minerals, and forests, and damage by particulate emissions.
- Carbon damage has been excluded from the calculation. By accounting for fixed and natural capital depletion, adjusted net national income better measures the income available for consumption and for investment to increase a country’s future consumption. The trend is based on the absolute difference in Adjusted Net Savings (minus carbon damage) between 2011 and 2015 or the most recent year.Source: World Development Indicators Online, World Bank.
- Public Debt (as a share of GDP) 2016 Gross debt consists of all liabilities that require paymentof interest and /or principal by the debtor to the creditor at a date or several dates in the future. This includes debt liabilities in the form of special drawing rights, currency and deposits, debt securities, loans, insurance,pensions, standardized guarantee schemes, and other accounts payable. Thus, all liabilities in the Government Finance Statistics Manual (GFSM) 2001 system are debt, except for equity and investment fund shares, financial derivatives, and employee stock options. For Australia, Belgium, Canada, Iceland, New Zealand, and Sweden, government debt.coverage also includes insurance technical reserves, following the GFSM 2001 definition. The trend is basedon the absolute difference in public debtas a share of GDP between 2012 and 2016 or the most recent year.Source: World Economic Outlook Database, April 2017.
Dependency ratio 2016 Age dependency ratio is the ratio of dependents,people younger than 15 or older than 64, to the working-age population, those aged 15-64. Data are shown as the proportion of dependents per 100 working-age people. The five-year trend is the absolute difference in the dependency ratios between 2012 and 2016.Source: World Development Indicators, World Bank.
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