Article: Why businesses and economies benefit from reducing inequality

Skilling and Vocational Services

Why businesses and economies benefit from reducing inequality

If economies were able to improve their social mobility score even by 10 points, then the GDP would increase by 4.4 percent by 2030, according to the World Economic Forum’s Social Mobility Report 2020.
Why businesses and economies benefit from reducing inequality

A society where every individual has access to equal opportunities to unlock their potential, irrespective of their socioeconomic background would not only result in societal benefits of less inequality, and every person being able to live a healthier and fulfilled life but also result in an economic boost of billions of dollars a year, according to the World Economic Forum’s Social Mobility Report 2020.

The five key dimensions spread across 10 pillars that were measured in this report that focuses on 82 economies. These dimensions are: Health, Education (access, quality, equity),Technology, Work (opportunities, wages, conditions), Protections and Institutions (social protection and inclusive institutions).

There are only a few economies that have adequate conditions to foster social mobility. Most of the key areas in emerging economies that are lagging behind include: low wages, lack of social protection, inadequate working conditions, and poor lifelong learning systems for workers and the unemployed. 

The report found that if economies were able to improve their social mobility score even by 10 points, then the GDP would increase by 4.4 percent by 2030. 

A blend of investments in social mobility measures and transformations in business practices would lead to an effective and impactful change in social mobility and in-turn the growth of the economy. 

Thus, improving social mobility is a goal that requires multiple stakeholders on a macro level. However, what it boils down to in terms of the landscape of the future of work is that business leaders must build a culture of meritocracy in hiring and provide equal access to vocational education, reskilling, upskilling, improving working conditions, and paying fair wages. 

“The response by business and government must include a concerted effort to create new pathways to socioeconomic mobility, ensuring everyone has faire opportunities for success,” said Klaus Schwab, Founder and Executive Chairman of the World Economic Forum.

European countries turned out to be the most socially mobile ones with Denmark, Norway, Finland, Sweden, and Iceland coming out at the top five spots. China happens to be the economy that has the most to gain from improving social mobility: its economy could grow by $103 Bn a year, or $1 Tn over the next decade. The US stands to gain $87 Bn a year. The next in line after the US is India, followed by Japan, Germany, Russia, Indonesia, Brazil, the UK and France. 

“The social and economic consequences of inequality are profound and far-reaching: a growing sense of unfairness, precarity, perceived loss of identity and dignity, weakening social fabric, eroding trust in institutions, disenchantment with political processes and an erosion of the social contract,” said Schwab.

The returns on enhancing social mobility are beyond tangible profits in the GDP. Returns can be seen in the form of social cohesion, stability, and better opportunities for more and more sections of the population to fulfil their potential. 

About 44 percent of the global respondents to a study conducted exclusively for the World Economic Forum by Ipsos, believe that prospects for today’s youth in terms of being able to buy their own home will be worse than what it was for their parents--who had only a 40 percent chance. The same survey found that people were pessimistic than optimistic for today’s youth compared to their parents--when it comes to working at a secure job. 

Some of the recommendations and findings coming out of the Social Mobility report include: 

Continuous learning opportunities

A targeted agenda to promote skills development while on the job and making quality education programs available to both public and private sector employees. 

Social protection mechanisms 

A contract is crucial in order to strengthen the employees potential. The report recommends that a contract offers holistic protection to all workers irrespective of their employment status. This contract becomes essential in an industry that is facing major transitions because of major technological upheavals. 

Business leaders to take charge 

Social mobility can no longer remain a nice-to-have. Multiple stakeholders need to take charge in addition to the government. A culture of hiring policies that focus on merit, promoting learning in the flow of work by providing vocational education, reskilling and upskilling opportunities. Enhanced working conditions and paying fair wages across various sectors can take the economic conditions of the country to the next level. 

“As long as an individual’s chances in life remain disproportionately influenced by their socioeconomic status at birth, inequalities will never be reduced,” said Saadia Zahidi, Managing Director, New Economy and Society, World Economic Forum. “In a globalized world where there is transparent information on the gulf between the ‘haves and the have-nots’, we will continue to see discontent, with far-reaching consequences for economic growth, the green transition, trade and geopolitics.” 

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Topics: Skilling and Vocational Services, #GlobalPerspective

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