Home Economy The real income growth during 1988 to 2008

The real income growth during 1988 to 2008

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By IE&M Research

Branko Milanovic has created something called as the “elephant graph”. It is charting global cumulative real income growth during the 20-year period from 1988 to 2008. It starts low at the tail on the left, gradually rising up to the top of the elephant’s head, sliding down his face and then back up as if he were raising his trunk proudly. It shows how much people’s income has gone up or down, at every percentile, around the world.

The real income growth during 1988 to 2008 1There are three points on this chart that are particularly interesting: the tip of the trunk, the high point at the elephant’s head, and the dip in between.

Branko Milanovic explains it as: Let’s start with the tip of the trunk. This is the global 1%, and they’re doing pretty well. If you were rich, you’ve gotten richer and your income’s gone up by more than 60% over those two decades. The top of the elephant’s head, around the 50–60th percentiles, is also a happy story. Those are the jobs created by the industrialization of China and India, where people went from nothing per day to a little better than nothing per day. A huge increase in percentage terms. It shows that the number of people living in absolute poverty has dropped by more than half over this period. The World Bank recently said that “For the first time in history, the number of people living in extreme poverty has fallen below 10%.”

To be fair, this doesn’t necessarily mean these folks are getting rich. As Milanovic points out, “Chinese and Indian GDP per capita has increased by 5.6 and 2.3 times, respectively, over the period, but the people around the global median are, however, still relatively poor by Western standards. This emerging ‘global middle class’ is composed of individuals with household per capita incomes of between 5 and 15 international dollars per day.”
Let’s move on to where the trunk dips. The 75–90th percentiles. Those are basically poor people in rich countries, and they’re not looking too good.