Inequality and Public Education: The GDP Link

Context

The World Inequality Report (WIR) 2026 highlights extreme global inequality. It shows that the top 10% of income earners earn more than the remaining 90% combined, while the poorest 50% receive less than 10% of global income. The report identifies public investment in education and health as the most effective tool to reduce inequality.

What is Inequality?

1. Inequality refers to unequal distribution of income, wealth, and opportunities across individuals, regions, and countries.
2. Key dimensions include:
   1. Income inequality: Who earns how much
   2. Wealth inequality: Who owns assets
   3. Opportunity inequality: Access to education, health, and skills
3. Globally:
   1. Top 10% own about 75% of global wealth
   2. Bottom 50% own only about 2% of global wealth
4. This concentration limits social mobility and long-term economic growth.

Why Inequality Matters for GDP and Development?

1. High inequality reduces human capital formation.
2. It limits productivity by preventing talent from poorer backgrounds from realising potential.
3. It weakens social cohesion and economic resilience.
4. Growth becomes unequal and fragile, rather than inclusive.
5. Therefore, inequality is not just a social issue but a core economic concern.

How Inequality Varies Across Regions (Income Perspective)?

1. Global averages hide sharp regional divides:
   1. High-income regions (North America & Oceania, Europe) have very high average incomes
   2. Middle-income regions (East Asia, Russia & Central Asia, Middle East & North Africa) lie in between
   3. Low-income, populous regions (South & Southeast Asia, Latin America, Sub-Saharan Africa) have much lower average incomes
2. For example:
   1. Average income in North America & Oceania is about 13 times that of Sub-Saharan Africa.
   2. It is about three times the global average.
3. India falls in South & Southeast Asia, a region with low average income despite large population size.

Why is Public Education Central to Reducing Inequality?

1. The World Inequality Report identifies public investment in education and health as the strongest equaliser because:
   1. It reduces early-life disadvantages.
   2. It ensures that talent and effort, not family background, determine outcomes.
   3. It improves long-term productivity and earnings.
   4. It creates inclusive and resilient societies.
2. Public education here means government expenditure on schooling and higher education, not private spending.

How Public Education Spending Reflects Inequality?

1. Public education spending per school-age individual shows enormous variation across regions:
   1. Very low spending in Sub-Saharan Africa
   2. Moderate spending in South & Southeast Asia and Latin America
   3. Very high spending in Europe and North America & Oceania
2. The gap is extreme:
   1. From around €220 per child in Sub-Saharan Africa
   2. To over €9,000 per child in North America & Oceania
3. This nearly 1:40 gap explains why poorer regions struggle to catch up.

Why Low-Spending Regions Continue to Lag?

1. Lower public education spending → weaker schools and skills
2. Weak skills → low productivity and incomes
3. Low incomes → limited tax capacity
4. Limited tax capacity → continued underinvestment
5. This creates a vicious cycle of inequality, especially in populous developing regions like South Asia.

Implications

1. Income inequality across regions mirrors education spending gaps
2. Regions that invest more in public education achieve higher incomes and stability
3. Underinvestment in education locks countries into low-income traps
4. Global inequality persists not due to lack of growth, but due to unequal public investment

Challenges and Way Forward

Conclusion

The World Inequality Report 2026 shows that inequality is closely linked to how much governments invest in public education. Without strong public spending on human capital, poorer regions will continue to lag, and global inequality will remain entrenched. Inclusive growth requires education-led equality.