Inclusive Growth Depends on Cities

PARIS, WASHINGTON, DC – We live in turbulent times, and popular discontent with the status quo is mounting. The reasons for popular frustration vary from country to country, but the common thread everywhere is a growing sense that the economy is rigged in favor of the few.

Indeed, the gains from economic growth are increasingly going to the very highest earners. In OECD countries, people in the top 10% of the income distribution earn around ten times more than people in the bottom 10% – up from seven times more nearly 30 years ago. In 2012, among the 18 OECD countries with comparable data, the top 10% accounted for 50% of total household wealth, while the bottom 40% accounted for only 3%.

We all pay a price when inequality reaches new heights. In a range of OECD countries, rising inequality knocked 6-10 percentage points off overall GDP between 1990 and 2010. When the poorest people are unable to fulfill their potential, economic growth suffers.

As policymakers and political leaders look for ways to make economic growth more inclusive, cities will play a central role in any solution. A survey of OECD countries shows that half the total population lives in cities of more than 500,000 inhabitants, and that cities have accounted for 60% of total growth of employment and GDP since 2001.