Economies at risk from wage gap

Income disparity is the most likely risk to cause serious global economic damage over the next decade, according to the new World Economic Forum’s (WEF) Global Risks 2014 report.

The report surveyed more than 700 global experts who assessed 31 risks that could cause significant harm across countries and industries.

Although a chronic gap between the incomes of the richest and poorest citizens is the most likely threat to an economy, the report said that global risks are interconnected and have systemic impacts.

The risks seen to be most interconnected with other risks are macroeconomic – fiscal crises, and structural unemployment and underemployment, which ranked as the second global risk of highest concern.

Additionally, fiscal crises have been identified as the most potentially impactful global risks, which experts believe have the potential to have the biggest impact on systems and countries over the course of the next 10 years.

This economic risk is followed by two environmental risks – climate change and water crises – then unemployment and underemployment, and then critical information infrastructure breakdown, a technological risk.

The 10 global risks of highest concern in 2014 are:

  1. Fiscal crises in key economies;
  2. Structurally high unemployment/underemployment;
  3. Water crises;
  4. Severe income disparity;
  5. Failure of climate change mitigation and adaptation;
  6. Greater incidence of extreme weather events (for example, floods, storms, fires);
  7. Global governance failure;
  8. Food crises;
  9. Failure of a major financial mechanism/institution;
  10. Profound political and social instability.

Commenting on the report, WEF chief economist Jennifer Blake said: “Each risk considered in this report holds the potential for failure on a global scale; however, it is their interconnected nature that makes their negative implications so pronounced as together they can have an augmented effect.”

She added: “It is vitally important that stakeholders work together to address and adapt to the presence of global risks in our world today.”