Middle East suffers from worst income inequality in the world - report

The average income of the bottom 50% of the population – less than $8,000 – is just a little more than 1% of the average income of the top 1% of the population.

First Gulf Bank (FGB), Khalid Bin Al-Waleed Road in Dubai, UAE (photo credit: REUTERS/NIKHIL MONTEIRO/FILE PHOTO)
First Gulf Bank (FGB), Khalid Bin Al-Waleed Road in Dubai, UAE
(photo credit: REUTERS/NIKHIL MONTEIRO/FILE PHOTO)
The Middle East suffers from the worst income inequality in the world, according to a new report by the World Inequality Database (WID).
The top 10% of income earners received 56% of the national income in countries in the Middle East in 2019, meaning that their income was about five times higher than the poorest 50% who received only 12% of the national income.
The WID defines national income as GDP minus the consumption of fixed capital, plus net foreign income. They believe it to be more accurate than GDP in assessing wealth per capita as it takes into account capital depreciation through wealth leaving the country.
The top 1% of income earners in the region earned 23% of the total income in 2019, which is almost twice as high as the share earned by those in the bottom 50%.
The average income for the top 1% stood at about $732,899 in 2019, while the average income for the bottom 50% stood at just over 1% of that, at about $7,929.
In comparison, in Israel the bottom 50% earned 16.8% of the national income while the top 10% earned about 46% and the top 1% earned about 14.4% in 2019. The average income for the top 1% stood at about $865,161 in 2019, while the average income for the bottom 50% stood at 2.33% of that, about $20,246.
Israel has actually experienced a decrease in income inequality in the past decade, according to the Taub Center's Picture of the Nation 2020 report released earlier this year. The report did stress, however, that the coronavirus crisis was expected to worsen inequality, as weaker populations would likely be affected more severely. Income inequality in Israel is still higher than in many other OECD countries.
The Gulf countries, including Bahrain, Kuwait, Oman, Qatar, the UAE and Saudi Arabia, suffer from some of the worst inequality in the region, with 54% of the national income being distributed among the top 10%.
 
SOME OF the factors that contribute to inequality in Gulf countries include their highly subsidized economies, a lack of income tax and free healthcare and education for citizens, along with a large number of migrant workers and a notoriously difficult naturalization process.
In comparison, the top 10% in non-Gulf countries hold about 49% of the national income.
The Middle East is joined by Latin America and Africa as the three regions where the top 10% earned over 50% of the national income. In comparison, the top 10% in Asia earn 49% of the national income, 47% in the United States and 34% in Western Europe.
Population growth in the Middle East since 1990 has been rapid, growing by 80% from less than 240 million in 1990 to over 430 million in 2019. Average income has grown much more slowly, with the income per adult rising from 19,651 euros in 1990 to 23,091 euros in 2019, about an 18% growth rate.
The overall income share held by the top 10% earners in the region has been decreasing since 1990, as inequality between the various countries in the region decreases.
A number of issues have contributed to income inequality in the region.
In Turkey and Egypt, where 45% of the region's population resides, inequality has increased as the share held by the bottom 50% decreases. In Egypt specifically, a number of policy changes led to a decrease in the income level of the bottom 50% and the middle 40%, leading to the rise in inequality.
In the report, WID's Rowaida Moshrif concluded that the extreme inequality in the Middle East is caused not just because of the large inequalities between rich and poor countries, but also because of internal inequality in each country.
The estimates by the WID are based on surveys, tax data and national accounts. The database warned that since there is only a limited amount of data available for the region, some of the estimates could be subject to revision.
The lack of data could mean that the levels of inequality are underestimated and that the share of the national income accrued by the top 10% of earners could actually be higher, according to the WID.
The database stressed that due to the lack of available data sources, it is not possible to draw precise conclusions about inequality within countries in the Middle East and called for more access and transparency concerning income and wealth in the region in order to draw more accurate conclusions.