inclusive economic planning: lessons in human capital from high-income distribution countries

Preamble

Global economic growth is facing a structural challenge in the form of income inequality. This paper presents the findings of a doctoral research project analysing income distribution in 48 countries according to 89 economic, social, and financial indicators (2008–2022) and its impact on human capital development. Based on the study of high-income distribution countries (HIDC) – those that allocate more than 50% of GDP to employee compensation – we propose an economic model that prioritizes social inclusion and macroeconomic stability. This is the basis for an adaptive economy.

HIDC – Switzerland, Germany, Iceland, Canada, China, Slovenia, Denmark, Japan, France, and Austria – have demonstrated that equitable income distribution promotes social cohesion, reduces poverty, and stabilizes the economy. They controlled variables such as labour productivity, low country risk, investment in education and health (% of GDP) and political stability. In the context of BRICS+, the adoption of strategies based on this model could boost sustainable growth.

Hypothesis and Analysis

Our research shows that countries with CE (Compensation of Employees) above 50% of GDP have lower inequality, greater social mobility, and a more resilient economy. We analysed the income of three key economic actors that explain GDP: workers (RE), entrepreneurs (IK), and the government (TG), identifying distributional patterns that favour inclusive growth. A correlation analysis of CE with respect to the GDP of HIDC (2008–2021) produced a result of 0.744, with a strong impact when CE>50%.[1] The model function of the GDP of HIDC yielded a multiple regression with R2 of 0.869.

Using a systematic approach, countries were classified into four groups according to their income distribution:[2] HIDC (>50% CE); Medium Income Distribution Countries (MIDC) (between the global average and 50% CE); Low Income Distribution Countries (LIDC) (below the global average to <34% CE); and Worst Income Distribution Countries (WIDC <34% CE). The global average CE/GDP in 2021 was 42%. 

Table 1. Classification of Countries by Income Distribution CE (% of GDP)

Classification	CE (% GDP)	Countries
HIDC	>50%	Switzerland (58.0), Germany (53.7), Iceland (53.7), Canada (52.5), China (52.4), Slovenia (51.7), Denmark (51.6), Japan (51.4), France (51.3), Austria (50.3)
MIDC	>average <50%	United Kingdom (49.5), Lithuania (48.8), Portugal (48.8), Netherlands (48.7), United States (48.4), Belgium (48.2), South Africa (47.6), Spain (47.5), Luxembourg (47.2), Russia (47.1), Sweden (47.0), Croatia (46.4), Finland (46.4), Czech Republic (45.7), Norway (44.5), Slovakia (44.1), Brazil (43.6), Serbia (41,1)
LIDC	> 34% < Global Average	Italy (40.8), Hungary (40.2), Zimbabwe (38.7), Chile (38.5), Romania (37.9), Cuba (36.9), Greece (36.6), Libya (36.5), North Macedonia (35.4), Colombia (34.0)
WIDC	<34%	Iraq (33.1), Sudan (28.9), Mexico (28.4), Saudi Arabia (27.5), Turkey (27.0), Iran (26.5), Ireland (25.7), Burundi (20.9), Venezuela (20.6), India (14.2)

Sources: World Bank, Eurostat, OECD, UN, IMF, Central Bank of Venezuela, National Administrative Department of Statistics (DANE, Colombia). Author’s estimates

The HIDC had an average Gini coefficient of 0.28, compared to 0.51 for the WIDC, confirming the positive impact of equitable distribution on economic stability. 

Results and Proposed Economic Model

The research identifies and proposes Six Economic Patterns for Equitable Redistribution that are essential for BRICS+:

1.     Growth Planning that Incorporates Inclusion: Designing scenarios where GDP grows along with proportional increases in wages and productivity (+%CE/GDP).

2.     Equitable distribution strategies: Progressive wage policies, wage indexation, and labour participation in corporate profits.

3.     A 50-50 microeconomic model: Equal distribution of 50% of net profits between employers and employees.

4.     Investment in human capital: Technical education, job training, and tax incentives for companies that promote quality employment.

5.     Fair Income Distribution Index (FIDI): A system of equity indicators that integrates %CE/GDP, minimum wage, GDP per capita, inflation, unemployment, and social fragility to monitor progress.

6.     Progressive tax reform: Increase revenues for health, education, and social protection.

An econometric analysis[3] of the “Growth Planning that Incorporates Inclusion” method revealed that increasing the share of CE (+1% per year) and tax revenues (TG) (+1% per year) in GDP, while reducing the share of corporate income (IK) (−2% per year), produces inclusive growth. The HIDC model guarantees GDP growth of >10% over five years, with a tendency towards a reduction in inequality.

Example of the Application of the Model on China

Author’s estimates based on data fr om the National Bureau of Statistics of China (2023), the World Bank, and Eurostat

If China increases CE to 55% within the next five years, GDP will grow to at least 19.1% (see table 24 in the link).[4] The model balances the interests of workers, business owners, and governments, prioritizing human capital as a productive driver, wh ere all economic actors win and do not depend on external factors.

The Fair Income Distribution Index (FIDI)[5] measurement scale proposes a scale for comparing countries:   

Compiled by the author

FIDI calculations (2021) are high for Switzerland (at 0.724), medium for China (0.281), and low for India (0.114) and Venezuela (0.112). 

FIDI calculations for the BRICS+ countries in 2021:

Table 2: Fair Income Distribution Index (FIDI) and World Ranking for the BRICS+ Countries (2021)

Source: Author’s calculations based on data from the World Bank, the Central Bank of Venezuela, the UN, and fragilestatesindex.org

Economic and Social Impact

The benefits of implementing the HIDC model in the BRICS+ countries include:

·       Economic Impact: GDP growth of >10% within five years incorporating inclusion; 15% growth of domestic demand; reduced economic volatility (standard deviation of 1.2% in HIDC vs. 4.8% in WIDC).  

·       Social Impact: FIDI figures for 2021 were 0.477 on average for HIDC and 0.207 for WIDC. Applying the model would improve the figures from low to medium for WIDC in a few years. Poverty will decrease from 34% to 8% in adopting countries. Education mobility – 78% of young people have access to higher education in HIDC, compared to 22% in WIDC. Greater social wellbeing and increased happiness rates. 

Relevance for the BRICS+ Countries and Policy Proposals

Strategies for the BRICS+ countries to achieve HIDC status include:

·         Gradually increasing the share of CE in GDP through progressive wage adjustments and collective bargaining.

·         Signing national income distribution agreements guaranteeing wage increases indexed to inflation and benefits shared between workers and employers.

·         Labour and tax reforms that encourage legal employment and distributive equity.

·         The creation of a FIDI Observatory to monitor progress in equity.

·         The improvement of tax collection and redistribution to finance social and infrastructure programmes, allocating greater resources to health, education, and social protection.

1.     Ideal Income Distribution Scenario for BRICS+ (2030):

BRICS+ targets for 2030 using the HIDC model:

Source: Compiled using data from the World Bank, IMF, OECD, Central Bank of Venezuela, Eurostat, UN.

Conclusions

The results show that HIDC have achieved fairer and more stable economies over the past 17 years through equitable income distribution policies. They also demonstrate that equitable redistribution is not a utopia, but is rather a proven strategy for achieving sustainable and inclusive growth. The implementation of the HIDC model in the BRICS+ countries could significantly reduce inequality and strengthen global economic growth. The introduction of the Six Economic Patterns for Equitable Redistribution –Growth Planning and FIDI in particular – could help reduce inequality, strengthen human capital, and stabilize vulnerable economies.

This model represents a pragmatic vision that not only challenges the traditional capitalist paradigm but also offers a path to a future wh ere economic development and social justice coexist.

Bibliography:

·        GIUSSEPE, ANDRÉS (Noviembre, 2024). “Distribución de los ingresos y beneficios desde una perspectiva sistémica-compleja”. Tesis Doctoral presentada ante la Faces, Ceap, UCV, como requisito para optar al título académico de Doctor en Economía. Caracas.

·        WORLD BANK (Portal web). https://www.bancomundial.org

·        INTERNATIONAL MONETARY FUND. https://www.imf.org/es/Home

·        UNITED NATIONS. https://www.unece.org/stats/

·        FRAGILE STATES INDEX. https://fragilestatesindex.org/

·        Expasión. https://www.expansion.com/Datosmacro.com

·        Index Mundi. https://www.indexmundi.com/

·        Eurostat – European Commission.: https://ec.europa.eu/eurostat/data/database

 

To check the calculations and parts of the doctoral thesis, visit: https://poli-data.com/economia-adaptativa-y-multidimensional/

 

 

Email: agiussepe@gmail.com / agiussepe@poli-data.com

Tel.: +58-412-5986812.