The given sentence is missing in the paragraph below. Decide where it best fits among the options 1, 2, 3, or 4 indicated in the paragraph.

Sentence: Productivity gains, once expected to feed through to broader living standards, now primarily serve to enhance returns to wealth. Paragraph: Economists now argue that inequality is no longer a by-product of growth but a condition of it. ____ (1) ____. Unlike wages, wealth reflects not just income but also access to assets, favourable institutional conditions - such as low interest rates - and public policies like low taxes and housing shortages. ____ (2) ____. In other words, wealth depends on political choices in ways that income currently does not. It’s not just the inequality itself that is the issue but the erosion of mechanisms that once constrained it. ____ (3) ____. Wealth and income inequality are linked, but where wages have stagnated and collective bargaining has weakened, capital income - derived from profits, rents and interest - has been boosted by design. ____ (4) ____.

The correct option is Option 4.

To determine the best position for the missing sentence, we need to analyze its core message and see where it naturally fits in the logical flow of the paragraph. The missing sentence states: "Productivity gains, once expected to feed through to broader living standards, now primarily serve to enhance returns to wealth." This sentence sets up a clear contrast between two ideas: the historical expectation that productivity would improve everyone's living standards (usually through higher wages), and the modern reality that it mainly increases the wealth of those who already hold capital assets.

Now let us examine the sentence immediately preceding position (4): "Wealth and income inequality are linked, but where wages have stagnated and collective bargaining has weakened, capital income - derived from profits, rents and interest - has been boosted by design."

This preceding sentence explicitly discusses the stagnation of "wages" (which directly connects to the "broader living standards" mentioned in our missing sentence) and the boosting of "capital income" (which perfectly aligns with the "returns to wealth" mentioned in our missing sentence). By placing the missing sentence at position (4), it provides a natural, logical, and powerful conclusion to this thought process. It acts as a summarizing statement, explaining the ultimate consequence of those stagnant wages and boosted capital incomes: all the new productivity gains in the economy are being funneled directly into wealth generation for a few, rather than benefiting the living standards of society as a whole.

Placing the sentence in any of the other positions would disrupt the paragraph's intended flow. Position (1) is too early, as the passage has not yet established the foundational contrast between wages and wealth. Position (2) interrupts a specific, ongoing point about how wealth is influenced by institutional policies, which is immediately summarized by the following sentence starting with "In other words...". Position (3) is placed right before the detailed explanation of how capital income has been boosted versus wages, making the concluding thought premature. Therefore, position (4) is the only cohesive and appropriate fit.