OECD: Report Finds Record-Breaking Income Inequality

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By Jenny David

June 1—Income inequality has reached record highs in much of the world, according to a new report by the Organization for Economic Cooperation and Development (OECD), the richest 10 percent of the population in OECD countries now earning 9.6 times the income of the poorest 10 percent, up from ratios of 7:1 in the 1980s and 9:1 in the 2000s. The bottom 40 percent of households owned just 3 percent of total household wealth in 2012, the top 10 percent 50 percent and the wealthiest 1 percent 18 percent.

“We have reached a tipping point,” OECD Secretary-General Angel Gurría said in a May 21 statement. “Inequality in OECD countries is at its highest since data collection began. The evidence shows that high inequality is bad for growth,” so by not addressing inequality “governments are hurting their long-term economic growth.”

Lowest Most Hurt

The 330-page report estimated that the increase in inequality between 1985 and 2005 knocked 4.7 percentage points off cumulative growth in OECD countries between 1990 and 2010. Most of the economic harm appears to have been caused to the bottom 40 percent of wage earners, who have not benefited proportionately from recent growth in global economic activity. As inequality rises, families at the lower socioeconomic levels experience the most significant drops in educational achievement and skills, wasting their economic potential, according to the report.

The report also noted structural change in the world job market. Between 1995 and 2013, more than half of all jobs created in OECD countries were part-time positions, temporary contracts or positions for self-employed, a trend the OECD called “one important driver of growing inequality.”

Youth are most affected, the report continued, 40 percent working in “nonstandard” jobs and about half of all temporary workers under age 30. Youth are also less likely to move from a temporary to a permanent job.

Pay Equity Worst in U.S.

More must also be done to reduce the gender gap, according to the report, which found that the total increase in inequality would have been one point greater had more women not entered the job market during the past two decades. Women are still about 16 percent less likely to be in paid work, however, and earn about 15 percent less on average than men.

Of the 19 OECD countries surveyed, the report found the greatest income inequality in Chile, Mexico, Turkey, Israel and—in last place—the U.S. The average income of the top 10 percent in the U.S. was 19 times higher than the bottom 10 percent in 2013, far greater than the OECD average and up from 11 times higher 30 years ago.

The OECD identified the lowest levels of income inequality in Denmark, Slovenia, the Slovak Republic and Norway. Inequality is higher in major emerging economies, although it has fallen in some, including Brazil.

To reduce inequality and boost inclusive growth, the OECD recommended that governments:

•  promote gender equality in employment,

•  broaden access to better jobs,

•  encourage greater investment in education and skills throughout working life,

•  redistribute wealth via taxes and transfers and

• ensure that wealthier individuals and multinational firms pay their share of taxes.


Together with the report, the OECD launched a new interactive web-tool that lets users from OECD member states identify where they fit into their country's income distribution. “Compare Your Income” is available at http://www.oecd.org/statistics/compare-your-income.htm.

To contact the reporter on this story: Jenny David in Jerusalem at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

The full report, In It Together: Why Less Inequality Benefits All, is available at http://www.keepeek.com/Digital-Asset-Management/oecd/employment/in-it-together-why-less-inequality-benefits-all_9789264235120-en#page3.


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