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Income inequality
and poverty rising in most OECD countries.
(Organisation for
Economic Co-operation and Development)
The gap between rich
and poor has grown in more than three-quarters of OECD countries over the past
two decades, according to a new OECD report.
OECD’s finds that the economic
growth of recent decades has benefitted the rich more than the poor. In some
countries, such as Canada, Finland, Germany,
Italy, Norway and the United States, the gap also
increased between the rich and the middle-class.
Countries with a wide distribution of income tend to have more widespread
income poverty. Also, social mobility is lower in countries with high
inequality, such as Italy,
the United Kingdom and the United States,
and higher in the Nordic countries where income is distributed more evenly.
“Growing inequality is divisive. It polarises societies, it
divides regions within countries, and it carves up the world between rich and
poor. Greater income inequality stifles upward mobility between generations,
making it harder for talented and hard-working people to get the rewards they
deserve. Ignoring increasing inequality is not an option.”
A key driver of income inequality has been the
number of low-skilled and poorly
educated who are out of work. More people living alone or in single-parent households has also contributed.
Some groups in society have done better than others. Those around retirement
age have seen the biggest increases in incomes over the past 20 years, and
pensioner poverty has fallen in many countries. In contrast, child
poverty has increased. (The OECD defines poor as someone living in a household
with less than half the median income, adjusted for family size.)
Children and young adults are now 25% more likely to be poor than the
population as a whole. Single-parent households are three times as likely
to be poor than the population average. And yet OECD countries spend 3 times
more on family policies than they did 20 years ago.
In developed countries, governments have been taxing more and spending more on
social benefits to offset the trend towards more inequality. Without this
spending, the report says, the rise in inequality would have been even more
rapid.
But new ways of tackling this issue need to be found, Mr Gurría said. “Although
the role of the tax and benefit system in redistributing incomes and in curbing
poverty remains important in many OECD countries, our data confirms that its
effectiveness has gone down in the past ten years. Trying to patch the
gaps in income distribution solely through more social spending is like treating
the symptoms instead of the disease.”
“The largest part of the increase in inequality comes from changes in the
labour markets. This is where governments must act. Low-skilled workers are
having ever-greater problems in finding jobs. Increasing employment is the best
way of reducing poverty,” he said.
Better education is also a powerful way to achieve growth which benefits all,
not just the elites, the report finds. In the short-term, countries have to do
better at getting people into work and giving them in-work benefits to provide
working families with a boost in income, rather than relying on unemployment,
disability and early retirement benefits.
Key Findings of Growing
Unequal
Why is the gap between rich and
poor growing?
In most countries the gap is growing because rich households have done
significantly better than middle-class and poor households. Changes in the
structure of the population and in the labour market over the past 20 years
have contributed greatly to this rise in inequality.
·
Wages have been improving for those
people who were already well paid.
·
Employment rates have been dropping
among less-educated people.
·
And, there are more single-adult and
single-family households.
Who is most affected?
Statisticians
and economists assess poverty in relation to average incomes. Typically, they
take the poverty line to be equivalent to one-half of the median income in a
given country.
·
Since 1980, poverty among the elderly
has fallen in OECD countries.
·
By contrast, poverty among young
adults and families with children has increased.
·
On average, one child out of every
eight living in an OECD country in 2005 was living in poverty.
What does this mean for future
generations?
Social
mobility is generally higher in countries where income inequalities are
relatively low. In countries with high income inequalities, by contrast,
mobility tends to be lower.
·
Children living in countries where
there is large gap between rich and poor are less likely to improve on the
education and income attainments of their parents than children living in
countries with low income inequality.
·
Countries like Denmark and Australia
have higher social mobility, while the United
States, United Kingdom
and Italy
have lower mobility.
What can be done?
In some cases, government policies of taxation and redistribution of income
have helped to counteract widening inequalities, but this cannot be their only
response. Governments must also improve their policies in other areas.
·
Education policies should aim to
equip people with the skills they need in today’s labour market.
·
Active employment policies are needed
to help unemployed people find work.
·
Access to paid employment is key to
reducing the risk of poverty, but getting a job does not necessarily mean you
are in the clear. Growing Unequal? found that over half of all households in
poverty have at least some income from work.
·
Welfare-in-work policies can help
hard-pressed working families to have a decent standard of living by
supplementing their incomes.
