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article imageReport Says Gap Between Rich and Poor Has Grown

By Bob Ewing     Oct 21, 2008 in Politics
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.
The Organization for Economic Development and Cooperation (OECD) has just released Growing Unequal? The OECD report finds that the economic growth of recent decades has benefited the rich more than the poor.
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. In addition, 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.
The OECD Secretary-General Angel Gurría warned of the dangers posed by inequality and the need for governments to tackle it. “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.”
The number of low-skilled and poorly educated who are out of work has been a key driver of income inequality has been as has the reality that more people are living alone or in single-parent households
Some groups are doing 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.
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 a powerful way to achieve growth which benefits all, not just the elites.
Countries, in the short-term, 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.
For information how where Canada stands visit this pdf file, for other countries here.
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