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Rapacious Rich and Pitiful Poor Drifting Further Apart

Posted by feww on May 21, 2015

10% Wealthiest households hold half the total wealth, the bottom 40% have only 3%

The gap between rich and poor has risen to its highest levels since the 1980s, the Organization for Economic Cooperation and Development (OECD) says.

In most countries, the gap between rich and poor is at its highest level since 30 years. Today, in OECD countries [34 nations,] the richest 10% of the population earn 9.6 times the income of the poorest 10%. In the 1980s, this ratio stood at 7:1 rising to 8:1 in the 1990s and 9:1 in the 2000s. In several emerging economies, particularly in Latin America, income inequality has narrowed, but income gaps remain generally higher than in OECD countries. During the crisis, income inequality continued to increase, mainly due to the fall in employment; redistribution through taxes and transfer partly offset inequality. However, at the lower end of the income distribution, real household incomes fell substantially in countries hit hardest by the crisis.
[OECD (2015), In It Together: Why Less Inequality Benefits All, OECD Publishing, Paris.

The average Gini coefficient across OECD was 0.32, according to the report. The US and UK had high rankings with coefficients of 0.40 and 0.35 respectively. Chile scored highest at 0.50, the most unequal wealth distribution, while Denmark scored the lowest at 0.25, meaning closer to equal income distribution across the 34-nation OECD club.

[The Gini coefficient measures the inequality among values of a frequency distribution, for example, a measure of how well income is distributed across a nation. A coefficient of zero means perfect equality, where all values are the same, e.g., everyone has the same income, while one, or 100%, would mean maximal inequality among values, e.g., only one person has all the income, and all others have nothing.]

Higher wealth inequality limits opportunities

“Wealth is much more concentrated than income,” says OECD. About 10% of wealthiest households in rich countries hold half of total wealth, “the next 50% hold almost the other half, while the 40% least wealthy own little over 3%. At the same time, high levels of indebtedness and/or low asset holdings affect the ability of the lower middle class to undertake investments in human capital or others.”

The report suggests the widening gap in education leads to a less effective workforce in the most unequal countries.

However, Joe Stiglitz of Cloumbia Business School told BBC News that the problem goes beyond lack of training and education.

“What we’ve seen, particularly in the last 15 years, is that even those who are college graduates have seen their incomes stagnate. The real problem is the rules of the game are stacked for the monopolists, the CEOs of corporations.”

“CEOs today get pay that’s roughly 300 times that of ordinary workers – it used to be 20 or 30 times. No increase in productivity justifies this change in relative compensation.”

“Injustice: Why social inequality persists”

According to a report published by a geographer at UK’s Sheffield University, in 2010, “of all the 25 richest countries in the world (excluding very small states), the US and the UK rank as second and fourth most unequal respectively when the annual income of the best-off tenth of their population is compared with that of the poorest tenth.”

Starting with the most unequal, the income ratios of the top five 10% richest to 10% poorest were:

  • 17.7 Singapore
  • 15.9 US
  • 15 Portugal
  • 13.8 UK
  • 13.4 Israel

And the most equal were:

  • 6.9 Germany
  • 6.2 Sweden
  • 6.1 Norway
  • 5.6 Finland
  • 4.5 Japan.

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