Income inequality on the rise

(CS) The gap between rich and poor has reached its highest level in the last 30 years, also in Luxembourg, according to an OECD study on income inequality.

The “Divided We Stand: Why Inequality Keeps Rising” study finds that the average income of the richest 10% is nine times higher than that of the poorest 10%.

Even countries considered more egalitarian, such as Sweden, Denmark and Germany have seen a rise in income difference from five to one, to six to one over the past two decades.

Income in equality is measured in the Gini coefficient, where 0 means perfectly equal and 1 perfectly unequal. Luxembourg saw its Gini rise to 0.288 as measured against the whole population. In the mid-eighties this number was still at 0.247.

The factor is a lot higher when measured against the population of working age where it has risen from 0.239 in the eighties to 0.292 in 2008.

Still, Luxembourg ranks eleventh in the OECD-20 and the OECD-34, ahead of France, Ireland, the Netherlands, and Germany.

The United Kingdom is placed in the bottom half of the poll with a Gini of 0.345, while the United States come in at 0.378.

Especially emerging countries register a high income inequality. In Brazil the income ratio is 50 to one, meaning the richest 10% earn 50 times more than the poorest 10%. While this is a whopping figure, it nonetheless marks a significant decline over the past decade, according to the OECD.

Launching the report in Paris, OECD Secretary-General Angel Gurría said, “the social contract is starting to unravel in many countries. This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, inequality will continue to rise.”

The study recommends a review of tax and benefits systems as playing a major role in reducing inequality. It recommends investing in human capital and making available freely accessible and high-quality public services, such as education, health, and family care.