And that is bad news.
Across the OECD:
As the report notes, The Gini coefficient ranges from 0 (when all people have identical incomes) to 1 (when the richest person has all the income). Market incomes are labor earnings, capital incomes and savings. Disposable income is market income plus social transfers less income taxes. Incomes are adjusted for household
size. Data refer to the working-age population.
Starting with the US:
“The United States has the fourth-highest inequality level in the OECD, after Chile, Mexico and Turkey. Inequality among working-age people has risen steadily since 1980, in total by 25%. In 2008, the average incomeof the top 10% of Americans was 114 000 USD, nearly 15 times higher than that of the bottom 10%, who had an average income of 7 800 USD. This is up from 12 to 1 in the mid 1990s, and 10 to 1 in the mid 1980s.
Income taxes and cash benefits play a small role in redistributing income in the United States, reducing inequality by less than a fifth – in a typical OECD country, it is a quarter. Only in Korea, Chile and Switzerland is the effect still smaller.”
And check out the video:
The full report with truckloads of data, tables and graphs here.
The annoying part is that, when it comes to public policy, the report reads like it has been written by a crusty and unimaginative functionalist:
“Rising income inequality creates economic, social and political challenges. It can stifle upward social mobility, making it harder for talented and hard-working people to get the rewards they deserve. Intergenerational earnings mobility is low in countries with high inequality such as Italy, the United Kingdom, and the United States, and much higher in the Nordic countries, where income is distributed more evenly (OECD, 2008). The resulting inequality of opportunity will inevitably impact economic performance as a whole, even if the relationship is not straightforward. Inequality also raises political challenges because it breeds social resentment and generates political instability. It can also fuel populist, protectionist, and anti-globalisation sentiments. People will no longer support open trade and free markets if they feel that they are losing out while a small group of winners is getting richer and richer.
Reforming tax and benefit policies is the most direct and powerful instrument for increasing redistributive effects. Large and persistent losses in low-income groups following recessions underline the importance of well-targeted income-support policies. Government transfers – both in cash and in-kind – have an important role to play in guaranteeing that low-income households do not fall further back in the income distribution.
At the other end of the income spectrum, the relative stability of higher incomes – and their longer-term trends – are important to bear in mind in planning broader reforms of redistribution policies. It may be necessary to review whether existing tax provisions are still optimal in light of equity considerations and current revenue requirements. This is especially the case where the share of overall tax burdens borne by high-income groups has declined in recent years (e.g. where tax schedules became flatter and/or where tax expenditures mainly benefitted high-income groups).
However, redistribution strategies based on government transfers and taxes alone would be neither effective nor financially sustainable. First, there may be counterproductive disincentive effects if benefit and tax reforms are not well designed. Second, most OECD countries currently operate under a reduced fiscal space which exerts strong pressure to curb public social spending and raise taxes. Growing employment may contribute to sustainable cuts in income inequality, provided the employment gains occur in jobs that offer career prospects. Policies for more and better jobs are more important than ever.
A key challenge for policy, therefore, is to facilitate and encourage access to employment for under-represented groups, such as youths, older workers, women and migrants. This requires not only new jobs, but jobs that enable people to avoid and escape poverty. Recent trends towards higher rates of in-work poverty indicate that job quality has become a concern for a growing number of workers. Policy reforms that tackle inequalities in the labour market, such as those between standard and non-standard forms of employment, are needed to reduce income inequality. The lessons from the Restated Jobs Strategy (OECD, 2006), adapted to recent experience, provide important guidelines in this respect, e.g. with regard to more balanced policy measures between temporary and permanent employment contracts.”
Geez, and how is this going to happen when other institutions are going full-blast the austerity way, that is, implementing the exact opposites of what is being suggested above?