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Rich-Poor Divide Is Widening in Developed Countries, OECD Says

OECD Secretary-General Angel Gurria
Organisation of Economic Cooperation and Development (OECD) secretary-general Angel Gurria. Photographer: Jason Alden/Bloomberg

The gap between rich and poor is widening across most developed economies as skilled workers reap more rewards and top executives and bankers benefit from a global job market, the Organization for Economic Cooperation and Development said.

The average income of the richest tenth of the population is now about nine times that of the poorest tenth, the Paris-based OECD said today in a report. The gap has increased about 10 percent since the mid 1980s.

Mexico, the U.S., Israel and the U.K. are among the countries with the biggest divide between rich and poor, while Denmark, Norway, Belgium and the Czech Republic are among those with the smallest gap. The earnings multiple is 14-to-1 in the U.S. and Israel, compared with about 10-to-1 in the U.K., Italy and Japan and 6-to-1 in Germany and Denmark.

“The social contract is starting to unravel in many countries,” OECD Secretary-General Angel Gurria said in a statement. “This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that the greater inequality fosters greater social mobility.”

The OECD used a “Gini coefficient,” or standard measure of income inequality that ranges from zero to one. At zero an entire population would have identical incomes, while at one all income would go to one person. The coefficient stands at about 0.316 today, up 10 percent since the mid-1980s.

The coefficient rose in 17 out of 22 OECD countries for which long-term data are available. Only Turkey, Greece, France, Hungary and Belgium recorded no increase or small declines in their coefficients, the OECD said.

“There is nothing inevitable about high and growing inequalities,” Gurria said. “Up-skilling the workforce is by far the most powerful instrument to counter rising inequality. The investment in people must begin in early childhood and be followed through into formal education and work.”

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