As the gap between rich and poor keeps widening, the richest 10 percent of the population earn 9.6 times the income of the poorest 10 percent of the population in most of the OECD’s 34 member countries. This is up from 7:1 in the 1980s and 9:1 in the 2000s, according to the body’s most recent report “In it together: Why less inequality benefits all.”
The OECD believes high inequality has a negative effect on growth, stating that an increase in inequality cut 4.7 percentage points off cumulative growth across major economies between the years of 1990 and 2010.
“By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth,” said OECD Secretary General Angel Gurria. “We have reached a tipping point. Inequality in OECD countries is at its highest since records began,” he added.
According to the organisation in order to reduce inequality and boost inclusive growth governments should promote gender equality in employment, broaden access to better jobs, and encourage greater investment in education and skills throughout the working life.
Redistribution via taxes and transfers is also considered to be an effective way to reduce the gap between rich and poor, says the OECD. The organisation believes that to solve this, policies need to ensure that wealthier people and multinational firms pay their fair share of tax.
Another important aspect of the report is that it suggests more steps should be taken to reduce the gender gap. The increase in the number of women working has helped reduce a rise in inequality, despite women earn about 15 percent less than men. The OECD says if the proportion of households with working women had remained at the levels of 20 to 25 years ago income inequality would have increased by almost 1 Gini point (a unit which is used to measure inequality).