The gap between rich and poor in OECD countries has reached its highest level for over over 30 years,and has grown more quickly in the UK since 1975 than in any other high income country,according to a new OECD report out today.
“Divided We Stand: Why Inequality Keeps Rising” finds that the average income of the richest 10 per cent is now about nine times that of the poorest 10 per cent across the OECD.
The income gap has risen even in traditionally egalitarian countries, such as Germany, Denmark and Sweden, from 5 to 1 in the 1980s to 6 to 1 today.
The gap is 10 to 1 in Italy, Japan, Korea and the United Kingdom, and higher still, at 14 to 1 in Israel, Turkey and the United States.
The average annual salary of the UK’s top 10 per cent earners was almost 12 times higher than that of the bottom 10 per cent, up from eight times higher in 1985.
The report reveals some interesting trends.First, globalisation had little impact on both wage inequality and employment trends. Even though trade flows between countries around the world have been increasing rapidly, companies have been investing more and more directly in other countries, and imports from emerging economies, such as China and India, have surged, these trends were not major drivers of inequality in OECD countries.
Second, technological progress has been more beneficial for workers with higher skills. People with much-demanded skills to deal with the new information and communication technologies or skills specific to the financial sector, for instance, have enjoyed significant earnings and income gains while workers with low or no skills have been left behind. As a result, the earnings gap between high- and low-skilled workers has been growing.
The report also found that part-time work increased, a typical labour contracts became more common and the coverage of collective-bargaining arrangements declined in many countries. These changes in working conditions also contributed to rising earnings inequality.
The authors say that the economic crisis has added urgency to the debate. The social contract is starting to unravel in many countries.
Youths who see no future for themselves feel increasingly disenfranchised. They have now been joined by protesters who believe that they are bearing the brunt of a crisis for which they have no responsibility while people on high incomes appear to have been spared.