| Rich-poor divide widens, says OECD |
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The gap between rich and poor has widened in most developed countries over the past two decades as economic growth has benefited the wealthy more than the impoverished, according to the Organisation for Economic Co-operation and Development (OECD). The OECD report entitled ‘Growing Unequal?’ published October 21st, 2008 shows that Ireland’s level of inequality is almost as bad as it was in the mid-1980s having fallen in the period between then and the start of the present decade. Ireland was seventh most unequal country – more than 5 per cent above the OECD average – using the Gini scale, which measures disposable household income adjusted for household size. The UK was ranked sixth with inequality 8 per cent above the OECD average. The greatest inequality in incomes in the mid 2000s was found in Mexico and Turkey followed by Portugal and the US. Denmark and Sweden were the most equal societies in terms of income disparity in the 30-nation study. Angel Gurría, OECD Secretary General said: “Growing inequality is divisive. It polarises societies, it divides regions within countries, and it carves up the world between rich and poor. Greater income inequality stifles upward mobility between generations, making it harder for talented and hard-working people to get the rewards they deserve. Ignoring increasing inequality is not an option.” Tax and benefit systems have helped to redistribute incomes and curb poverty. How unequal are we? The income of the richest 10% of people is, on average across OECD countries, nearly nine times that of the poorest 10%. But the size of income differentials varies. In Mexico, the richest have incomes of more than 25 times those of the poorest and, in Turkey, the ratio is 17 to one. The income gap between rich and poor is also well above the OECD average in Portugal, Poland and the United States (figure 1). But in Nordic countries, such as Denmark, Sweden and Finland, the gap is much smaller. The incomes of the richest 10% average around five times those of the poorest 10%. A number of countries are bunched together around the OECD average. This group comprises most of the English-speaking countries (Ireland, Canada and the United Kingdom, for example) and some Southern European nations, such as Greece, Italy and Spain. What is to be done? According to this OECD report incomes are more equally distributed and fewer people are poor where social spending is high. For example this is the case in the Nordic countries and in western European countries, such as Austria, Belgium and the Netherlands where social spending on people of working age was 7-8% of national income in 2005 and the share of working-age people in poverty was between 5% and 8%. At the other end of the spectrum are countries such as Korea, Mexico, Turkey and the United States. Despite the current state of the Exchequer finances in Ireland CORI Justice believes it is crucial that Ireland’s social spending rise to bring it closer to the OECD average. This is required to ensure that Ireland’s poverty and inequality are both reduced in the years immediately ahead. This means that Ireland needs to address the issue of how such expenditure is to be funded in a changing fiscal situation. |