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World

OECD report decries growing income disparities

In developed countries, those at the top end of the income scale are earning almost ten times as much as those at the bottom. Societies, as a whole, are suffering as a result of that inequality, an OECD study concludes.

It is a poor testimony for the Organization for Economic Cooperation and Development (OECD) member states: wage disparities between the poorest and the richest members of the population are increasing.

In the OECD's view, this is not just bad for those at the bottom end of the scale, but for those at the top as well. Tellingly, the study is called: "In It Together: Why Less Inequality Benefits All."

Growing divide

"In most countries, the income gap between the rich and poor is at its highest level in 30 years," the study states. In the 34 OECD nations, the richest 10 percent of the population are earning 9.6 times the income of the poorest 10 percent.

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A vicious circle: for children from low-income families, it's a long way to a well-paid job

And the gap between rich and poor keeps widening. According to the OECD inequality study published two years ago, this ratio stood at 9.5 to 1. In the 1980s it had stood merely at 7 to 1, only to grow with every following decade: In the 1990s, the richest segment of the population earned 8 times the income of the poorest, and 9 times that in the 2000s.

"The fight against inequality needs to be put in the center of the political debate," said OECD Secretary General Angel Gurria in 2014 already. After all, not only the poor were suffering from unequal distribution of incomes: The study states that growth of a nation's gross domestic product (GDP) - which measures the general level of economic activity - could be higher in an environment of more equality: "Increasing inequality jeopardizes long-term economic growth."

Gender disparities

One of the reasons behind inequality is the so-called "Gender Pay Gap" - wage disparities between men and women. According to the OECD study, women in the 34 countries under scrutiny are still earning about 15 percent less than men.

This is due - not only, but also - to unequal payment for the same jobs (men are paid more than women although both are doing the same work). In addition, the gap between the average incomes of all women and men was rather wide in Germany, said Oliver Stettes, labor market expert at the employer-oriented Cologne Institute for Economic Research (IW).

For one thing, more women than men were working in low wage jobs, such as nursery school teacher and shop assistant, said Stettes, who went on: "For another thing, in comparison to men, women continue to adopt more caring responsibilities within their families. That means they go on leave longer and more frequently when a child is born. And, most importantly, when they return to work later they do so primarily as part-timers." This pattern, Stettes concluded, resulted in wage disparities.

Symbolbild Führungsposition Frau

Women have lower wages than men and find it more difficult to get management positions

Scandinavian countries, where the government offers multiple child care facilities and mothers return to work quickly, have a rather equal income distribution. This is indicated by their low Gini index values. The Gini index, used by researchers for measuring income distribution, puts countries on an 0 to 1 scale. A value closer to 1 amounts to greater inequality of income distribution.

What is a 'typical' job?

Another aspect behind the widening gap between the rich and the poor is the changing labor market. An increasing number of people are employed in so-called "non-standard" jobs, which include temporary posts, part-time work, and self-employment. Since the mid-1990s, the report states, more than half of all job creation has been in "non-standard" work. People with "atypical" jobs often earn less than regular employees, who work full-time and in permanent positions.

According to the OECD, almost 40 percent of all employees in Germany had "atypical" jobs in 2013, earning only 56 percent of a regular employee's annual income. Austria is the only OECD country in which this gap is bigger.

Combating inequality

The OECD suggested a number of routes which governments could take to address income inequality. For example, a "powerful instrument promoting equality and economic growth" would be a more progressive tax system which imposes a significantly higher income tax rate on people with high incomes.

Other proposals include political strategies designed to help women to become part of the workforce - and provide equal opportunities for them -, as well as creating more secure and well-paid jobs.

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