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1. The big picture: inequality on the rise in most OECD countries
Over the two decades prior to the onset of the global economic crisis, real disposable
household incomes increased by an average 1.7% a year in OECD countries. In a large majority
of them, however, the household incomes of the richest 10% grew faster than those of the
poorest 10%, so widening income inequality. Differences in the pace of income growth across
household groups were particularly pronounced in some of the English-speaking countries,
some Nordic countries, and Israel.
In Israel and Japan, the real incomes of those at the bottom
of the income ladder actually fell compared with the mid-1980s (Table 1).
In OECD countries today, the average income of the richest 10% of the population is about
nine times that of the poorest 10% – a ratio of 9 to 1. However, the ratio varies widely from one
country to another. It is much lower than the OECD average in the Nordic and many
continental European countries, but reaches 10 to 1 in Italy, Japan, Korea, and the United
Kingdom; around 14 to 1 in Israel, Turkey, and the United States; and 27 to 1 in Mexico and
Chile.
The Gini coefficient, a standard measure of income inequality that ranges from 0 (when
everybody has identical incomes) to 1 (when all income goes to only one person), stood at an
average of 0.29 in OECD countries in the mid-1980s. By the late 2000s, however, it had increased
by almost 10% to 0.316. Significantly, it rose in 17 of the 22 OECD countries for which long-term
data series are available (Figure 1), climbing by more than 4 percentage points in Finland,
Germany, Israel, Luxembourg, New Zealand, Sweden, and the United States. Only Turkey,
Greece, France, Hungary, and Belgium recorded no increase or small declines in their Gini
coefficients.
Income inequality followed different patterns across the OECD countries over time
(Figure 2). It first started to increase in the late 1970s and early 1980s in some English-speaking
countries, notably the United Kingdom and the United States, but also in Israel. From the
late 1980s, the increase in income inequality became more widespread. The latest trends in
the 2000s showed a widening gap between rich and poor not only in some of the already
highinequality countries like Israel and the United States, but also – for the first time – in
traditionally low-inequality countries, such as Germany, Denmark, and Sweden (and other
Nordic countries), where inequality grew more than anywhere else in the 2000s. At the same
time, Chile, Mexico, Greece, Turkey, and Hungary reduced income inequality considerably –
often from very high levels. There are thus tentative signs of a possible convergence of
inequality levels towards a common and higher average level across OECD countries.
Increases in household income inequality have been largely driven by changes in the
distribution of wages and salaries, which account for 75% of household incomes among
working-age adults. With very few exceptions (France, Japan, and Spain), the wages of the
10% best-paid workers have risen relative to those of the 10% lowest paid. This was due to
both growing earnings’ shares at the top and declining shares at the bottom, although top
earners saw their incomes rise particularly rapidly (Atkinson, 2009). Earners in the top 10%
have been leaving the middle earners behind more rapidly than the lowest earners have
been drifting away from the middle.AN OVERVIEW OF GROWING INCOME INEQUALITIES
iN OECD COUNTRIES: MAIN FINDINGS
The 2008 OECD report Growing Unequal? highlighted that inequality in the distribution
of market incomes – gross wages, income from self-employment, capital income, and
returns from savings taken together – increased in almost all OECD countries between the
mid-1980s and mid-2000s. Changes in the structure of households due to factors such as
population ageing or the trend towards smaller household sizes played an important role
in several countries. Finally, income taxes and cash transfers became less effective in
reducing high levels of market income inequality in half of OECD countries, particularly
during the late 1990s and early 2000s.
While these different direct drivers have been described and analysed in depth and are
now better understood, they have typically been studied in isolation. Moreover, while
growing dispersion of market income inequality –
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