Page last updated at 10:52 GMT, Tuesday, 21 October 2008 11:52 UK

'More inequality' in rich nations

Jobseekers at a jobs fair in California. File photo
The income gap has grown prominently in the US since the 1980s

The gap between rich and poor in most wealthy nations has widened, the Organisation for Economic Co-operation and Development (OECD) has said.

Across the 24 OECD countries where data was available, the cumulative rise in inequality was 7% over the past 20 years, the Paris-based group said.

But this was not as large a rise as had been expected, it said.

Since 2000, income inequality had risen sharply in the US and Germany and declined in the UK, Mexico and Greece.

But the OECD report, which covers a period of two decades between 1985 and 2005, said the UK still had one of the highest levels of income inequality in the developed world.

The 'Hello' effect

The report found that the income of the richest 10% of people was, on average, nearly nine times that of the poorest 10%.

Graph showing income gap between rich and poor

But the size of the income differentials varies, with the greatest disparity in Mexico, which has a ratio of 25 to one, followed by Turkey and the US.

The most equal distribution of wealth is in the Nordic countries, including Denmark, Sweden and Finland.

"The increase in inequality, though widespread and significant, has not been as spectacular as most people probably think it has been," the report said.

It added that the difference between what the data indicated and what people thought was likely to reflect the "Hello magazine effect", meaning that people read widely about the super-rich and imagined many people lived the life of luxury.

Children and low-skilled workers were more likely to be poor than the population in general, said the OECD, which represents the world's richest countries.

Meanwhile, pensioner poverty has fallen in many countries, with those around retirement age seeing the biggest increases in incomes over the past 20 years.

Labour market changes

Launching the report in Paris, OECD Secretary-General Angel Gurrķa warned of the dangers posed by inequality and the need for governments to tackle it.

"Growing inequality is divisive. It polarises societies, it divides regions within countries, and it carves up the world between rich and poor," he added.

THE GROWING GAP BETWEEN RICH AND POOR
The US has the highest inequality rate after Mexico and Turkey
In the past five years, the gap between rich and poor has grown the fastest in Germany
Since 2000, income inequality and poverty have fallen faster in Britain than in any other OECD country, but the UK still performs poorly against its neighbours
France is one of just five countries where inequalities have fallen in the past 20 years
Source: OECD Growing Unequal report

In developed countries, governments had been taxing more and spending more on social benefits to offset the trend towards more inequality, but the effectiveness of these policies had declined, the OECD said.

As an example, OECD countries spend three times more on family policies than they did 20 years ago and yet single-parent households are three times as likely to be poor.

Poverty is defined as applying to households with less than half the median income.

"Trying to patch the gaps in income distribution solely through more social spending is like treating the symptoms instead of the disease," said Mr Gurrķa.

He urged governments to act to increase education opportunities and job prospects for blue collar workers and to offer welfare-in-work to working-class families to boost income.




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