Research from the Organisation for Economic Co-operation and Development (OECD) released earlier this week indicates that income inequality continues to grow rapidly in Canada and in most of the world’s other rich economies.
The research points to an international trend where economic growth only translates into growth in household income for the wealthiest in society and doesn’t serve to benefit household incomes of everyone. This uneven income growth produces further income disparity — a widening of the income gap between the rich and poor.
This is a serious issue, not least because research from the Wellesley Institute, Toronto’s Medical Officer of Health and others across Canada and globally draw strong links between growing income inequality & eroding population health — including increased illness and premature death.
Some excerpts from the OECD study:
“In a large majority of OECD countries, household incomes of the top 10% grew faster than those of the poorest 10%, leading to widening income inequality.”
“At present, across OECD countries, the average income of the richest 10% of the population is about nine times that of the poorest 10%. While this ratio is much lower in the Nordic countries and in many continental European countries, it rises to around 14 to 1 in Israel, Turkey and the United States, to a high of 27 to 1 in Chile and Mexico.”
“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 of working-age adults.”
“A much debated driver of income inequality in OECD countries is the distribution of incomes from capital, property, investment and savings and private transfers which has become more unequal over the past two decades. In particular, capital income witnessed a greater increase in inequality on average than earnings in two-thirds of OECD countries.”
“The rise of earnings and income inequality occurred in most countries during periods of sustained economic growth, which raises the question why not everybody benefited from growth in the same way. While it is difficult to assess fully the role of many potential driving forces, the following factors have often been identified as having the most important impacts on widening inequality in OECD countries:
· Globalisation, skill-biased technological progress and institutional and regulatory reforms have all had an impact on the distribution of earnings;
· Changes in family formation and household structures have had an impact on household earnings and income inequality;
· Tax and benefit systems have changed in the ways they redistribute household incomes.”
OECD secretary general Angel Gurria issued a strong warning in releasing the new report: “Income and earnings inequality has been on the rise over the past two decades in most OECD countries and emerging economies… We know that the [economic] recovery is underway. But what a recovery? Not yet one that will be strong enough to bring the millions of new unemployed back to work. Low income households have been hardest hits by job losses and the persons unemployed in the OECD are still 14.4 million more than the number of jobless immediately before the crisis.”
“If in the decade of the strongest economic expansion inequality increased, what will happen now? What will we do with long-term unemployment increase and youth unemployment? Concerns also stem from the framework of fiscal consolidation in many countries and the related possible effects on income inequalities,” said Gurria. “Halting the scary outlook of increasing inequality is more urgent than ever. It requires enlightened policies and strong political commitment.”
The Wellesley Institute is particularly interested in income inequality as we know that there is a strong link to health inequity. We particularly like to cite the OECD numbers in this regard as they are internationally comparable, and the OECD is an organization that represents the governments of the richest economies of the world.