Global inequality is at a 30-year high, and it's hurting growth
The richest 10 percent of the population in 20 developed economies earn 9.6 times the income of the poorest 10 percent, according to a report from the Organization for Economic Cooperation and Development (OECD).
A new study shows the wealth gap among countries in the developed world has widened to the highest level in 30 years.
The report, by the Paris-based Organization for Economic Cooperation and Development, found that the richest 10 percent of the population in 20 developed economies earn 9.6 times the income of the poorest 10 percent. That ratio has risen steadily from 7 to 1 in the 1980s.
The gap has come as the top earners have accumulated a great share of overall wealth, which is much more concentrated than income, according to the report. On average, the 10 percent of wealthiest households hold half of all wealth, while the next 50 percent hold almost all of the rest. Those in the bottom 40 percent of all households own just more than 3 percent of all wealth.
The report points to globalization, technological change and regulatory reforms as major factors behind the widening wealth gap. Workers in high-skill, high-demand jobs like IT or finance have seen big gains in wages, while pay for low-skilled workers has lagged. Tax cuts for high earners have also helped concentrate wealth, the report said.
While wealth has accumulated among the richest, the financial crisis hurt wages for the average household. Real disposable income stagnated or fell in most OECD countries between 2007 and 2011, with the steepest declines in countries hit hardest. In Greece, the average household lost more than 8 percent of its real net income every year, while in Spain, Ireland and Iceland, those losses topped 3.5 percent. Most of the drop was due to lost employment, rather than falling wages.
Those losses were especially painful for those at the bottom of the income ladder. In Spain, the poorest 10 percent saw incomes drop by almost 13 percent per year, compared to only 1.5 percent for the richest 10 percent. In about half of countries where incomes rose, the top 10 percent did better than the bottom 10 percent. In Austria, Denmark, France and the United States, incomes at the top of the ladder rose, after adjusting for inflation, while they fell for those at the bottom.
The pressure on wages has pushed about 1 in 10 households deeply into debt, according to the report, with total debts of more than three-quarters of the value of their assets or more than three times their incomes.
In the Netherlands, Norway and the United States, more than 1 in 6 households are that deeply in debt. The biggest share is in the middle of the income ladder—above the bottom fifth and below the top fifth. Because poorer households have a hard time getting credit, only about a third of households in the bottom fifth have any debts.