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‘Divided We Stand: Why Inequality Keeps Rising’

The gap between New Zealand’s rich and poor is growing faster than any other developed nation, a new OECD report shows.

### 3news.co.nz Tue, 06 Dec 2011 12:48p.m.
Rich, poor gap growing fast
The report, called Divided We Stand, charts the widening gap between the top 10 per cent wealthiest residents and the poorest 10 per cent. The richest Kiwis now claim an income 10 times that of the poorest residents. This is considerably less than the huge margin seen in the worst countries Brazil, Russia, China and India where the wealthy earn 50 times more, but New Zealand won the dubious honour of the gap widening the fastest. On an inequality index called the Gini coefficient, where zero means everybody has the same income and one means the richest person has all the income, New Zealand scored 0.33. This is up six percentage points from 1985, when it scored 0.27, constituting the biggest jump of any OECD country.
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### freshbusinessthinking.com 05/12/2011
Divided we stand: rich-poor gap hits 30 year high
By Maximilian Clarke
The richest 10% of OECD member states own 9 times more than the poorest 10%- the highest income disparity for more than 30 years. A new report by the Paris-based OECD (the Organisation for Economic Cooperation and Development) entitled Divided We Stand: Why Inequality Keeps Rising urges governments to act quickly to prevent the growing discord between the haves and have-nots, which – particularly during times of economic decline – can fuel political instability.
The main driver behind rising income gaps has been greater inequality in wages and salaries, as the high-skilled have benefitted more from technological progress than the low-skilled. Reforms to boost competition and to make labour markets more adaptable, for example by promoting part-time work or more flexible hours, have promoted productivity and brought more people into work, especially women and low-paid workers. But the rise in part-time and low-paid work also extended the wage gap.
Tax and benefit systems play a major role in reducing market-driven inequality, but have become less effective at redistributing income since the mid-1990s. The main reason lies on the benefits side: benefits levels fell in nearly all OECD countries, eligibility rules were tightened to contain spending on social protection, and transfers to the poorest failed to keep pace with earnings growth.
The income gap has risen even in traditionally egalitarian countries, such as Germany, Denmark and Sweden, from 5 to 1 in the 1980s to 6 to 1 today. The gap is 10 to 1 in Italy, Japan, Korea and the United Kingdom, and higher still, at 14 to 1 in Israel, Turkey and the United States. In Chile and Mexico, the incomes of the richest are still more than 25 times those of the poorest, the highest in the OECD, but have finally started dropping.
Income inequality is much higher in some major emerging economies outside the OECD area. At 50 to 1, Brazil’s income gap remains much higher than in many other countries, although it has been falling significantly over the past decade. FBT Link


Posted by Elizabeth Kerr

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