Over the two decades to the onset of the global economic crisis, real disposable household incomes increased in all OECD countries, by 1.7% a year, on average. 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. Differences in the pace of income growth across household groups were particularly pronounced in some of the English-speaking countries, some of the Nordic countries and Israel. In Israel and Japan, real incomes of people at the bottom of the income ladder actually have fallen since the mid-1980s.
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. The Gini coefficient, a standard measure of income inequality that ranges from zero (when everybody has identical incomes) to 1 (when all income goes to only one person), stood at 0.28 in the mid-1980s on average in OECD countries; by the late 2000s, it had increased by some 10%, to 0.31. On this measure, income inequality increased in 17 out of the 22 OECD countries for which data are available (Figure 1, left-hand panel). In Finland, Germany, Israel, New Zealand, Sweden and the United States, the Gini coefficient increased by more than 4 percentage points: and only five countries recorded drops, albeit small ones (Figure 1, right-hand panel)
With very few exceptions (France, Japan and Spain), wages of the 10% best-paid workers have risen relative to those of the 10% least-paid workers.
Self-employment is another factor that could play a role. It is much more unequally distributed across countries than wages and salaries and the self-employed tend to be disproportionally concentrated in the lower income groups in most OECD countries.
A key challenge for policy is to facilitate and encourage access to employment for under-represented groups. This requires not only new jobs, but jobs that enable people to avoid and escape poverty. Recent trends towards higher rates of in-work poverty indicate that job quality has become a concern for a growing number of workers. Policy reforms that tackle inequalities in the labour market, such as those between standard and non-standard forms of employment, are needed to reduce income inequality.
Policies that invest in human capital of the workforce are needed. This requires better training and education for the low-skilled. The latter would serve to boost their productivity potential and future earnings. Over the past two decades, the trend to increased education attainment has been one of the most important elements in counteracting the underlying increase in wage inequality in the longer run. Policies that promote the up-skilling of the workforce are therefore key factors to reverse the trend to further growing inequality. (Vir: GROWING INCOME INEQUALITY IN OECD COUNTRIES: WHAT DRIVES IT AND HOW CAN POLICY TACKLE IT?)