Gap Between Rich and Poor Continues to Grow Across Industrialized World

By Akito Yoshikane

The rich keep getting richer.

Income inequality has increased in most developing countries in part due to technological advances and globalization, according to a new paper from the Organization for Economic Cooperation and Development (OECD).

The gap between the rich and the poor has long been a problem in the United States, but even countries that have had historically low rates of inequality like Germany, Sweden and Denmark have seen the fastest rise in disparate income levels over the last past decade.

In a report published Tuesday, the Paris-based think tank wrote that among its member countries, the richest 10 percent of the population makes nine times the amount of the poorest 10 percent. The income ratio is generally lower in continental European and Nordic countries, but rises to around 14:1 in the United States, Israel and Turkey. Chile and Mexico are among the highest with a 27:1 ratio.

The report, measuring data from the mid-1980s to the late 2000s, found that top income earners became richer while more moderate to low-income have gone in the opposite direction. Disposable household income grew in all OECD countries, but the top 10 percent rose at a faster annual average (2 percent) than the bottom 10 percent (1.4 percent).

The paper also found that working hours for lower-wage workers fell more dramatically than high-wage earners, leading to greater inequality. That speaks to the larger trend of globalization having created a greater demand for high-skilled labor. The increase of technological developments in the last two decades has left out lower-skilled workers.

Governments have also made several regulatory reforms by reducing anti-competitive regulations and making workplaces more “flexible.” The rise of temporary workers, stagnant wages and declining union membership sounds all too familiar here in the United States. The OECD writes:

Employment protection legislation for workers with temporary contracts also became more lenient in many countries. Minimum wages, relative to average wages, have also declined in a number of countries since the 1980s. Wage-setting mechanisms have also changed; the share of union members among workers has fallen across most countries, although the coverage of collective bargaining has generally remained rather stable over time.

One other interesting point, the new study notes, was the outward growth of foreign direct investment among the OECD’s 34 member nations, which has grown significantly in the last decade. Multinational corporations have continued to grow and many have sent jobs offshore, a sharp contrast to the 1990s when jobs were added domestically and abroad.

But times have changed. The U.S. Commerce Department announced last month that 2.9 million jobs in the United States were slashed during the 2000s while U.S. multinationals added 2.4 million jobs overseas. The more specific details are a little unclear, as the Wall Street Journal notes:

The Commerce Department’s totals mask significant differences among the big companies. Some are shrinking employment at home and abroad while increasing productivity. Others are hiring everywhere. Still others are cutting jobs at home while adding them abroad.

At some companies, hiring to sell or make products abroad means more research or design jobs in the U.S. At others, overseas hiring simply shifts production away from the U.S.

The OECD suggests governments revisit their tax and redistribution policies to curb inequality, but job creation is also a challenge. Increasing access to employment and creating policies that address formal and informal work is also suggested.

The paper, while ultimately a preview of a more extensive report to be released later in the year, offers a grim view of a widening gap between the rich and the poor. What seems clear is that workers across the developing world are grappling with tenuous employment patterns. Whether it’s the threat of losing your job, or being asked to work more while wages remain unchanged, the average worker is feeling more pressure than ever.