The Organisation for Economic Co-operation and Development (OECD) has issued a new report, Divided We Stand: Why inequality keeps rising. ‘In OECD countries today, the average income of the richest 10% of the population is about nine times that of the poorest 10% – a ratio of 9 to 1. However, the ratio varies widely from one country to another. It is much lower than the OECD average in the Nordic and many continental European countries, but reaches 10 to 1 in Italy, Japan, Korea, and the United Kingdom; around 14 to 1 in Israel, Turkey, and the United States; and 27 to 1 in Mexico and Chile. … Until the mid-1990s, tax-benefit systems in many OECD countries offset more than half of the rise in market-income inequality. However, while market income inequality continued to rise after the mid-1990s, much of the stabilising effect of taxes and benefits on household income inequality declined … Reforming tax and benefit policies is the most direct and powerful instrument for increasing redistributive effects. … However, redistribution strategies based on government transfers and taxes alone would be neither effective nor financially sustainable. First, there may be counter-productive disincentive effects if benefit and tax reforms are not well designed. (An Overview of Growing Income Inequalities in OECD Countries: Main Findings, pp.22, 37, 40).
