OECD: Crisis hit income inequality, warns may get worse

The global economic crisis worsened income inequality in the world\'s leading economies substantially and there is a growing risk that the most vulnerable will be hit harder still, the OECD warned Wednesday. The global economic crisis has \"has squeezed incomes from work and capital in most countries,\" a report based on the Organisation of Economic Cooperation and Development\'s income distribution database said. It found that income inequality had increased by more over the three-year period from 2008 to 2010 than during the previous 12 years for the 34-nation group as a whole, when the mitigating effects of the welfare benefits were excluded. \"After taxes and transfers, the richest 10 percent of the population in OECD countries earned 9.5 times the income of the poorest 10 percent in 2010, up from 9 times in 2007,\" the report said. \"The gap is largest in Chile, Mexico, Turkey, the United States and Israel, and lowest in Iceland, Slovenia, Norway and Denmark,\" it added. OECD Secretary-General Angel Gurria said: \"These worrying findings underline the need to protect the most vulnerable in society, especially as governments pursue the necessary task of bringing public spending under control.\" A breakdown of the data showed a wide difference between countries, with so-called market income, which includes income from both work and capital, down by about 12 percent in Iceland, but about 3.0 percent higher in Poland, for example. Chile was another country that fared quite well, with a gain that was slightly lower than that of Poland, while New Zealand was the second worst performer at almost minus 8.0 percent. The OECD report emphasised \"that these results only tell the beginning of the story.\" Economic growth in a number of OECD countries is still weak, and some have even fallen back into recession. Meanwhile, \"many people exhausted their rights to unemployment benefits and governments have shifted the fiscal policy stance towards consolidation,\" the organisation noted. \"If sluggish growth persists and fiscal consolidation measures are implemented, the ability of the tax-benefit system to alleviate the high (and potentially increasing) levels of inequality and poverty of income from work and capital might be challenged,\" it concluded.