Inequality: A widening gap

Jun 21st 2007

From Economist.com

EARNINGS inequality has been increasing in rich countries, says the OECD. From 1995 to 2005 the rise in earnings of the best-paid ten percent outpaced that of the worst-paid ten percent in 18 out of 20 countries.

Inequality is highest in Anglo-Saxon, entrepreneurial economies. Hungary and Poland are exceptions, where large increases followed liberalisation after the collapse of communism. Nordic countries, with their large welfare states and high taxation see most equality.

Inequality is often blamed on globalisation, which some argue has helped to depress the wages of the lower skilled. However, top earners have also been gaining ground against middle earners. This suggests that advances in information technology, which reward the highly skilled and eliminate many middle-ranking administrative jobs, may be the likelier suspect.

The OECD said this week that trade has contributed only modestly to the upward trend in inequality.