The Global Rise of Income Inequality

income inequality

Judy Woodruff, of the PBS show NewsHour, recently interviewed the Secretary General for the Organization for Economic Cooperation and Development (OECD), Angel Gurria. The topic was the global rise of income inequality, particularly in the U.S. and Europe. The organization has been conducting a study on the subject and has found some sadly revealing results.

For over three decades, income inequality has been on the rise. The U.S. is leading the way, followed by Canada, France and the United Kingdom. While this was happening, the portion of overall income going to the wealthiest people was also on the rise. In the U.S., the much talked about “one percenters” have doubled their portion since 1980, which now represents almost 20 percent of all the income earned.

Woodruff first asked Gurria why a European organization would be interested in income  inequality in the United States. Gurria explained that the OECD is actually a successor to the United States Marshall Plan. Not only is the U.S. invested heavily in the OECD in particular, but in Europe in general. The membership of the Paris-based organization is made up of 20 European nations, the U.S. and 13 other countries.

Gurria is asked what he finds so disturbing about the research results. He said that three years into the study, they released a report titled Growing Unequal? This was in 2008. Not long after, the question mark was removed. It had become clear that there was no question that inequality was growing and that the resulting differences were growing at an alarming rate. Gurria points out that during the three years of economic crisis, 2009 through 2011, inequality had grown even faster than it had in the previous 12 years.

The disparity has accelerated to a point that it has become a dire political, social and practical issue, with moral and ethical underpinnings. Gurria believes that this is an issue to which no country is immune. He also feels that due to the speed of the growth in the equality gap, it has become an arduous obstacle to economic recovery.

Woodruff asked Gurria to explain why he thinks that is so and what can be done to rectify it. He noted that for each one percent in the growth of inequality, there is an inevitable drop in overall growth of approximately 0.2 to 0.3 percent. The more unequal a society is, the less it will grow. In fact, inequality is a hindrance to needed growth.

Gurria adds that income is not the only factor at play in this problem. Inequality of access to education, employment opportunities and health services have all not only been growing, but have proven to be polarizing. The concentrations of opportunities have been on the wealthy people. A legacy has been created that has marginalized a huge segment of the populations of nations.  To make matters worse, the legacy is being passed down to the children of the people who have experienced missed opportunities and falling wages.

Gurria suggests that remedies would be improved services on a federal level that actually connect the unemployed with real opportunities. The U.S. spends a quarter of what other nations spend on this sort of service. He also points out that education and skills training are not where they need to be. There is a major mismatch between what the market wants and the skilled and trained individuals available to fill those positions. Many educated citizens are left with useless diplomas. He also believes that tax structures need to be put in place that lend support to employers who are working to provide improved jobs and opportunities.

Woodruff goes on to make the argument that the conservative base in the U.S. would fight hard against any expansion of government spending in this capacity. Gurria said that this is not a matter of intervention by government, but a government doing what it is meant to do; protect its most vulnerable citizens. He explained that this is also about leveling an important playing field. Players on usually opposing sides in other parts of the world are all coming around and supporting this effort. Even though it is a global issue, the income inequality problem has seen the fastest growth in the U.S., which, in Gurria’s final words, is where the problem needs to be strongly addressed.

Opinion By Stacy Lamy

Sources:
PBS
OECD
MarshallFoundation

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