Growing economic inequality is becoming a major problem for the world’s developed nations and could prove a major drag on future growth, according to an extensive report released Thursday by the Organization for Economic Cooperation and Development.
The Paris-based OECD said the gap between the rich and poor is at record levels in most of the organization’s 34-member countries, including the United States. This crisis is not only harmful to the future economic growth of these countries, but it also presents glaring social immobility for lower-income people, the report says.
“We have reached a tipping point,” said OECD Secretary-General Angel Gurria in a briefing for reporters. “By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth.”
The income of the richest 10 percent of the population in OECD countries is now 9.6 times more than that of the poorest 10 percent, a roughly 6 percent increase from where it was in the 2000s.
An increase in income inequality between 1985 and 2005 shaved 4.7 percentage points off cumulative growth between 1990 and 2010 across the OECD countries, the report concluded.
In the U.S., the average income of the top 10 percent is 16.5 times that of the bottom 10 percent, joining Chile, Mexico, Turkey and Israel as having the most unequal distribution of income among OECD members.
President Obama has repeatedly addressed the issue of inequality, calling it “the defining challenge of our time” in a speech in 2013. Most recently, Mr. Obama suggested economic inequality was an underlying factor in the riots in Ferguson and Baltimore.
The OECD report also highlights the increase in part-time employees as a contributing factor to the lopsided concentration of wealth.
“The challenge is not only the quantity but the quality of the jobs,” said Mr. Gurria. “Not just how many jobs there are and how well paid they are, but also the quality, and that includes the securities, the permanence, the guarantees and even the working environment.”
About 6.6. million Americans are employed part-time, either because their employer cut back their hours or they simply could not find a full-time position. This number has been slowly gaining ground since the 2008-09 recession.
About half of all temporary workers in OECD countries are under 30 years old, leaving younger workers to bear the brunt of the growing inequality. Their temporary-work status makes it difficult for them to find full-time jobs, posing risks for the future of the global economy.
“The evidence shows that high inequality is bad for growth. The case for policy action is as much economic as social,” Mr. Gurria said.
The OECD stressed that governments should focus on improving education to fulfill the social and economic needs of the people.
“We cannot afford to neglect education and skills. The focus on education in the early years is essential,” Mr. Gurria said. “This investment needs to be continued throughout the life cycle, then you move into not just education but innovation, vocational training, lifelong learning, and therefore the whole provision of the upscaling of the workforce.”
• Brennan Weiss can be reached at bweiss@washingtontimes.com.
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