MRO Magazine

OECD report finds income inequality rising, urges action by governments


Industry

December 5, 2011
By PEM Magazine

OTTAWA — A global economic think-thank says the gap between rich and poor in Canada has been getting wider, particularly since the mid-1990s.

The Organization for Economic Co-operation and Development says income equality in Canada is above the average for its member nations, but remains below the income gap in the United States.

In Canada, the average income of the top 10 per cent of Canadians in 2008 was $103,500, 10 times that of the bottom 10 per cent at $10,260. The ratio for Canada in the early 1990s was about eight to one.

The OECD says the gap between rich and poor in its member countries has reached the highest level in over 30 years.

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In its latest report, the organization says the average income of the richest 10 per cent is now about nine times that of the poorest 10 per cent.

Income inequality is at the heart of the Occupy Wall Street protests across the U.S. and Canada.

OECD Secretary-General Angel Gurria said the social contract is starting to unravel in many countries.

“This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility,” Gurria said in a statement.

“Without a comprehensive strategy for inclusive growth, inequality will continue to rise.”

The report found the main driver behind rising income gaps has been that high-skilled workers have benefited more from technological progress than the low-skilled.

The report also noted the top tax rates for high-earners have been cut, while benefits limited as rules have been tightened to contain spending.

As a result, the benefit system in most countries has become less effective in reducing inequalities over the past 15 years, the report said.

In Canada, the richest one per cent of Canadians say their share of total income increase to 13.3 per cent in 2007 from 8.1 per cent in 1980, while the richest 0.1 per cent more than doubled to 5.3 per cent from two per cent.

The top federal marginal income tax rates in Canada fell to 29 per cent in 2010 from 43 per cent in 1981.

The report also noted that the increased inequality was also driven by a rise in self-employment, as the self-employed typically earn less than full-time workers.