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Monday, 7 August 2017

Finance: RANKED: The 8 most unequal major economies in the world

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New data from the OECD shows which countries have the highest levels of inequality, based on earnings and levelling factors like taxation.

LONDON – Inequality among OECD countries is still very much a problem, and some of the richest and most developed countries have the widest gaps between the rich and the poor.

New data, collated by the OECD, shows the levels of inequality across all 36 member states.

Inequality is measured on a scale between zero and one, where zero represents perfect equality and one represents the maximum possible inequality (if one person were to have everything and everybody else had nothing).

Each country has two scores: one for market income inequality, which measures salaries, capital and property income, and one for income after redistribution, which also takes into account levelling factors, such as taxes paid, cash benefits and social security.

All countries see a reduction in inequality after this redistribution is considered, although the amount by which inequality is reduced varies considerably.

Keep scrolling for the eight most unequal countries:

8. Lithuania — 0.35

Inequality before redistribution: 0.51

Lithuania has one of the highest inequality levels in Europe, both before and after redistribution — although taxes bring this down significantly.

The top 20% of the population has 6.1 times the amount of disposable income than the bottom 20%, and roughly a fifth of the population has been estimated to be at risk of poverty, according to the International Monetary Fund (IMF).

Source: OECD, IMF



= 6. United Kingdom — 0.36

Inequality before redistribution: 0.53

The UK has the third highest level of inequality in Europe after redistribution, and the joint fourth highest, with Spain, of all 36 counties beforehand. After redistribution, Spain is more equal than the UK.

Income for the richest 20% of the population before cash benefits and direct taxes was roughly 12 times higher than that for the poorest 20% in 2016, according to the Office for National Statistics (ONS).

When taxes are taken into account, disposable incomes were around five times higher for the richest 20% than for the poorest.

Source: OECD, ONS



= 6. Estonia — 0.36

Inequality before redistribution: 0.51

Estonia's level of inequality is very similar to the UK's, both before and after redistribution, and has worsened in the years since the 2008 financial crisis.

As the population has increasingly have moved to urban centres, the government has reduced rural public services, perpetuating inequality in more distant regions.

Source: OECD, Leader of the Estonian Social Democratic Party, via news.err.ee.



5. Israel — 0.37

Inequality before redistribution: 0.46

Redistribution in Israel makes relatively little difference to the country's level of inequality, compared to the other 36 states.

Although redistribution reduces overall inequality, Israel becomes the fifth most unequal OECD country after taxes are considered, from being in the bottom half of beforehand.

Nevertheless, the OECD found the country ranks among the best for life satisfaction, health status and educational achievements.

Source: OECD



= 3. Turkey — 0.39

Inequality before redistribution: 0.42

Redistribution makes the second smallest amount of difference to inequality in Turkey, compared to the other countries studied. However, it goes from being among the least unequal countries beforehand to among the most, since taxes and social security makes relatively little difference, compared to in other countries.

Although inequality is among the highest after taxes are considered, between 2007 and 2013 real labour income growth increased by almost 20% — although higher earners saw wages increase more, and lower earners saw wages increase less.

Source: OECD



= 3. United States — 0.39

Inequality before redistribution: 0.51

Redistribution in the United States does reduce inequality, but by less than in most other countries.

The wealth gap has been worsening significantly since the 1980s, which is most pronounced in urban centres, not helped by the high cost of higher education and healthcare.

Many have pointed to the growing divide between the rich and the poor as a significant factor in producing an undercurrent of discontent and subsequent backlash, which helped President Donald Trump rise to power.

Source: OECD, Fortune



2. Mexico — 0.46

Inequality before redistribution: 0.48

Redistribution in Mexico makes the smallest amount of difference to the country's inequality, and it suffers significantly higher levels of inequality than the next most unequal.

This has been a problem for centuries: "Mexico is a country of inequality. Nowhere does there exist such a fearful difference in the distribution of fortune," said Alexander von Humboldt in 1811.

More than half the country's population lives below the poverty line, while the four richest men are billionaires who, according to the London School of Economics, could comfortably pay all of Mexico's 2.3 unemployed, paying them minimum wage.

Corruption and the prevalence of drug cartels also makes parts of Mexico among the most dangerous in the world.

Source: OECD, LSE



1. Chile — 0.47

Inequality before redistribution: 0.50

Like in Mexico, redistribution makes relatively little difference to inequality in Chile. Taxes often fall heaviest on the poorest, reducing their disposable incomes and chances of upward social mobility.

The country also has to contend with corruption and a small number of powerful oligarchs. However, according to the World Bank the number of people living in poverty has fallen considerably since 2006.

Source: OECD, World Bank



All countries



Country ranking, where 1 is most unequal and 36 is least unequal





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