Watch CBS News

In richer countries, rising inequality stunts economic growth

The gap between rich and poor isn't widening only in the U.S. -- it's also growing across the industrialized world.

A report from the Organisation for Economic Co-operation and Development shows that income inequality throughout its 34 members is at a 30-year high. Across all the countries, which includes the U.S., Europe and most of the globe's other major economies, the top 10 percent of households earn 9.6 times as much as the bottom 10 percent. The top 10 percent owns roughly half of the wealth in OECD states, compared with 3 percent for the bottom 40 percent.

Such inequality not only erodes social cohesion, but also hurts long-term economic growth, the organization said. Between 1990 and 2010, which spans periods of strong and weak economic expansion, inequality reduced growth in OECD states by a total of 4.7 percent.

Factors such as low-paying jobs, gender inequity in pay and a high concentration of wealth stunt economic growth and, in turn, worsen inequality, the researchers conclude.

Although much of the recent debate over inequality has focused on the financial fortunes of the top 1 percent of income earners, the economic decline among the bottom 40 percent less well understood, according to the report.

"If the bottom loses ground, everyone is losing ground," the OECD notes. Addressing inequality and growth means moving beyond questions of poverty alone and into a broader question of income, including sectors of the middle class.

There are three main factors that increase income inequality and decrease growth, according to the OECD.

  • The spread of non-standard work -- temporary, part-time and self-employment, which together account for about a third of total employment on OECD countries -- is lowering worker pay, reducing job security and curbing access to training that might help people move up the economic ladder.
  • A persistent gender wage gap, with women earning an average 15 percent less than men in OECD countries, dilutes women's financial contributions.
  • The high concentration of wealth at the top reduces growth because those lower down the ladder are burdened by debt and lack the financial assets to spend, invest and help grow the economy.

View CBS News In
CBS News App Open
Chrome Safari Continue
Be the first to know
Get browser notifications for breaking news, live events, and exclusive reporting.