Michael Förster OECD Social Policy Division November 3 rd 2015 Rózsavölgyi Szalon Budapest 4 November 2015
Three major OECD studies since 2008 2008 2011 2015 2/16
Results from recent OECD study on inequality: the bottom lines Inequality has reached record highs in most OECD countries It is not only about poverty, it is about the bottom 40%. 33% The rise in non-standard work contributed to higher inequality. High wealth concentration limits investment opportunities. Rising inequality drags down economic growth. Social mobility is lowered. More women in the workforce means less household income inequality 3/16
Large country differences in levels of income inequality Source: OECD Income Distribution Database (www.oecd.org/social/income-distribution-database.htm), Note: the Gini coefficient ranges from 0 (perfect equality) to 1 (perfect inequality). Income refers to cash disposable income adjusted for household size. Data refer to 2013 or latest year available. 4/16
It is not just about income: Wealth is much more unequally distributed Share of income and wealth going to different parts of the income and wealth distribution, respectively, around 2013 Source: OECD (2015), In It Together, http://www.oecd.org/social/in-it-together-why-less-inequality-benefits-all-9789264235120-en.htm. OECD wealth questionnaire and ECB-HFCS survey and OECD Income Distribution Database (www.oecd.org/social/inequality.htm Note: Income refers to disposable household income, corrected for household size. Wealth refers to net household wealth. 5/16
Over the long run, income inequality increased in a large majority of OECD countries The gap between rich and poor is at its highest level since thirty/forty years The richest 10% earn close to 10 times more than the poorest 10% This is up from a ratios of: 7:1 (1980s); 8:1 (1990s); 9:1 (early 2000s) Inequality increased in good times, and it increased in bad times Inequality increased in egalitarian and less egalitarian countries alike 6/16
Rather than continuous long-term trends, episodes of inequality increases Long-term trends in inequality of disposable income (Gini coefficient) Source: OECD (2015), In It Together, http://www.oecd.org/social/in-it-together-why-less-inequality-benefits-all- 9789264235120-en.htm OECD Income Distribution Database, www.oecd.org/social/income-distribution-database.htm. Note: Income refers to disposable income adjusted for household size. 7/16
So was the crisis a game changer?.. also during the crisis, in a majority of countries incomes of the poorest households fell behind in relative and, often, in absolute terms Annual percentage changes in household disposable income between 2007 and 2011 Source: OECD 2014, Rising Inequality: youth and poor fall further behind. http://www.oecd.org/els/soc/oecd2014-income-inequality-update.pdf Note: 2008 2011 for France, Germany, Sweden. 8/16
Two major reasons for the increase of income inequality 1) Labour markets: new employment patterns and job polarization 2) Public policies: less redistribution 9/16
New employment patterns contributed to inequality: temporary jobs, part-time, self-employment Non-standard work arrangements increased: they accounted for 43% of all job creation 95-07 (54% 95-13) Those provide less job quality: hourly wages (-30% for temp work); job security; training; job strain; social protection (esp. new SE). Stepping-stone effects do exist, but mostly for prime-age and older workers; For poverty risks, the household constellation matters 10/16
Half of all non-standard workers are the main breadwinners in their household In Hungary, 53% of NSW are main breadwinners and many of them have children Share of non-standard workers who are main earners in a household, by family type Source: OECD (2015), In It Together Why Less Inequality Benefits All 1 11/16
, and redistribution became weaker in most countries until the onset of the crisis Trends in market income inequality reduction, working age population Source: OECD Income Distribution Database, www.oecd.org/social/income-distribution-database.htm 12/16
What is the relation between inequality and growth: main findings from the recent OECD study Higher income inequality lowers economic growth in the long-term o Increasing income inequality by 1 Gini point lowers the growth rate of GDP per capita by ~0.12 %-points per year This is driven by disparities at the lower end of the distribution, incl. lower middle classes, not just the poor Redistribution through taxes and transfers has not led to bad growth outcomes 13/16
The mechanism: high inequality hinders skills investment by the lower middle class and lowers social mobility Inequality decreases average years of schooling, but mostly among individuals with low parental education Source: OECD (2015), In It Together Higher inequality by ~5-6 Gini pts. (the current differential between Hungary and Italy/Ireland) means ~half a year less average schooling of Low PEB individuals Note: Low PEB: neither parent has attained upper secondary education; Medium PEB: at least one parent has attained secondary and postsecondary, non-tertiary education; High PEB: at least one parent has attained tertiary education. The bars indicate 95% confidence intervals. 14/16
Designing policy packages to tackle high inequality and promote opportunities for all 1 2 3 4 Promote employment and good-quality jobs Foster women s participation in economic life Strengthen quality education and skills development Improve the design of tax and benefit systems for a more efficient redistribution 15/16
Köszönöm Thank you for your attention! michael.forster@oecd.org www.oecd.org/social/inequality-and-poverty.htm Includes: "COMPARE YOUR INCOME" WEB TOOL @OECD_Social 16/16