Redistribution of income

Income inequality has been growing over the past decades in many OECD countries and remains at a historical high in a number of OECD economies. The redistribution of incomes through taxes and public transfers helps to reduce poverty and inequality, thereby strengthening the economy and fostering social well-being. Income inequality has profound impacts not only on individuals’ and families’ living conditions but also their health status, as well as the equality of life chances, social cohesion and trust in institutions. It also hampers long-term economic growth, as it restricts in particular the opportunities of lower- income households to invest in their education and skills. This in turn hampers their employability, less during economic booms but more so during and in the aftermath of economic crises (OECD, 2015).