In It Together: Why Less Inequality Benefits All

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The gap between rich and poor keeps widening. Growth, if any, has disproportionally benefited higher income groups while lower income households have been left behind. This long-run increase in income inequality not only raises social and political concerns, but also economic ones. It tends to drag down GDP growth, due to the rising distance of the lower 40% from the rest of society. Lower income people have been prevented from realising their human capital potential, which is bad for the economy as a whole. This book highlights the key areas where inequalities are created and where new policies are required, including: the consequences of current consolidation policies; structural labour market changes with rising non-standard work and job polarization; persisting gender gaps; the challenge of high wealth concentration, and the role for redistribution policies.

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Income inequalities during the crisis and fiscal consolidation

This chapter looks at the distribution of income during the recent global financial and economic crisis and subsequent period of fiscal consolidation. In particular, it describes trends in market and disposable income inequality. It analyses drivers of earnings inequality using a decomposition of the employment and wage effects. It examines the redistribution of income via taxes and transfers, their role as automatic stabilisers and impact on income inequality. The chapter also explores trends in relative poverty rates and anchored poverty rates, as well as poverty rates by age groups. Finally, it summarises detailed analyses of tax and benefit reforms in ten OECD countries implemented as part of fiscal stimulus and fiscal consolidation programmes and their impact and incidence on household income.

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