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Divided We Stand

Why Inequality Keeps Rising

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In the three decades to the recent economic downturn, wage gaps widened and household income inequality  as measured by GINI increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth. This report analyses the major underlying forces behind these developments. It examines to which extent economic globalisation, skill-biased technological progress and institutional and regulatory reforms have had an impact on the distribution of earnings. The report further provides evidence of how changes in family formation and household structures have altered household earnings and income inequality. And it documents how tax and benefit systems have changed in the ways they redistribute household incomes. The report discusses which policies are most promising to counter increases in inequalities and how the policy mix can be adjusted when public budgets are under strain.

"Analyses rely on simple statistical techniques that are accessible to a large readership... the graphic and charts are of great help to gain a quick visual grasp of the various issues addressed."

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Trends in Household Earnings Inequality

The Role of Changing Family Formation Practices

This chapter looks at the transmission of earnings inequality from individual to household. There are a number of factors at play. Some are related to labour market trends, such as the increasing polarisation of male earnings and changes in men’s and women’s employment rates. Other factors relate to changes in the composition of households, such as increases in single-headed households or growing marital sorting. The chapter begins with an overview of the development of individual and household earnings inequality, and then examines patterns of change in its labour market and family formation drivers over the past 20 years. Finally, it analyses and assesses the relative contributions of labour market and demographic factors to the increase in overall household earnings inequality.

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