Rich-Poor Gap Widening

The global economy has grown sevenfold since 1950. Meanwhile, the disparity in per capita
gross domestic product between the 20 richest and 20 poorest nations more than doubled
between 1960 and 1995.

Reference:
http://www.worldwatch.org/rich-poor-gap-widening

The gap between the rich and the poor keeps widening, the Organization for Economic
Cooperation and Development (OECD) says.
There is no standard measure of inequality, but most indicators suggest it slowed or fell during
the financial crisis and is now growing again.

The OECD warns that such inequality is a threat to economic growth.

OECD member states include most of the European Union as well as developed economies such
as the US, Canada, Australia and Japan.

One of the factors that the OECD blames for growing inequality is the growth in what it calls
non-standard work, which includes temporary contracts and self-employment.

The OECD says that since the mid-1990s more than half of all job creation in its member states
has been in non-standard work. It says that households dependent on such work have higher
poverty rates than other households and that this has led to greater inequality.

The main theory the OECD puts forward for why inequality and growth are negatively correlated
is that poorer people invest less in their own education and self improvement - which is why its
main anti-inequality prescriptions are government investment in skills and education, and a focus
on a promoting better quality jobs.

Strikingly it isn't saying that the best way to greater equality and faster growth is to soak the rich.
Instead it wants activism focused on raising the living standards of the poorest, especially the
poorest 40%.

That's not to be sniffed at. It would represent increasing our current growth rate by around 13%.

Behind the OECD averages there is a considerable range in the degrees of inequality in each
country.

The Gini coefficient is a figure showing how well income is distributed across a country. A
coefficient of zero would mean everybody was paid the same amount, while one would mean all
the money was earned by one person.

The average across the OECD was 0.32. Chile had the highest at 0.50, indicating that income
distribution there was the most unequal, while Denmark was the lowest at 0.25, making it the
most equal.

Reference:
http://www.bbc.com/news/business-32824770
Economic inequality consists of disparities in the distribution of wealth and income.

Economic inequality consists of disparities in the distribution of wealth (accumulated assets) and
income. The term typically refers to inequality among individuals and groups within a society,
but can also refer to inequality among countries. The issue of economic inequality is related to
the ideas of equity: equality of outcome and equality of opportunity. There are various numerical
indices for measuring economic inequality, but the most commonly used measure for the
purposes of comparison is the Gini coefficient. The Gini coefficient is a statistical measure of
the dispersal of wealth or income.

There are many reasons for economic inequality within societies, and they are often interrelated.
Acknowledged factors that impact economic inequality include, but are not limited to:
1 Inequality in wages and salaries;
2 Wealth concentration in the hands of a few individuals or institutions;
3 Labor markets;
4 Globalization;
5 Technological changes;
6 Policy reforms;
7 Taxes;
8 Education;
9 Racism;
10 Gender;
11 Culture;
12 Innate ability
A major cause of economic inequality within modern economies is the determination of wages
by the capitalist market. In the capitalist market, the wages for jobs are set by supply and
demand. If there are many workers willing to do a job for a great amount of time, there is a high
supply of labor for that job. If few people need that job done, there is low demand for that type of
labor. When there is high supply and low demand for a job, it results in a low wage. Conversely,
if there is low supply and high demand (as with particular highly skilled jobs), it will result in a
high wage. The gap in wages produces inequality between different types of workers.
13 Public education: Increasing the supply of skilled labor and reducing income inequality due
to education differentials.
14 Progressive taxation: The rich are taxed proportionally more than the poor, reducing the
amount of income inequality in society.
15 Minimum wage legislation: Raising the income of the poorest workers
16 Nationalization or subsidization of products: Providing goods and services that everyone
needs cheaply or freely (such as food, healthcare, and housing), governments can effectively
raise the purchasing power of the poorer members of society.

References:
https://www.boundless.com/sociology/textbooks/412/stratification-inequality-and-social-class-
in-the-u-s-9/social-mobility-76/growing-gap-between-rich-and-poor-450-2081/
THE REAL REASON FOR THE GROWING GAP BETWEEN RICH AND POOR

Inequality has widened due to the increasing concentration of political power among the
corporate and financial elite that has been able to influence the rules by which the economy runs,
the author writes.

You often hear inequality has widened because globalization and technological change have
made most people less competitive, while making the best educated more competitive.

There’s some truth to this. The tasks most people used to do can now be done more cheaply by
lower-paid workers abroad or by computer-driven machines.

But this common explanation overlooks a critically important phenomenon: the increasing
concentration of political power in a corporate and financial elite that has been able to influence
the rules by which the economy runs.

Intellectual property rights—patents, trademarks and copyrights—have been enlarged and

extended, for example, creating windfalls for pharmaceutical companies. Americans now pay the
highest pharmaceutical costs of any advanced nation.

The largest banks and auto manufacturers were bailed out in 2008, shifting the risks of economic
failure onto the backs of average working people and taxpayers.

Tax laws have special loopholes for the partners of hedge funds and private-equity funds, special
favors for the oil and gas industry, lower marginal income-tax rates on the highest incomes and
reduced estate taxes on great wealth.

Today, nearly one out of every three working Americans is in a part-time job. Many are
consultants, freelancers and independent contractors. Two-thirds are living paycheck to
paycheck.

And employment benefits have shriveled. The portion of workers with any pension connected to
their job has fallen from just over half in 1979 to under 35 percent today.

More states have adopted so-called “right-to-work” laws, designed to bust unions. The National
Labor Relations Board, understaffed and overburdened, has barely enforced collective
bargaining.

All of these changes have resulted in higher corporate profits, higher returns for shareholders and
higher pay for top corporate executives and Wall Street bankers – and lower pay and higher
prices for most other Americans.

They amount to a giant pre-distribution upward to the rich. But we’re not aware of them because
they’re hidden inside the market.

Reversing the scourge of widening inequality requires reversing the upward pre-distributions
within the rules of the market, and giving average people the bargaining power they need to get a
larger share of the gains from growth.

The most important political competition over the next decades will not be between the right and
left, or between Republicans and Democrats. It will be between a majority of Americans who
have been losing ground, and an economic elite that refuses to recognize or respond to its
growing distress.

Reference:

http://www.newsweek.com/real-reason-growing-gap-between-rich-and-poor-377662