Gross income inequality in developed countries increased by more in the first three years of the global economic crisis, to the end of 2010, than it had in the previous twelve years, according to a new analysis from the Organisation for Economic Co-operation and Development (OECD).

Key points

• Poorer households tended to lose more or gain less than richer households between 2007 and 2010. The top 10 per cent of the population did better than the poorest 10 per cent in 21 of the 33 countries where data are available. Using pre-crisis income levels as a benchmark, the number of people living in poverty rose during the crisis in most countries.
• Taxes and benefits helped mitigate the overall increases in inequality, but their impact varied between different groups. Between 2007 and 2010, average relative income poverty in OECD countries rose from 13 to 14 per cent among children and from 12 to 14 per cent among young people: but it fell from 15 to 12 per cent among elderly people. Until 2010, in many countries, pensioners were largely protected, while working households suffered the largest income falls.
• Child poverty has risen in 16 OECD countries since 2007, with increases exceeding 2 points in Turkey, Spain, Belgium, Slovenia and Hungary. This confirms a previously identified trend of young people and children replacing elderly people as the group most at risk of income poverty across the OECD.
• Even after taxes and transfers, the richest 10 per cent of the population in OECD countries earned 9.5 times the income of the poorest 10 per cent in 2010, up from 9 times in 2007.

OECD Secretary-General Angel Gurría commented: 'These worrying findings underline the need to protect the most vulnerable in society, especially as governments pursue the necessary task of bringing public spending under control'.

Source: Crisis Squeezes Income and Puts Pressure on Inequality and Poverty: New Results from the OECD Income Distribution Database, Organisation for Economic Co-operation and Development
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