Income Inequality Significantly Hurts Economic Growth, OECD Says – Bloomberg 12-08-14

Salient to Investors:

The OECD said:

  • Widening inequality creates a drag on economic growth that can be counteracted by tax policies to benefit the less well-off. Changes in wages and salaries have been the biggest direct driver of inequality. The earnings of the 10% best-paid workers have risen relative to the 10% at the bottom, who also saw a drop in annual hours worked.
  • Inequality undermines growth by preventing disadvantaged people from accessing education to develop their skills, impeding social mobility.
  • Policy makers need to be concerned with the general welfare of the bottom 40% of society and not just the poverty of the lowest 10%. Tackling poverty won’t be enough. Needed are government transfers, including policies to improve access to public services such as health care and education. Policies that help to limit or reverse inequality may also make societies wealthier.
  • Inequality knocked 6%-7% off US GDP growth between 1990 and 2010, and hurt growth in the UK, Italy and Mexico.
  • A widening in inequality like that seen in OECD states over the past two decades would slow growth by a statistically significant 0.35% a year, or 8.5% over a quarter century.

Read the full article at http://www.bloomberg.com/news/2014-12-08/income-inequality-significantly-hurts-economic-growth-oecd-says.html

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