Within-Country Inequality Rising in Rich Countries

A new report from the Organisation for Economic Co-operation and Development -- a club of the world's wealthiest nations -- shows that across the developed world, income inequality between households is on the rise. Over the past twenty years a confluence of events have biased big economies towards wealthier individuals. Low-wage workers in rich countries now face competition from cheaper workers in poorer countries and from computerization and mechanization of many low-skilled jobs. As a result, they have seen incomes stagnate, and their working hours decline: a trend exacerbated by the Thatcher/Reagan wave of neo-liberalism that loosed regulations intended to protect these employees in many countries. Meanwhile, wealthier people have benefited disproportionately from technological advances and globalization and have made money through capital gains on assets.

In addition to the familiar refrain of globalization, technology and neo-liberalism, generally used to explain the rise in within-country inequality (and corresponding decline in between-country inequality), the authors of the OECD report offer another possible explanation for rising households inequalities. As more and more households include two incomes, the gap in household income will increase given that most rich people marry other rich people and most poor people marry other poor people.

The OECD report has been widely discussed throughout the world.