SAIS Next Europe

« Previous Post | Next Post »

Rich-Poor Gap Widens in Europe, North America

By Dan Hamilton

The Paris-based Organization for Economic Cooperation and Development (OECD) released a study Tuesday showing clearly that the gap between rich and poor is widening in Europe and North America. The report, which covers developments spanning 20 years in 30 countries, contains some interesting nuggets:

• The U.S. has the greatest inequality in the OECD after Mexico and Turkey -- and the gap has grown rapidly since 2000. The richest 10 percent of Americans earn an average of $93,000 (highest in the OECD) - whereas the poorest 10 percent of Americans earn an average of $5,800 (about 20 percent lower than the OECD average).
• Since 2000, income inequality has grown fastest in Germany, although Germany's gap remains below the OECD average.
• British inequalities have been falling since 2000, but the rich-poor gap there is still wider than in three-fourths of OECD countries.
• The rise in inequality is generally due to the rich improving their incomes relative both to low- and middle-income people.
• Older people are much less likely to be poor than in the past. Poverty has shifted from pensioners to young adults and families with children.

The report is likely to fuel popular resentment on both sides of the Atlantic about what is widely perceived to be the essential unfairness of this month's rapid, massive bank bailouts engineered by governments in response to the financial crisis. This week Ulrike Mascher, President of Germany's largest social welfare advocacy organization, drove the point home: "People ask themselves why 500 billion euros can be mobilized very quickly to recapitalize banks while an effective poverty-fighting program is rejected due to budgetary concerns."

The study offers fodder to those like Mascher who argue that the bailouts must now be followed by economic stimulus efforts. In the U.S., Democrats are pushing for such a package, and both President Bush and Fed Chairman Bernanke have voiced support. In Europe opinions are mixed, but many are watching the U.S. debate. Anticipation of a U.S. growth package has already pushed the dollar to its highest level against the euro since the summer of 2007.

The OECD report also offers a caution, however, to those arguing that the best way to curb poverty and reduce inequalities is for government simply to redistribute wealth through social policies. Such approaches are proving to be less effective because technological progress and globalization are making it harder for low-skilled workers to find work. Studies by the IMF and many other sources confirm that better access to education and training is more likely to close income disparities.

So who bucked the trend? According to the report, the big winner was France - where income inequalities have fallen as fast as the country's integration into the global economy has risen. C'est incroyable.

Dan Hamilton, director of the Center for Transatlantic Relations at Johns Hopkins SAIS, is the host of Next Europe.

Email the Author | Email This Post | Del.icio.us | Digg | Facebook

The views expressed are those of the author and do not necessarily represent those of the Johns Hopkins University.

Comments (26)

CCTuser Author Profile Page:

The cost of living in the US varies dramaticaly across regional areas and states, likely more so than many other OECD countries. A better attempt must be made to distinguish actual trends toward income inequality and divergences in local cost-of-living within-US.

Plus,if you switch from household income to per-capita income, the trend toward inequality in US is much less. the trend in household income seems to be partly due to doububle-income households with two high-earners (often w/3+kids) alongside many more singles/divorcees living alone at a given point in time. The US Census bureau calls both 'households'.

Mugwamp Author Profile Page:

There is a point to tracking the poor/rich gap. If you stayed awake in history class you may have picked up on the fact that violent revolutions have historically been about the gap between rich and poor. The current stability in most developing nations is the emergence of a large middle class. If the middle class descends into poverty, we have a 'heavily armed' problem. We are witnessing increased pressure on our economic and political systems, to address this problem. The people will force a mandate for change by their vote, or we will get 8 more years of Neoconism, Palin style, and a widening rich/poor gap.

title24uscode Author Profile Page:

In the United States since the 1970s and more recently in Europe, there has been a dramatic increase in income inequality. This is a big problem for economists, who nearly universally promote a middle class, and for the economy that has less because a few people, with limited time and even more limited social responsibility, have acquired the vast majority of the wealth. They also lie atrociously.

The underlying cause of income inequality is injustice, namely, that greedy pig of injustice, the prosecutor. Wherever the prosecutor is glorified and permitted to waltz through, seize or serve as an absentee moral conciounse in civil society, as the DEA beginning in 1970, or the ICC in Europe in the new millennium, or the proposed European prosecutor in the Lisbon Treaty, that precipitated the European side of the economic crisis, and is a poor substitute for the discipline of a European Bar, income inequality takes off.

By putting the prosecutor on a pedestal the courts become very toxic to the civil petitioners who are universally complaining about how they want money because they are tired of being treated like slaves and it is in society's best interest to compensate them because slavery and slave like and colonial practices are detrimental to society and the economy as a whole, therefore economic justice is in order. Not so says the prosecutor, furthermore there will be no freedom of thought, expression, or really any movement against the slaving, torturing oppressors who have stolen all the money and pay the prosecutor bribes and perpetuate the soulless and illiterate system of credentialism.

The Europeans never should have killed all the Jews, in Hebrew prosecutor is pronounced "satan". Free Noriega. Give us back our European Court of Human Rights, we do not want to institutionalize injustice at time when the International Court of Justice has been overthrown by the ICC. Stop invading Afghanistan and establish a National Opium Agency so the wealthy nations and pharmaceutical companies can buy their opium legaly rather than sending soldiers to steal it. To restore income equality the goernment must again serve as an intermediary to pay those humble petitioners and researchers a living wage for creating a more egalitarian society.

perfgeek Author Profile Page:

Income level of zero will always be there acting as an "anchor" but there is no cap at the top, so indeed unless the top is capped, expansion will always mean an increasing spread. Might as easily decree 2+2 equal 5. Even distribution of wealth is an idealistic oxymoron. The goal should be equitable distribution of opportunity. The question is not "Do I have as much as the Joneses this year?" but "Are we Smiths better off this generation then we were the last?"

farfromstoppin Author Profile Page:

No one here is addressing the fact that some poor want to be poor. I have worked in the education field for more than 25 years and have taught classes to welfare moms. The majority were 3rd generation welfare recipients. Of that majority most had no intention of leaving the system. They simply showed up at class as a requirement to continue to receive their checks. If their children got too old to receive benefits they simply conceived another. Why should I share more of my "modest" wealth with people that have no motive to help themselves and feel that we all owe them a living? Before you agree with Obama to "spread the wealth" you should take a long hard look at who you are "really" spreading it to!

xlanmanx Author Profile Page:

The only transfer of wealth I see happening is from the middle class to the upper class via tax loopholes, job outsourcing, free trade agreements, H1B visas, corporate welfare, corporate bailouts, and other schemes which screw the middle class.

This occurs because a corrupt Federal Government on the take is obligated to serve its Corporate Masters and billionaire individuals rather than we the people who elected them.

Ignorant Americans allow politicians to frame these problems as a Democratic or Republican problem - thinking there is a difference and a choice. Unfortunately, they are two sides of the same coin and both rotten to the core. The only hope is for a strong 3rd party candidate to emerge who is not beholden to the status quo.

Chamaco Author Profile Page:

The age old issue. The poor want what the rich have earned to be given to them. Why is it immigrants that come to the USA realize the opportunity they now have and are able to boot strap their way to prosperity through hardwork and grit, but the poor just continue to believe they are victims? Their condition is always the result of someone else doing it to them. Successful people are evil and the poor are just the victims. The liberal agenda propagates this message in order to keep the constituent base beholden. If people rolled up their sleeves, dug in, and believed in themselves they could improve their lot measurably, but it easier to whine and blame someone else for their situation.

Superpower Author Profile Page:

Capitalism is the way The United States of America survives economically. The more you see government step in and take control, the more you'll see the economy fail. Please, try this at home; go out and get a job and make some of your own money. This will help Capitalism and you'll feel better about yourself. Thanks!

changbroot Author Profile Page:

It's not over yet. Nothing will help the US or the West, as they have done so many wrong that it's inevitable to run away.

Helping the rich for their loss but not the poor has a very grave consequences. For starters, the poor has no choice to take arms and take the money by force. Force could be anything, from murdering the rich, kidnapping, drug dealing and many many more. Indeed a revolution is needed in the West balance out the spread of wealth, but it's too late. The west has abused both other countries and our environment.

The so called "International Monetary Fund" and "World Bank" has been charging more interest than they borrowed in the first place. These kind of agenda has unquestionable consequences and we are seeing it coming.

Has anyone ever questioned why the oil prices dropped so fast and stayed low until now? How could US's bail-out have this kind of effect on OPEC? Conspiracy? Yes!!!!!!!!!!

Muhammad Jan

deborahallencox Author Profile Page:

You must be crazy if you think $93,000 is rich. My brother has been making more than that for over 10 years and STILL filed bankruptcy in the USA. Why don't you get POOR and POOR BUT HONEST straight. Circumvention and payday in the Ghetto is what contributes to the Gap between rich and poor. Why don't you admit that an honest savings plan is the answer. Why bother.

Steve86 Author Profile Page:

Why is it that the purported wealth gap is the result of the "rich" getting "richer"? What about the fact that entitlements have disincentivized many otherwise productive workers?

ActionExpressesPriority Author Profile Page:

Read the full OECD report to avoid Washington Post headlines and spin. (follow their link).

Three Questions came to mind for me.

Question #1: What do the 10% making less than $5,800 need to find their own way?
Answers: First, OECD states the bottom 10% need education and opportunity. SECOND, The public services in the USA reduce the gap, helping with education, health, and opportunity.

Question #2: Should the gap compare more to OECD's average, France's rate or Germany's?
Observations: First, The OECD recognizes their ratings omit considerations reducing the gap in countries as in the USA.
SECOND, the OECD recognises "earnings mobility" where USA, Italy, UK and France excel. This may show why so many people migrate to the USA. Read about it.

Question #3: Why is this happening?
Observations: Components include: Movement of skilled labor out of the country. Global competition, opening our markets in fairness.


Read the full OECD report to get beyond the .

Are we "good" if our gap

Based on migration patterns,
I volunteer 1-2 nights a week at a homeless shelter teaching computer, assiting resumes, and meeting people personally.


vette Author Profile Page:

Some are losing sight of what is being said- the gap between the rich and the poor- this is not an attack on the rich who manage to create their wealth but rather the individual who takes employment that is way too expensive for a society to exist.

Should a lawyer, doctor, accountant, engineer, politician, mayor etc etc. be paid so much more than a working tradesman, construction worker, dish washer. If so, what is a reasonable difference to prevent inflation and equity and allow everyone to acquire general health, education from a society that is so restrictive.

cherrybeach Author Profile Page:

The capitalism system is designed in favour of capital owners, in another word, the people who owns money. The more money you have, the more favour the system rewards you. That's why the rich get richer, and poor get poorer. The wealth created by the whole community will be increasingly concentrated in a small group of people. The middle classes and the alreday poor people will be pushed further into poorer situation. The system like this is approaching to a break point by days, which will cause the collapse of the whole system. When that happens, everybody loses, the rich lose their privilege, the poor lose their underprivilege. Therefore, you can see who is benefiting from the present system and who is deprived by the system. The majority of population is getting poorer by days, do we expect they will quietly suffer from this? No! There will be a revolution for sure. Let's wait and see.

triskelion Author Profile Page:

"backscatter" - you were incorrect when you stated that, "We are not starving in America". In fact, the opposite is true. How sad in a country of so much.

Here in NYC, we estimate over a million are at risk of acquiring food each day, http://www.foodbanknyc.org/go/food-poverty-in-nyc. Why do so many people, like yourself, believe otherwise?

backscatter Author Profile Page:

I remember talking to my now passed grandmother of over 90 years old talking about all the amazing achievements and progress she had seen in this country over her lifetime. She marveled at how even the poorest in our country have television, a home, and food. We are not starving in America.

Rather than focus on the gap in income, more important is how the average citizen is faring vs. the past. We are immensely rich as a society -- and, as hard as it is for many liberals to stomach, it is because there have been men and women with courage and strength and smarts to risk it all to create this thing we call industry which is the engine of our achievements. It is not because of Government.

Equalization of income creates trickle-up-poverty. How is N. Korea's average citizen faring, how about Cuba, the former Soviet Union, etc. I'll take the income gap every day over a Socialist State.

Thank God for those the create the engine that drives this great Nation.

saintpeterii Author Profile Page:

While few can argue with the necessity to jump start our economy, even the most optimistic claim that this is going to a longer rather than a shorter project and none are talking about any quick fixes. There is one way to jump start the economy within a couple of months; a trickle up strategy that serendipitously addresses the growing gap between the poor and the rich. We can no longer afford the poor, we need armed with cash, out there in tha malls spending and spending. In the mean time the current strategy, based on the discredited trickle down theory still has the attention of those who will decide matters and coincidentally they have scheduled themselves as the first beneficiaries. If you want the truth follow the gold! Can't up load images here but do invite you to see Uncle Sam doing a new kind of investing at The Spank of America, Misters Drip & Drop on the unsolved murder of Misters Dollar and Mister America runs for president.
http://www.saintpeterii.com

hewat Author Profile Page:

"Are we to conclude that there are better socio-economic models....that are more fair? France? C'mon..."

Have you lived in France? I have for half my life, with the other half in Australia and the UK, more like the US. As a small entrepreneur I pay half my profits in social security, and also pay income tax. I have never been sick in the 40 years I have been paying, so I'm a net contributor :-) But 6 years ago my wife developed an illness that in the US would have possibly bankrupted us. In France, State Social Security paid 100% to cure her. She would not have had better treatment in the US, even if we could have paid for it. And living in France is pretty good too. Get over thinking that the US is still best at everything. Change, or you're History.

Jim246 Author Profile Page:

Insted of emphasizing the disparity, provide incentive for the poor to get educated. Of course if you are lazy and poor, there may be no answer but to accept the Obama's doctrin. I imagine most of the media, including Washington Post, are highly educated socialists, why don't we start with media workers and ask them to give up their salary to reduce the gap between rich and poor.

mzafrullah Author Profile Page:

Redistribution of wealth sounds unfair, granted. But equally unfair is giving tax-breaks to the wealthy, indiscriminately. That I am afraid is what is happening. A bank that fails because of legally questionable practices is bailed out, while there is no help for a poor man whose 401k plan gets whittled down because of a bump in the market. The scenario becomes something like this: If the rich lose due to their stupidity and dishonesty the government is there to bail them out, but if working class folks fall on hard times then no one cares.
When this kind of behavior becomes extreme and the poor become the surfs there is a revolution of the Russian kind. To keep that kind of social upheaval at bay we should find a formula that keeps poor from becoming too poor. If that means keeping rich from becoming too rich, by hurting the economy by exporting jobs abroad then so be it.
Muhammad Zafrullah

aelemay Author Profile Page:

Well, I have worked hard all my life, I risked all my life's savings on business ventures, and I made money, lots of money. Now,I also hired a lot of really stupid and incompetent people. I taught them how to work, why it was important to come to work on time, do their jobs cost effectively, and now you think income inequality is unfair?

I beg your pardon, you must be imbeciles. I gave these people jobs, I trained them, so if it was not for me, they would be on welfare. So, I now have to share my ownership equity in the form of income with them? Why would I want to work hard if I can't keep what I produce?

I am not rolling in money, and if the Government takes too much, I will just shut down the business and let the Government take care of these people.

icouce Author Profile Page:

Are the poor today as poor, as the poor were 20, 40 or 80 years ago? Adjusted for population growth, is the relative size of the poor grown? Do the poor stay poor over time or is there social mobility, and if so, by what ratios? What are the relationships between access to education and social mobility? What are the relationships between economic regulation for small businesses and social mobility? I consider these more important questions than the one "answered" by the study which begs them.

So-called "redistribution" of wealth, as opposed to it's creation and earning, is the easy knee-jerk "answer" that begs the question, "Then what?"

mightytightywhity Author Profile Page:

It's so good to see the US is competing for something again, even if it is the greatest amount of disparity in the world. We are without doubt the most ignorant people in the world. The aristocracy has us so well trained, that we tell them we will be happy to eat cake. We so enjoy our servitude to the most greedy self important of our society that we excuse it by hating ourselves. We simply treat ourselves like the worthless slaves we are. Millions of Americans don't work because they are simply to lazy, not because there isn't a job to find. And how dare we suggest the wealthiest in our society pay their fair share. It should fall to the working classes to pay for multi-trillion dollar wars that line the pockets of oil companies and defense contractors. The working poor should pay for the billion dollar profits of health care providers and pharmaceutical companies, rather than eliminating the charlatans opportunity to profit from it and spreading and thus lowering the cost of it for all of society.
The richest people got the biggest tax break in history and they used it as an opportunity to suck society dry. Thieves and liars who have never created anything of value in their lives but have only been a tape-worm, a parasite that sucks out all the value of what labor produces, what industry creates and calls it their own. Now the con-men who created the biggest casino (the derivatives market) in the world, that created fraudulent paper with absolutely no value placed bets on whether they would be able to scam the tax payer into paying for the spreads on that worthless paper bet on that bet and bet on it again are laughing as they pad their pockets and squeeze every last dime from the suckers (the American people) who are trying to monetize a system that represents 20x more money than the GDP of the entire world, 1.5 quadrillion (one thousand trillion) dollars. Indeed America has become the stupidest most rapacious society that ever existed on earth.

kpod Author Profile Page:

Yes....the gap is growing in the US and in Europe. Are we to conclude that there are better socio-economic models....that are more fair? France? C'mon.....

If the people that haven't made it yet have no hope of making then they won't try harder. I believe in social mobility that goes both ways....you work real hard, you do real well.....you make big mistakes, you lose it. Those that lied and decieved in the banks and corporations should be jailed, and those that made poor mortgage decisions should lose their house.

Stop appologizing for America's success and write about a study that can figure out how to take our success to other places.

TreeLuvBurdpu Author Profile Page:

The gap is growing. Yet more poor people have cell phones than ten years ago. The cell phone boom was not driven by poor poeple. Narrowing the gap would require pushing the top down. I am poor and I am not in favor of that. My boss, you see, is rich, and I want him to stay that way. I have a flexible rule of thumb that says 'never work for a poor boss.'

abby0802 Author Profile Page:

I have no doubt that the gap between rich and poor is growing. I observe more poor people taking the bus and those with Hummers, Lexus cars and expensive cars filling up.

I observe people in Wal-Mart putting food back at the checkout because they don't have enough money. I walk the mall for exercise (can't afford a gym) and see rich people still buying expensive jewelry, clothes, etc. without hesitation.

I listen to people talk and hear the middle class worrying about their jobs, their mortgages, paying for their children's school clothes and supplies. I watch the rich buy designer clothes.

My husband lived through the Depression and he said that almost everyone in his community were in the same sinking boat. Not today.

We watch and listen and notice that the middle class is losing ground and the poor are just getting poorer and more desperate.

We know people at our church who are wealthy who think nothing of trips to Europe, buying a second home, buying new cars.

We, on the other hand, are still trying to find the cheapest, safest place to live and are having to move again since apartment prices keep going up. We are cutting back on food and utilities. We have no dinners out, no special gifts on birthdays or anniversaries. We didn't lose 401 money because we never had enough to put into special savings accounts for the future. The tiny savings we have doesn't even earn enough interest to think about.

Why is this happening? Because of the greedy actions of the haves who don't give a hoot about those less fortunate than themselves.

The government takes action when the rich get worried and protects the banks, corporations, and investment firms -- only the rich -- and let the middle class and poor lose their jobs, homes, and future.

PostGlobal is an interactive conversation on global issues moderated by Newsweek International Editor Fareed Zakaria and David Ignatius of The Washington Post. It is produced jointly by Newsweek and washingtonpost.com, as is On Faith, a conversation on religion. Please send us your comments, questions and suggestions.