Portuguese American Journal

Portugal: The most unequal among the European economies – OECD

The study “Divided We Stand: Why Inequality Keeps Rising,” released Monday by the Organization for Economic Cooperation and Development (OECD), revealed Portugal remains one of the most unequal countries in the developed world, and the most unequal among the European economies.

With a sharp gap in income distribution, the richest 20% earn over 6.1 times more than the poorest 20%. The average between rich and poor in the countries in the OECD study is 5.5 times.

According the OECD report, over the last two decades, the bottom 20% in Portugal have seen their incomes rise by an annual average of 3.6% against 1.1% for those in the top earning bracket, while the richest 10% of the population earn up to nine times more than the poorest 10% in almost every Portuguese region.

The gap between rich and poor in the developed world has reached its highest level in over 30 years, and governments must act quickly to tackle inequality, says the OECD report.

“This study dispels the assumptions that the benefits of economic growth will automatically trickle down to the disadvantaged and that greater inequality fosters greater social mobility. Without a comprehensive strategy for inclusive growth, inequality will continue to rise.” said OECD Secretary-General Angel Gurría.

Overall, 17 of the 22 OECD countries for which long-term data was available showed growing inequality.

The income gap has risen even in traditionally egalitarian countries, such as Germany, Denmark and Sweden, from 5 to 1 in the 1980s to 6 to 1 today, the OECD found.

Based on the variations in the Gini coefficient (used to measure income inequality), Portugal ranks fourth in income inequality after the Israel, United States and Chile.

The only European Union country where the gap between rich and poor narrowed was Greece, while, although inequality fell in Spain between 1994 and 2008, it has been on the rise in the last two years. Belgium, France and Hungary saw no change.

In Chile and Mexico, the incomes of the richest are still more than 25 times those of the poorest, the highest in the OECD report.

Income inequality is much higher in some major emerging economies outside the OECD area. At 50 to 1, Brazil’s income gap remains much higher than in many other countries, although it has been falling significantly over the past decade.

The gap has increased the most in the United Kingdom, where the richest 1 per cent have doubled their incomes since the 1970s. In the UK and Italy in 2008 the wealthiest earned 10 times more than the poorest.

Outside the European Union, inequalities were even greater. In Turkey and the United States the rich earned 14 times more than the poor in 2008.

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Read the OECD report here >>