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Gap widens between Spain's rich and poor

AFP/The Local · 21 May 2015, 14:55

Published: 21 May 2015 14:55 GMT+02:00
Updated: 21 May 2015 14:55 GMT+02:00

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The report by the Organisation for Economic Cooperation and Development (OECD) released on Thursday showed that Spain's high unemployment rates since the start of the economic crisis were responsible for widening the divide to record levels.
Spain had the fifth highest rate of inequality of the OECD countries in Europe, after the United Kingdom, Greece, Estonia and Portugal.
The economic crisis hit low-income Spaniards the hardest, according to the report, with the poorest 10 percent of the population losing 13 percent of their real incomes each year between 2007 and 2011. The top 10 percent, in comparison, lost 1.4 percent.
In 2007, the bottom 10 percent of Spaniards were richer those in the Slovak Republic, but by 2012 they had become poorer, despite Spain have a considerably higher median income.
Still, the wealth in Spain seemed to be less highly concentrated among the ultar-rich compared to the rest of the OECD countries. 
The top 10 percent of the Spanish population owned 43 percent of all household wealth, lower than the OECD average of 50 percent, while the bottom 60 percent owned 20 percent of all household wealth - well above the OECD average of 13 percent.
Though poverty rates started to show some improvement since 2011, the portion of the population below the poverty line in Spain was 18 percent - almost double what it was before the economic crisis and as well as the OECD average.
Throughout the OECD countries, the gap between the rich and poor in most of the world's advanced economies is at record levels and there were glaring differences between men and women.
In most of the 34 countries in the OECD, the income gap is at its highest level in three decades, with the richest 10 percent of the population earning 9.6 times the income of the poorest 10 percent.
In the 1980s this ratio stood at 7 to 1, the OECD said in a report.
The wealth gap is even larger, with the top 1 percent owning 18 percent and the 40 percent only 3 percent of household wealth in 2012.
"We have reached a tipping point. Inequality in OECD countries is at its highest since records began,” said OECD Secretary-General Angel Gurria.
As high inequality harms growth prospects, there are economic as well as social arguments for governments to try to address the issue, he said.
"By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth," said Gurria.
The study found that the rise in inequality between 1985 and 2005 in 19 OECD countries knocked an estimated 4.7 percentage points off cumulative growth between 1990 and 2010. 
An increase in part-time and temporary work contracts as well as self-employment was seen as an important driver of increased inequality, with half of all jobs created in OECD countries between 1995 and 2013 falling into these categories.
The report also found that as inequality rose, there were significant falls in educational attainment and skills among families in lower income groups, thus implying large amounts of wasted potential and lower social mobility.
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As wages for women are 15 percent less than for men, ensuring gender equality in employment is one way to reduce inequality.
Redistributive taxes and transfers is another effective option, said the OECD as it noted that existing mechanisms have been weakened in many countries. 
"To address this, policies need to ensure that wealthier individuals, but also multinational firms, pay their share of the tax burden," said the OECD, which has been playing a key role in an international effort to crack down on tax avoidance.
It also encouraged countries to broaden access to better jobs and and encourage greater investment in education and skills throughout working life.
The report found inequality to be highest in Chile, Mexico, Turkey, the United States and Israel among OECD countries.
It was lowest in Denmark, Slovenia, Slovak Republic and Norway.

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AFP/The Local (news@thelocal.es)

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