6. Equity Indicators 1

6. EQUITY INDICATORS 1. Income inequality

not general. Income inequality actually fell considerably in Definition and measurement Greece, Ireland, Spain and Chile. Poorer countries have tended to have higher income Measures of income inequality are based on data on inequality (EQ1.2). The most unequal countries in the people’s household disposable income (see “Definition OECD included the several of the least rich: Chile, Mexico and measurement” in GE1 for more detail). The main and Turkey. Luxembourg, Iceland and Norway were all indicator of income distribution used is the Gini coeffi- relatively rich and relatively equal, but more unequal than cient. Values of the Gini coefficient range between 0 in expected given their high incomes (above the line in EQ1.2). the case of “perfect equality” (each person gets the The United States was quite unequal, given its riches same income) and 1 in the case of “perfect inequality” (above the line in EQ1.2), while the Czech Republic, the (all income goes to the share of the population with the Slovak Republic, Hungary and Poland managed to be quite highest income). Life expectancy data is discussed in equal, given their relatively low income (below the line “Definition and measurement” of indicator HE1. in EQ1.2). There was no strong tendency for countries that grew richer faster to have rising inequality (EQ1.3). Sometimes it is argued that rapid income growth requires paying a price – growing inequality. Alternatively, some suggest that Income inequality is an indicator of how material rapid income growth brings a further gain in its wake: a resources are distributed across society. Some people more equal society. Neither of these two stylised facts is consider high levels of income inequality are morally supported by the OECD income inequality data. undesirable. Others focus on income inequality as bad for instrumental reasons – seeing it as causing conflict, limit- ing co-operation or creating psychological and physical Further reading health stresses (Wilkinson and Pickett, 2009). Often the OECD (2008), Growing Unequal? Income Distribution and Poverty policy concern is more focussed on the direction of change in OECD Countries , OECD Publishing, Paris. of inequality, rather than its level. OECD (2011), Causes of Growing Income Inequality in OECD Income inequality varied considerably across the OECD Countries , OECD Publishing, Paris, forthcoming. countries in the late 2000s (EQ1.1, Panel A). Chile, Mexico The Spirit Level: Why and Turkey had the highest income inequality. OECD Wilkinson, R. and K. Pickett (2009), Anglophone countries had levels of inequality around Equality is Better for Everyone , Penguin Books, London. or above the OECD average. Southern European and Mediterranean countries also tended to have higher than Figure notes average inequality. Inequality was lower than average amongst the Nordic countries and continental European Figure EQ1.1, Panel A: Gini coefficients refer to mid-2000s for Greece and countries. Switzerland. Since the mid-1980s, income inequality grew moderately Figures EQ1.1, Panel B and EQ1.3: No changes available for Estonia, Iceland, Korea, Poland, the Slovak Republic, Slovenia and Switzerland. across the OECD (EQ1.1, Panel B). However, the overall Changes are available from mid-1990s for Australia, Chile, Israel and range concealed a diversity of experiences across countries Portugal. Changes are available until 2000 for Austria, Belgium, the and across the time period. Income inequality rose Czech Republic, Ireland, Portugal and Spain, as current data from most strongly in the Czech Republic, Finland, New Zealand EU-SILC are not comparable with earlier years for these countries. and Sweden. But the pattern of increasing inequality was Information on data for Israel: http://dx.doi.org/10.1787/888932315602 .

66 SOCIETY AT A GLANCE 2011: OECD SOCIAL INDICATORS © OECD 2011 6. EQUITY INDICATORS

1. Income inequality

EQ1.1. Income inequality has been rising Panel A. Gini coefficient, Panel B. Ann ual average change in Gini late-2000s between mid-1980s and late-2000s, percentages

0.24 Slove nia 0.25 Slovak Rep ublic 0.25 De nma rk 0.5 0.25 No rway 0.5 0.26 Czech Rep ublic 1.1 0.26 Swede n 1.1 0.26 Fi nla nd 1.2 0.26 Aus tria 0.4 0.27 Belgi um 0.3 0.27 Hun ga ry 0.0 0.27 Luxembo ur g 0.5 0.28 Switze rla nd 0.28 Icela nd 0.29 France -0.1 0.29 Nethe rla nds 0.3 0.30 Ge rma ny 0.7 0.30 Irela nd -0.7 0.31 Spai n -0.5 0.31 OECD 0.3 0.31 Esto nia 0.31 Pola nd 0.32 Ko rea 0.32 Ca nada 0.4 0.32 Greece -0.8 0.33 Japa n 0.4 0.33 New Zeala nd 0.9 0.34 Aus tralia 0.6 0.34 Italy 0.4 0.34 United Ki ngdom 0.8 0.36 Po rtugal -0.2 0.37 Isr ael 0.6 0.38 United State s 0.5 0.41 Tur key -0.3 0.48 Mexico 0.2 0.50 Chile -0.5 0.50 0.45 0.40 0.35 0.30 0.250.20 -0.8 -0.4 0 0.4 0.8 1.2

EQ1.2. Richer countries have lower income inequality EQ1.3. Rapid income growth does not reduce inequality Media n eq uivali sed i ncome i n U SD at c urr ent p rice s Annu al ave rage cha nge i n media n ho us ehold i ncome and c urr ent PPP s i n 2007 betwee n mid-1980 s a nd mid-2000 s, pe rce ntage s 35 000 LUX 5

30 000 ISL JPN NOR S PRT KOR U A 4 ESP CHE IRL CAN 25 000 AUT NLD GBR AU S DNK BEL DEU AU S 20 000 3 SVN FIN FRA ITA S OECD S E P CHL NOR WE GRC NZL S 15 000 LUX I R GBR S ISR 2 GRC WE CZE EST PRT OECD NLD AUT NZL CZE 10 000 S VK HUN FRA MEX USA FIN POL CHL 1 CAN TUR DNK DEU 5 000 TUR MEX BEL HUN ITA JPN 0 0 0.2 0.3 0.4 0.5 -0.8 -0.4 0 0.4 0.8 1.2 Gi ni coefficie nt, Annu al ave rage cha nge i n Gi ni late-2000 s betwee n mid-1980 s a nd late-2000 s, pe rce ntage s

Source: Provisional data from OECD Income distribution and Poverty Database ( www.oecd.org/els/social/inequality ). 1 2 http://dx.doi.org/10.1787/888932381874

SOCIETY AT A GLANCE 2011: OECD SOCIAL INDICATORS © OECD 2011 67 6. EQUITY INDICATORS 2. Poverty

Poverty rates generally increased moderately over the Definition and measurement period from mid-1980s to mid-2000s for the OECD (Panel B, EQ2.1). Large rises occurred in the Netherlands and Sweden. Perceptions of a decent standard of living vary across On the other hand Belgium, Greece, Chile and Portugal were countries and over time. Thus no commonly agreed most successful in reducing their poverty rate. measure of poverty exists across OECD countries. As In some countries older people were more likely to be with income inequality, the starting point for poverty poor, while in other countries child poverty was a greater measurement is equivalised household disposable issue (EQ2.2). While Korea had a very high poverty rate for income provided by national consultants (see the elderly and low child poverty, Turkey had much higher “Definition and measurement” under EQ1. Income child poverty than pensioner poverty. The United States, inequality). People are classified as poor when their Chile and Mexico, sharing quite high overall poverty rates, equivalised household income is less than half of the had relatively equally high poverty rates amongst the two median prevailing in each country. The use of a relative dependent age groups. The Nordic countries combined low income-threshold means that richer countries have poverty rates for both the young and the old. the higher poverty thresholds. Higher poverty thresholds in richer countries capture the notion that Faster economic growth is often seen as the solution to avoiding poverty means an ability to access to the poverty problems (EQ2.3). However, economic growth and goods and services that are regarded as customary or poverty have not been strongly related within the OECD in the norm in any given county. The poverty rate is a the past generation. There is little evidence of a relation- headcount of how many people fall below the poverty ship between poverty and household income growth in line. either a positive or negative direction. For example, Ireland has had very rapid income growth over the period and a large rise in poverty, while income growth has stagnated in Belgium in combination with a considerable reduction in poverty.

Poverty measures the relative numbers of people at the Further reading bottom end of the income distribution. Often a society’s equity concerns are greater for the relatively disadvan- OECD (2008), Growing Unequal? Income Distribution and Poverty taged. Thus poverty measures often receive more attention in OECD Countries , OECD Publishing, Paris. than income inequality measures. Poverty concerns are often greater for certain groups like older people and for Figure notes children, since they have no or limited options for working their way out of poverty. Figure EQ2.1, Panel A: Poverty rates coefficients refer to mid-2000s for The average OECD country poverty rate was 11% for the Greece and Switzerland. OECD (Panel A, EQ2.1). Poverty rates were particularly high Figures EQ2.1, Panel B and EQ2.3: No changes available for Estonia, Iceland, Korea, Poland, the Slovak Republic, Slovenia and Switzerland. in Chile, Israel and Mexico. Czech and Danish poverty rates, Changes are available from mid-1990s for Australia, Chile, Israel and in contrast, were about one in twenty people. Other Nordic Portugal. Changes are available until 2000 for Austria, Belgium, the and European countries also had low poverty. The bottom Czech Republic, Ireland, Portugal and Spain, as current data from part of the table is dominated by Anglophone countries, EU-SILC are not comparable with earlier years for these countries. Mediterranean countries and the two OECD-Asia countries. Information on data for Israel: http://dx.doi.org/10.1787/888932315602 .

68 SOCIETY AT A GLANCE 2011: OECD SOCIAL INDICATORS © OECD 2011 6. EQUITY INDICATORS

2. Poverty

EQ2.1. Poverty has been rising Panel A. Percentage of persons living with less Panel B. Ann ual average change in poverty rate than 50% of median eq uivalised ho usehold income, late-2000s between mid-1980s and late-2000s, percentages

5.4 Czech Rep ublic 2.9 6.1 De nma rk 0.1 6.4 Hun ga ry 0.1 6.5 Icela nd 6.7 Slovak Rep ublic 7.2 Aus tria 2.7 7.2 Nethe rla nds 3.2 7.2 Luxembo ur g 1.4 7.2 France -0.2 7.8 Slove nia 7.8 No rway 0.9 7.9 Fi nla nd 2.1 8.4 Swede n 3.7 8.7 Switze rla nd 8.9 Ge rma ny 2.1 9.1 Belgi um -1.9 9.8 Irela nd 2.9 10.1 Pola nd 11.0 New Zeala nd 2.5 11.1 OECD 1.0 11.3 United Ki ngdom 2.2 11.4 Ca nada -0.2 11.4 Italy 0.4 12.6 Greece -1.1 13.6 Po rtugal -1.3 13.7 Spai n -0.2 13.9 Esto nia 14.6 Aus tralia 1.9 15.0 Ko rea 15.7 Japa n 1.3 17.0 Tur key 0.2 17.3 United State s -0.1 18.9 Chile -0.7 19.9 Isr ael 2.2 21.0 Mexico 0.1 25 20 15 10 5 0 -2 -1 0 1 2 3 4

EQ2.2. Poorer pensioners or poorer children? EQ2.3. Income growth is no poverty solution Pove rty amo ng people of reti reme nt age, Real ave rage a nnu al cha nge i n media n ho us ehold i ncome, pe rce ntage s, late-2000 s betwee n mid-1980 s a nd late-2000 s, pe rce ntage s 50 6 KOR IRL 5 40 AU S Highe r pe ns io ner pove rty ESP 4 PRT 30 EST MEX AU S GRC USA 3 NZL ESP S SWE AUT JPN I R CHL NOR 20 CHE CHL LUX SVN ISR OECD 2 GBR CZE SWE FIN BEL IRL PRT GRC TUR OECD DNK GBR MEX FIN NLD DEU S DNK 10 U A TUR NZL AUT S ITA 1 NOR CZE FRA VK FRA POL CAN Highe r child pove rty BEL ITA DEU ISL CAN HUN LUX HUN JPN 0 NLD 0 0 10 20 30 -2 -1 0 1 2 3 4 Pove rty amo ng child ren, Ave rage a nnu al cha nge i n pove rty rate pe rce ntage s, late-2000 s betwee n mid-1980 s a nd late-2000 s, pe rce ntage s

Source: Provisional data from OECD Income Distribution and Poverty Database ( www.oecd.org/els/social/inequality ). 1 2 http://dx.doi.org/10.1787/888932381893