Dire Warning About Rich-Poor Divide

[HuffingtonPost]

* Welfare spending vital to bridging growing wealth gap -  OECD                

* Rich-poor divided widened quickly after financial crisis                

PARIS, May 15 (Reuters) - A growing divide between rich and  poor risks will yawn still wider if cash-strapped governments  keep cutting back the welfare state, an industrialised nations'  think-tank warned on Wednesday.                

Weighing into a debate on inequality in developed countries,  the 33-nation Organisation for Economic Cooperation and  Development said welfare spending had mitigated an increase in  the wealth gap that emerged with the 2008-2009 financial crisis,  but that was running out.                

Excluding social transfers and taxes, income inequality rose  more in the three years to the end of 2010 than in the previous  12 years, a report by the Paris-based think-tank found.                

"As the economic and especially the jobs crisis persists and  fiscal consolidation takes hold, there is a growing risk that  the most vulnerable in society will be hit harder as the cost of  the crisis increases," it said.                

The richest 10 percent of society in OECD countries pocketed  9.5 times as much market income as the poorest 10 percent in  2010, up from 9 times in 2007.                

The widest gap between rich and poor was found in Chile,  Mexico, Turkey and the United States while Iceland, Slovenia,  Norway and Denmark were the most egalitarian societies.                

"These worrying findings underline the need to protect the  most vulnerable in society, especially as governments pursue the  necessary task of bringing public spending under control," OECD  head Angel Gurria said in a statement.                

He added that governments should not neglect fairness when  they craft their policies, especially when they reform their tax  systems.                

With many developed countries facing the pinch of austerity,  economic inequality has become a hot topic especially after an  ECB study last month found that households in many peripheral  euro zone countries are on average wealthier than those in the  bloc's core due to higher levels of home ownership.                

Long a staunch advocate of free-market reforms shunned by  some left-wingers, the OECD has become an increasingly vocal  supporter of the welfare state for its capacity to soften the  blow of hard economic times.                

The study said the pain of the crisis was unevenly spread.  Poorer households either lost more income from the recession or  benefited less from recovery. Children and young people suffered  more than the elderly, whose incomes were relatively immune.                

To read the report and access the data:  www.oecd.org/els/social/inequality

Via: HuffingtonPost