Trends in income inequality and its impact on economic growth
A new working paper, published by the Organisation for Economic Co-operation and Development (OECD) suggests that Government policies which increase inequality can have a detrimental effect on a country’s economic growth.
According to new OECD analysis, countries where income inequality is decreasing grow faster than those with rising inequality.
“This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate,” said OECD Secretary-General Angel Gurría. “Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”
In Italy, the United Kingdom and the United States, the cumulative growth rate would have been six to nine percentage points higher had income disparities not widened.
The paper finds new evidence that the main mechanism through which inequality affects growth is by undermining education opportunities for children from poor socio-economic backgrounds, lowering social mobility and hampering skills development.
The impact of inequality on growth stems from the gap between the bottom 40 percent with the rest of society, not just the poorest 10 percent. Anti-poverty programmes will not be enough, says the OECD. Cash transfers and increasing access to public services, such as high-quality education, training and healthcare, are an essential social investment to create greater equality of opportunities in the long run.
The paper also finds no evidence that redistributive policies, such as taxes and social benefits, harm economic growth, provided these policies are well designed, targeted and implemented.
Disability Rights UK campaigns for increasing opportunities for disabled people to achieve their potential and aspirations through education, skills and training.
The paper itself makes no specific reference to disability, though it has a useful publications list which does. However, the principle of reducing inequality as a means to economic prosperity applies equally the circumstances of disabled people.
You can view the paper at http://www.oecd.org/newsroom/inequality-hurts-economic-growth.htm