Group 5 - Income Inequality What is income inequality? What is happening around the world and why? Why is it bad?

Income Inequality Refers to the extent to which income is distributed in an uneven manner among a population (www.inequality.org) Is the unequal distribution of household or individual income across the various participants in an economy. It is often presented as the percentage of income to a percentage of population (www.investopidia.com)

What is happening?? In OECD countries is at its highest level for the past half century. The average income of the richest 10% of the population is about nine times that of the poorest 10% across the OECD, up from seven times 25 years ago. In emerging economies, such as China and India, a sustained period of strong economic growth has helped lift millions of people out of absolute poverty. But the benefits of growth have not been evenly distributed and high levels of income inequality have risen further. 

Why this is happening?? Globalization Skill-biased technological change (the rapid pace of progress in IT has increased the demand for the highly skilled and educated so that income distribution favored brains rather than brawn) Effectiveness and efficiency of countries policy approaches (education, labor market, public health)

Why is this bad?? May affect crime rates (as a social problem) Threatens a country’s political and social stability because more people are dissatisfied with their status, making it harder to reach political and social consensus among population group. May discourage certain basic norms of behavior among economic agents, such as trust and commitment (higher costs of contract, slowing down the economic growth).