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Chile reported as nation with highest income disparity in OECD study

Chile reported as nation with highest income disparity in OECD study
December 12
14:28 2011

A recent report from the OECD, “Divided We Stand: Why Inequality Keeps Rising,” has compared earnings between the highest 10 percent and lowest 10 percent of earners

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Chile had the highest level of income disparity in OECD countries. Photo: St Krekeler via WikiCommons

throughout the 34 member countries. Chile had the highest income disparity, alongside Mexico with a ratio of 27 to 1 between the highest earners and lowest earners. The average for OECD countries was 9 to 1, with Nordic countries showing the most even distributions.

An interesting statistic in the report was that the fact that the salary of the lowest income earners was increasing at a higher rate than the highest income earners. This is a trend that was not seen across the other OECD nations. But with such a large disparity, there is a long way to catch up for Chile’s poor.

The paper also had a special focus on inequality in emerging economies. This section of the report made comparisons between OECD countries including Chile, Mexico and Turkey against emerging economies. These included Brazil, South Africa, China, Russia, India and Argentina. The comparison outlined current issues and the contributing factors to income disparity and the policy challenges that lie ahead for the emerging economies.

It was noted in the results that many of the countries with higher income disparity, including Chile, spend lower than average on social welfare programs. The report noted that the factors behind income inequality were similar throughout the world, however, the informal sectors in emerging economies, featuring workers in low paid, low productivity jobs, outside of social protection systems were noted as a driving force in emerging economies. According to the report, the informal sector contributed 36 percent of Chile’s total workforce.

While Chile’s social spending was below the OECD average, the unemployment insurance scheme was noted as an example for other emerging economies. The report noted the mix of employer contributions and government contributions as a possible way forward for the emerging economies. The report also noted the need for fair access to these contributions for those who have lost their jobs.

The report suggests three main pillars to stand on for the various governments of the world to build platforms to reduce income inequality: “more intensive human capital investment; inclusive employment promotion; and well-designed tax/transfer redistribution policies.” While Chile rated at the bottom of the OECD countries, the report also suggested tendencies towards a more even distribution between the nations in the future.

Chile became the first South American nation to join the OECD in January 2010.

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Daniel Boyle is an Australian living in Santiago. Daniel’s main interests are sports, music and travel. He has a degree in Sports Management and is completing a Master of Arts (Writing). Daniel plays the sport of Freestyle Footbag and is hoping to spread it through Chile. In 2013 Daniel was granted a Start-Up Chile grant.
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