Special Report

Countries With the Widest Gap Between Rich and Poor

10. Japan
> Gini index – post tax & transfer: 0.336
> Social spending, pct. of GDP: n/a

> Chg. in Gini after tax & transfer: 0.152 (11th smallest)
> Job growth, 2013: 0.7% (16th lowest)

Before taxes and transfers, Japan’s Gini index was relatively high, roughly on par with that of the U.S. While after taxes and transfers the gini index score fell from 0.488 to 0.336, it remained 10th highest among all OECD nations. Japan’s population was relatively well educated — 46.4% of the population between 25 and 64 years old had a tertiary degree, among the most worldwide. Inequality is just one problem facing the Japanese economy, which has suffered from years of falling prices, little economic growth, and a growing debt burden. In an effort to bolster the country’s finances, Japan recently increased its nationwide value added tax to 8%, which triggered a massive rush by consumers and businesses to make big purchases ahead of the tax hike.

9. Greece
> Gini index – post tax & transfer: 0.337
> Social spending, pct. of GDP: 22.0% (17th highest)
> Chg. in Gini after tax & transfer: 0.185 (10th largest)
> Job growth, 2013: -4.0% (the lowest)

Greece’s GDP growth was negative every year from 2011 to 2013, as the country continued to reel from its debt crisis. Despite defaulting on its debt in 2012, the Greek government continued to spend some money on its people. Social spending accounted for 22% of the nation’s GDP, in line with the OECD average. After taxes and transfers, the country’s Gini index fell from fourth-highest in the OECD to ninth-highest. However, employment has decreased substantially in recent years, falling nearly 8% in 2012 and then roughly 4% in 2013.

8. Spain
> Gini index – post tax & transfer: 0.338
> Social spending, pct. of GDP: 27.4% (8th highest)
> Chg. in Gini after tax & transfer: 0.169 (14th smallest)
> Job growth, 2013: -3.1% (2nd lowest)

Like several countries with high income inequality, Spanish residents had relatively low educational attainment rates. Only about 54% of Spaniards between 25 and 64 had at least an upper secondary education as of 2011, less than all but a few OECD nations. Recent economic problems may do little to help improve inequality. Spain was one of the countries at the epicenter of the eurozone crisis, and it still has a long way to go on its road to recovery. More than one quarter of the workforce is unemployed in Spain, nearly the worst in all of Europe. After remaining virtually unchanged in 2011, Spain’s GDP contracted by 1.6% in 2012 and by an additional 1.3% last year.

7. United Kingdom
> Gini index – post tax & transfer: 0.341
> Social spending, pct. of GDP: 23.8% (13th highest)
> Chg. in Gini after tax & transfer: 0.182 (12th largest)
> Job growth, 2013: 1.3% (8th highest)

The U.K. had the OECD’s third-highest Gini index before taxes and transfers, well above that of the U.S. After taxes and transfers, however, the country’s Gini index fell to 0.341, well below the equivalent index score for the U.S., although still seventh highest in the OECD. As of 2009, the country offered considerable government support to families, totalling 4.2% of GDP, more than all but one OECD country. In recent years, however, the U.K. government has pursued fiscal policies to trim the country’s budget deficit. One such policy is the implementation of a hard cap on welfare payments, set to take effect next year.

6. Portugal
> Gini index – post tax & transfer: 0.344
> Social spending, pct. of GDP: 26.4% (9th highest)
> Chg. in Gini after tax & transfer: 0.178 (13th largest)
> Job growth, 2013: -2.6% (3rd lowest)

Portugal’s social spending as a percentage of GDP totalled 26.4%, among the highest out of the OECD countries. However, the country was still among the most unequal in the developed world, even after taking into account taxes and transfer payments. Portugal’s bailout in 2011 did not improve the country’s economy much. Employment shrank in each of the last two full years, by 4.2% in 2012 and by 2.6% in 2013. Also, only 17.3% of its residents attained tertiary degrees, among the lowest in the OECD. This might not be particularly surprising, as the Portuguese government spent $5,843 per student in 2010, among the lower per-student expenditures in the OECD.

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