Special Report

Countries With the Widest Gap Between Rich and Poor

5. Israel
> Gini index – post tax & transfer: 0.376
> Social spending, pct. of GDP: 15.8% (4th lowest)

> Chg. in Gini after tax & transfer: 0.125 (5th smallest)
> Job growth, 2013: 2.7% (2nd highest)

Israel was among the top spenders on educational institutions in 2010, spending 7.4% of GDP, more than all but a handful of nations. The government’s interest in education seems to have paid off, as residents are generally quite well-educated. Nearly half of residents between 25 and 64 years old had attained a college degree as of 2011, higher than all but two other OECD countries. However, taxes and government programs had a relatively weak impact on inequality. The nation’s Gini index dropped just 0.125 after taxes and transfers, considerably less than in most other countries. Additionally, government social spending totalled just 15.8% of GDP, lower than most OECD countries.

4. United States
> Gini index – post tax & transfer: 0.380
> Social spending, pct. of GDP: 20.0% (11th lowest)
> Chg. in Gini after tax & transfer: 0.119 (4th smallest)
> Job growth, 2013: 1.0% (14th highest)

Despite being one the world’s wealthiest nations with the third highest GDP per capita in the OECD, the U.S. still had one of the developed world’s largest income gaps. The U.S. spent the most of any member nation on education per student, at more than $22,700 annually as of 2010. The U.S. also had the fourth highest percentage of adults between 25 and 64 years old with a tertiary degree, at over 42%. Despite this, the country has struggled to keep workers in the labor force. In each of the last two years, labor force growth has been less than 1%, as Americans exited the workforce and the population continued to age.

3. Turkey
> Gini index – post tax & transfer: 0.411
> Social spending, pct. of GDP: n/a
> Chg. in Gini after tax & transfer: n/a
> Job growth, 2013: n/a

Although still considered an emerging economy, Turkey has struggled in recent years with slowing growth and rising debt levels and other structural problems in the country’s economy, including high levels of inequality. A number of factors likely contribute to the country’s high inequality. For one, just 14% of the country’s population ages 25 to 64 had a tertiary degree as of 2011, the lowest in the OECD where 31.5% of adults had such an education. Turkey has also struggled to fight poverty. According to the OECD, the number of children, young adults, and elderly residents living in poverty rose between 2007 and 2010. Government corruption and political turmoil are also concerns. Last summer’s mass protests against Prime Minister Recep Tayyip Erdogan in Istanbul’s Taksim Square captured the world’s attention and bred concerns about the country’s future under Erdogan.

2. Mexico
> Gini index – post tax & transfer: 0.466
> Social spending, pct. of GDP: 7.4% (the lowest)
> Chg. in Gini after tax & transfer: n/a
> Job growth, 2013: 1.1% (11th highest)

The Mexican government set aside the equivalent of just 7.4% of the nation’s GDP for social programs, among the smallest budgets for social spending in the OECD. Total public spending on Mexican families equaled just 1.1% of GDP in 2009, less than half the average for the OECD. Low educational spending likely also did not promote income equality in Mexic. Nearly all educational institutions — from primary schools to research and development ones — were also relatively underfunded, spending less than $3,000 per student in 2010, the lowest in the OECD. Another factor driving up inequality may be the high levels of corruption in Mexico. Mexico was tied with Argentina as the most corrupt country in Latin America last year, according to Transparency International.

1. Chile
> Gini index – post tax & transfer: 0.501
> Social spending, pct. of GDP: 10.2% (3rd lowest)
> Chg. in Gini after tax & transfer: 0.025 (the smallest)
> Job growth, 2013: n/a

Chile was the least equitable country in the OECD, with a Gini index score of 0.501, even after accounting for taxes and transfers. The history of Chile’s economy has been shaped largely by Augusto Pinochet’s dictatorship. While the Chilean government has been relatively stable since returning to democracy in 1990, and residents have among the highest standards of living in Latin America, social services were still a relatively small expense in the country. Total social spending amounted to just $1,733 per capita in 2010, less than in every country reviewed except for Mexico. Chile’s GDP growth has actually been fairly strong in recent years. GDP grew 4.2% in 2013 from the year before, the highest growth rate among OECD countries.

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