Special Report

Countries With the Widest Gap Between the Rich and the Poor

10. Greece
> Gini index – post tax & transfer: 0.335
> Social spending, pct. of GDP: 24.0% (12th highest)
> Chg. in Gini after tax & transfer: 0.220 (3rd largest)
> Poverty rate: 15.2% (7th highest)

The health of a labor market is a factor affecting income inequality. Residents of countries with high unemployment rates may be less likely to earn a decent living. Greece, which went through a financial crisis in 2009, certainly fits the bill as a country where good-paying jobs are hard to come by. The country’s annual unemployment rate as of last year was more than 26%, the worst of any country in the OECD. The country’s part-time workers were much more likely to be unemployed because they had no other options. Moreover, 46.6% of the country’s part-time workers would have preferred a full-time job but could not find one. This was much higher than the 15% across the OECD.

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9. Japan
> Gini index – post tax & transfer: 0.336
> Social spending, pct. of GDP: N/A
> Chg. in Gini after tax & transfer: 0.153 (11th smallest)
> Poverty rate: 16.0% (6th highest)

In every country in the OECD, income inequality was mitigated somewhat by the country’s taxes and transfers, which include welfare and other forms of social assistance. In Japan, the country’s Gini index score fell from 0.488 before taxes and transfers to 0.336 after the fact. A college education often ensures a higher income, and so it might make sense that a well-educated population would be less likely to have high income disparity. Japan is at least one case where this is not the case, as nearly half of the country’s 25-64 year olds had the equivalent of a college degree, the third-highest proportion in the OECD.

8. Portugal
> Gini index – post tax & transfer: 0.341
> Social spending, pct. of GDP: 25.2% (10th highest)
> Chg. in Gini after tax & transfer: 0.196 (11th largest)
> Poverty rate: 11.9% (12th highest)

Spending on social programs such as welfare, housing, and unemployment insurance can have an impact on income inequality, but in the case of Portugal this is clearly not sufficient. Just over 25% of the country’s GDP was spent on social programs compared to an OECD average of 21.6%. The country is one of a handful of European nations that have been mired in economic struggles for years, even receiving a bailout in 2011 from the European Union and the IMF. Portugal had the third-highest unemployment rate in the OECD, with 13.8% of the workforce looking for work and unable to find it. Not surprisingly, the country also had one of the highest rates of residents working part time because they felt they had no other alternative.

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