Special Report

Countries With the Widest Gap Between the Rich and the Poor

Michael B. Sauter

7. Spain
> Gini index – post tax & transfer: 0.344
> Social spending, pct. of GDP: 26.8% (8th highest)
> Chg. in Gini after tax & transfer: 0.176 (15th largest)
> Poverty rate: 15.1% (8th highest)

Arguably even more than Portugal, Spain has dealt with severe financial and economic struggles as a result of the global financial crisis. Spain’s ongoing economic depression has coincided with an abysmal job market. The country’s unemployment rate was just shy of 25%. Further, nearly 10% of those who were able to find jobs in Spain have been forced to take part-time work because they could not find other employment. It is the highest rate in the OECD and nearly four times the average rate. While the employment issues may have had an impact on Spain’s income inequality, low educational attainment rates among its adult population may also be a factor. More than 44% of Spain’s 25-64 year olds had not achieved more than a high school degree.

6. United Kingdom
> Gini index – post tax & transfer: 0.344
> Social spending, pct. of GDP: 21.7% (16th lowest)
> Chg. in Gini after tax & transfer: 0.181 (12th largest)
> Poverty rate: 9.5% (13th lowest)

Before taxes and transfers, the United Kingdom had a Gini index score of 0.525, which was fifth in the OECD. After taxes and transders, the score fell to 0.344, which was sixth among the countries considered. Like many of the nations with high income inequality, the UK has a relatively large economy with a GDP of $2.5 trillion as of 2014, the fifth highest in the OECD. However, the country’s GDP per capita of $39,510 was 17th highest. The country was also among the nations with the highest proportion of workers in part-time jobs because they were unable to find full-time work.

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5. Israel
> Gini index – post tax & transfer: 0.377
> Social spending, pct. of GDP: 15.5% (4th lowest)
> Chg. in Gini after tax & transfer: 0.103 (5th smallest)
> Poverty rate: 20.9% (2nd highest)

Even in countries with more conservative structures, taxes and transfers usually mitigate income inequality somewhat. In Israel, the Gini score fell from 0.481 to 0.377. However, they did not have nearly as much of an equaling effect as in other countries. In fact, the country ranked 16th-least equal before taxes and transfers and fifth-least equal after taxes and transfers. Income inequality means poverty rates are certain to be higher, and that appears to be true in Israel as well. More than 20% of the country’s population lived below the poverty line, the second worst rate in the OECD. Higher educational achievement may help reduce the country’s income inequality. Just 15% of the country’s 25-64 year olds had failed to achieve at least the equivalent of a high school diploma, compared to an average 23.46% across the OECD.