Special Report

Countries With the Widest Gap Between the Rich and the Poor

Michael B. Sauter

4. United States
> Gini index – post tax & transfer: 0.389
> Social spending, pct. of GDP: 19.2% (10th lowest)
> Chg. in Gini after tax & transfer: 0.118 (6th smallest)
> Poverty rate: 17.4% (5th highest)

The United States once again ranks as one of the least equal developed nation in the world. It is also very unusual as a less equal nation. The United States is one of the wealthiest countries in the world with a GDP per capita of close to $55,000, fourth highest in the OECD. In fact, of the 16 nations with the highest per capita income in the OECD, the United States is the only one among the worst nations for income inequality. The United states had the fourth largest proportion of adults with a college degree. Having more college graduates might have helped reduce inequality in the country.

ALSO READ: The 10 Richest Towns in America

3. Turkey
> Gini index – post tax & transfer: 0.412
> Social spending, pct. of GDP: 12.5% (3rd lowest)
> Chg. in Gini after tax & transfer: 0.062 (3rd smallest)
> Poverty rate: 19.2% (3rd highest)

Turkey is one of poorest countries in the OECD with a GDP per capita of $18,993, second lowest among nations considered. It also had the third highest poverty rate in the OECD with 19.2% of its residents living below the poverty line. Turkey is another nation in which taxation and redistribution system does not reduce income inequality nearly as much as in most OECD nations. The country’s income inequality was 18th worst in the OECD before taxes and transfers and third worst after.

2. Mexico
> Gini index – post tax & transfer: 0.482
> Social spending, pct. of GDP: N/A
> Chg. in Gini after tax & transfer: N/A
> Poverty rate: 21.4% (the highest)

Less wealth per capita does not guarantee higher income inequality, but most of the OECD nations with the worst income inequality had less robust economies. This includes Mexico, which had a GDP per capita of just $17,880, the lowest among the nations considered and less than a third of the U.S. figure. Lower unemployment might be expected to maintain more equal salaries, but that does not appear to have made a big difference in Mexico. The country had an extremely low unemployment rate of just 4.8%, fourth lowest in the OECD. Given the high rate of income inequality in the country, it is not surprising that Mexico had the highest poverty rate of any OECD country at 21.4% of its population.

ALSO READ: States Where Incomes Are Booming

1. Chile
> Gini index – post tax & transfer: 0.503
> Social spending, pct. of GDP: 10% (the lowest)
> Chg. in Gini after tax & transfer: 0.029 (the smallest)
> Poverty rate: 17.8% (4th highest)

Chile is the only nation in the OECD with a Gini index score after taxes and transfers higher than 0.5. This is so severe it actually surpasses the OECD average Gini score before taxes and transfers. While it is no guarantee, spending on social assistance programs can have an impact on inequality. In Chile, that was not a factor, as the country spent just 10% of its annual GDP on social programs, lower than any other developed nation and less than half the OECD average. Chile also had a poverty rate of 17.8%, fourth worst in the OECD.