Detailed Findings & Methodology:
Among OECD countries, income inequality ranges from Iceland’s Gini coefficient of 0.25 to South Africa’s score of 0.62. The United States’ Gini coefficient of 0.39 is the ninth highest — the ninth worst income inequality — among the 42 OECD members and affiliates.
The countries with the worst income inequality are also often poor. The eight countries with the highest Gini coefficients also have the eight lowest GDPs per capita among the OECD member and affiliate states considered.
However, a high degree of income inequality is not exclusively an attribute of poor countries. The United States is one of the wealthiest countries in the world with a GDP per capita of $54,198 and an economy that accounts for over 15% of global output. Still, the United States ranks among the 10 countries with the worst income inequality.
The causes of income inequality extend beyond just salaries and wages. Often, governments will invest in social programs that provide assistance to citizens who are struggling financially — effectively redistributing resources. How much a given government invests in such programs also can have a meaningful impact on income inequality.
The countries on this list are ranked by their Gini coefficient after taxes and transfers. In almost every OECD member and partner state, the Gini coefficient is considerably lower after government taxes and transfers are factored in. However, in the countries with the highest income inequality, tax policy is often less progressive, meaning changes in income inequality after taxes are often less drastic.
For example, Costa Rica’s pre-tax Gini coefficient of 0.48 falls close to the middle of OECD member states and partners. After taxes and transfers, the country’s Gini coefficient improves negligibly. As a result, Costa Rica has the fourth worst income inequality of any country considered.
Because government policy can have a considerable impact on income inequality, government corruption can too. Waste, fraud, and abuse among institutions and policymakers can be common in nations with high income inequality. Some countries with high Gini coefficients, like Mexico and Russia, are also among the most corrupt in the world, based on the perceptions of their citizens.
Distributing tax dollars to needy citizens and thereby reducing income inequality is predicated upon having a strong tax base, and many countries struggling with high income inequality also have high unemployment and low labor force participation rates, leaving governments with little in the way of resources for social spending.
Three countries on this list — including South Africa, the country with the worst income inequality — have double digit unemployment rates. Many also have low labor force participation. in four countries on this list, less than 60% of the population 15 and older is either employed or looking for a job.
To determine the countries with the most uneven distribution of income, 24/7 Wall St. reviewed post-tax and transfer Gini coefficients published by the Organization for Economic Cooperation and Development. We also considered data on GDP at purchasing power parity, poverty rate, unemployment, GDP per capita, as well as social spending (which the OECD defines as “cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes”), all from the OECD. All figures are for the most recently available year. All ranks are out of the OECD member and affiliated states with data available.