Trends and Driving Factors in Income Distribution and Poverty in the OECD Area
OECD Labour Market and Social Policy Occasional Paper No. 42
168 Pages Posted: 20 Oct 2000
Date Written: August 2000
This paper summarizes trends and driving factors in income distribution and poverty in 21 OECD Member countries analysing separately the working- and the retirement-age populations. There has been no generalized long-term trend in the distribution of disposable household incomes since the mid-1970s. However, during the more recent period since the mid-1980s, income inequality has increased in about half of the countries studied, while none of the remaining countries recorded an unambiguous decrease in inequality. Gross earnings and other market income were main contributors to widening inequality at the household level, through channels of increased dispersion and employment polarization. This increase in market income inequality was not, or not entirely, translated into higher inequality of disposable incomes for the working-age population, as both transfers and taxes off-set the effects of earnings and capital/self-employment income on the distribution. In most countries, the redistributive impact of the tax-transfer system increased. Public transfers played an important role in the redistribution of incomes to lower-income segments, in particular among the working-age population. The shares of family and other benefits going to lower incomes among the working-age population grew in a great majority of countries, and the part of these transfers in the incomes of poorer working-age adults increased in all countries. With a few exceptions, relative poverty rates remained broadly stable over the last ten years, while poverty based on constant income thresholds fell in most countries in which real incomes increased. Most OECD countries experienced a change in the structure of poverty: over the last ten to 20 years a poverty population which was disproportionately elderly changed to one which is more weighted towards younger households with children. Joblessness is a key factor in explaining why poverty often increased for groups at risk. The effectiveness of tax/transfer systems in alleviating poverty among the working-age population had risen in a majority of OECD Member countries.
JEL Classification: I3, D31, D63, H23
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