OECD: Wealth redistribution should focus on families with children

January 4, 2015

The Organization for Economic Cooperation and Security has issued a report on growing levels of income inequality and its impact on the world’s economies.  The main conclusions of the report are the following:

  • The gap between rich and poor is now at its highest level in 30 years in most OECD countries.
  • This long-term trend increase in income inequality has curbed economic growth significantly.
  • While the overall increase in income inequality is also driven by the very rich 1% pulling away, what matters most for growth are families with lower incomes slipping behind.
  • This negative effect of inequality on growth is determined not just by the poorest income decile but actually by the bottom 40% of income earners.
  • This is because inter alia people from disadvantaged social backgrounds underinvest in their education.
  • Tackling inequality through tax and transfer policies does not harm growth, provided these policies are well designed and implemented.
  • In particular, redistribution efforts should focus on families with children and youth, as this is where key decisions on human capital investment are made and should promote skills development and learning across people’s lives.