Income inequality: Rich and poor, growing apart | The Economist - 0 views
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THINK income inequality growth is primarily an American phenomenon? Think again:American society is more unequal than those in most other OECD countries, and growth in inequality there has been relatively large. But with very few exceptions, the rich have done better over the past 30 years, even in highly egalitarian places like Scandinavia.
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Over the past decades, OECD countries have undergone significant structural changes resulting from their closer integration into a global economy and rapid technological progress. These changes have brought higher rewards for high-skilled workers and thus affected the way earnings from work are distributed. The skills gap in earnings reflects several factors. First, a rapid rise in trade and financial markets integration has generated a relative shift in labour demand in favour of high-skilled workers at the expense of low-skilled labour. Second, technical progress has shifted production technologies in both industries and services in favour of skilled labour...Finally, during the past two decades most OECD countries carried out regulatory reforms to strengthen competition in the markets for goods and services and associated reforms that aimed at making labour markets more adaptable. For instance, anti-competitive product-market regulations were reduced significantly in all countries. Employment protection legislation for workers with temporary contracts also became more lenient in many countries. Minimum wages, relative to average wages, have also declined in a number of countries since the 1980s. Wage-setting mechanisms have also changed; the share of union members among workers has fallen across most countries, although the coverage of collective bargaining has generally remained rather stable over time. In a number of countries, unemployment benefit replacement rates fell, and in an attempt to promote employment among low-skilled workers, taxes on labour for low-income workers were also reduced.
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It's tempting to look at this list of regulatory changes and argue that it was these rule changes which facilitated growth in inequality. That may be true to some extent, but the unverisality of the reform experience makes me think it's at least as likely that underlying trends (like globalisation and technological change) made the prevailing rules unsustainable.
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