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Rising income inequalities

Oct 16, 2008

ILO’s latest study World of Work Report 2008 finds the income gap between rich and poor households has widened significantly over the years. To boost employment and improve income distribution, the report emphasises a linkage between economic, labour and social policies.

World of Work Report 2008 - Income Inequality in the Age of Financial Globalization

Publisher: International Institute for Labour Studies, ILO, 2008

The study analyses the latest trends in income inequality, and its underlying factors, including financial globalisation, decent work deficits and the weakening role of redistribution policies.

Despite strong economic growth that created millions of new jobs since the early 1990s, income inequality grew dramatically in most regions of the world and is expected to increase due to the current global financial crisis.

The report also notes that a major share of the cost of the financial and economic crisis will be borne by hundreds of millions of people who haven’t shared in the benefits of recent growth.

“Rising income inequality represents a danger to the social fabric as well as economic efficiency when it becomes excessive,” it adds.

The report marks the most comprehensive study to date of global income inequalities by the Institute, and examined wages and growth in more than 70 developed and developing countries.

It calls for longer term action to put the global economy on a more balanced track, including promotion of the ILO’s Decent Work Agenda to link economic, labour and social policies to boost employment and improve incomes and income distribution.

Among its other conclusions, the report says:

  • Employment growth has also occurred alongside a redistribution of income away from labour. The largest decline in the share of wages in GDP took place in Latin America and the Caribbean (-13 percentage points), followed by Asia and the Pacific (-10 percentage points) and the Advanced Economies (-9 percentage points).
  • In countries with unregulated financial innovation, workers and their families became increasingly indebted in order to fund housing investment and consumption
  • The gap in income inequality is also widening – at an increasing pace – between top executives and the average employee. For example, in the United States in 2007, the CEOs of the 15 largest companies earned 520 times more than the average worker
  • Excessive income inequalities could be associated with higher crime rates, lower life-expectancy, and in the case of the poor countries malnutrition and an increased likelihood of children being taken out of school in order to work
Source : ILO
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