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An increase in part-time and temporary jobs is a driving factor in increased inequality. Photo:
While Denmark is certainly not immune to rising income inequality – the gap between the nation’s rich and poor is growing at a faster rate than all but just two European nations – the country has the lowest rate of inequality in a newly-released Organization for Economic Co-operation and Development (OECD) study.
Denmark’s 0.25 Gini coefficient is well below the OECD average and the best among the 34-country group.
In most of the OECD countries the income gap is at its highest level in three decades, with the richest ten percent of the population earning 9.6 times the income of the poorest ten percent. That ratio was at seven to one in the 1980s.
In Denmark, the richest ten percent earn 5.2 times more than the poorest ten percent, the lowest ratio among all OECD nations.
The wealth gap is even larger, with the top one percent owning 18 percent and the bottom 40 percent only three percent of household wealth in 2012.
“We have reached a tipping point. Inequality in OECD countries is at its highest since records began,” said OECD Secretary-General Angel Gurria.
Despite performing the best among OECD nations, Denmark has its own one percent problem.
A recent analysis from the think-tank Cevea showed that the wealthiest one percent of Danes – about 46,000 individuals – own nearly one third of the country’s total wealth. As is the case across the OECD, the gap between Denmark’s rich and poor is increasing. Since 2002, the income of the wealthiest Danes has increased by nearly 30 percent while the poorest Danes have ten percent less wealth than they did 12 years ago.
As high inequality harms growth prospects, Gurria said there are economic as well as social arguments for governments to try to address the issue.
“By not addressing inequality, governments are cutting into the social fabric of their countries and hurting their long-term economic growth,” said Gurria.
The study found that the rise in inequality between 1985 and 2005 in 19 OECD countries knocked an estimated 4.7 percentage points off cumulative growth between 1990 and 2010.
An increase in part-time and temporary work contracts as well as self-employment was seen as an important driver of increased inequality, with half of all jobs created in OECD countries between 1995 and 2013 falling into these categories.
The report also found that as inequality rose, there were significant falls in educational attainment and skills among families in lower income groups, thus implying large amounts of wasted potential and lower social mobility.
The report found inequality to be highest in Chile, Mexico, Turkey, the United States and Israel among OECD countries.
After Denmark, the lowest inequality was in Slovenia, Slovak Republic and Norway.