World-Class Inequality

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One of the persistent issues of the 2016 U.S. Presidential campaign was the wide (and growing) divide between the “haves” and the “have-nots”—variously expressed as a rising sentiment against the “one-percenters,” or as laments against the “hollowing out of the middle class.”

Is the U.S. any more unequal than other countries?  A report from the Organization for Economic Co-operation and Development (OECD) suggests that it is.  Looking at all developed nations, OECD researchers found that the average “score” of inequality, from 0-1, was right around 0.318 (see graphic), with higher scores indicating a bigger gap between the wealthiest citizens and the average working person.  (A “0” score would indicate that everybody enjoys exactly the same income, while a “1” score would mean that one person took home all the income.)  America, home to Wall Street and its multi-million-dollar bonuses, came in with the third-highest income inequality, behind only Chile and Mexico, and far more unequal than the world’s most egalitarian societies in Scandinavia: Iceland, Norway, Denmark and Finland.  (Turkey came in at a virtual tie with the U.S.)

What does that mean?  Traditionally, societies with greater inequality tend to be less socially stable, to the point where international economists monitor the discrepancy between rich and average citizens to determine which nations are in danger of experiencing a revolution among the masses.  Consider the most recent election a form of revolution, which may have failed, considering the number of Wall Streeters and wealthy corporate titans who are already preparing to take office in President-Elect Trump’s Washington cabinet.

About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years.  Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.

Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association. 

Source:

http://www.oecd.org/social/OECD2016-Income-Inequality-Update.pdf

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