OECD: The wealth gap has made the UK 20% poorer

The gap between the UK’s richest and poorest citizens has widened since the 1980s and continues to do so.

While politicians have often talked about a link between inequality and GDP, there hasn’t been much evidence.

However, the Organisation for Economic Cooperation and Development, known as the OECD, has released a report showing evidence that the lack of wealth equality has massively harmed the UK.

The economy would be 20% bigger if the gap between rich and poor had not widened since the 1980s.

In the report, the OECD said the richest 10% of people earned 9.5 times more than the poorest 10% of the population. In the 1980s, this figure was seven times.

As a result of this, growth was much slower.

The report said: “Income inequality has a sizeable and statistically negative impact on growth, and that redistributive policies achieving greater equality in disposable income has no adverse growth consequences.

“Moreover, it [the data collected from the thinktank’s 34 rich country members] suggests it is inequality at the bottom of the distribution that hampers growth.”

Between 1990 and 2000, the UK lost 9% of growth due to the wealth gap – meaning, while the economy expanded 40% in this time, we could have achieved nearly 50% growth.

But it’s not just the UK – other countries have suffered the same problem. Mexico and New Zealand have lost more than 10%, Finland and Norway 9% and the US, Italy and Sweden between 6% and 7%.

Angel Gurría, the OECD’s secretary general, said: “This compelling evidence proves that addressing high and growing inequality is critical to promote strong and sustained growth and needs to be at the centre of the policy debate. Countries that promote equal opportunity for all from an early age are those that will grow and prosper.”

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