The Unequal State of America: Why America is more unequal than most

INDIANAPOLIS Thu Dec 20, 2012 7:06am EST

INDIANAPOLIS (Reuters) - Some rich countries are more unequal than others - and the United States more so than most.

America has a higher degree of income inequality than almost any other developed country. Only three of the 34 members of the Organization for Economic Cooperation and Development rank higher - Chile, Mexico and Turkey.

So why is the U.S. so much more unequal than its peers? The U.S. Congressional Research Service cited several potential reasons in a report earlier this year.

One is that most other rich countries spend a bigger share of their national output on social programs, which tend to lessen income inequality. In Germany, public social spending accounted for 27.8 percent of gross domestic product in 2009, compared with 19.2 percent in the United States, according to the OECD.

A second factor is tax systems. A 2012 study by economists at the OECD found that, in general, the more a country spends on social programs, and the more progressive its tax-and-transfer system is, the more it can reduce income inequality. The U.S. is less effective at reducing inequality through taxes and benefits than the OECD average; German policies have cut inequality more than the average.

Australia spends less than the OECD average on social programs - but has been more effective than average in reducing inequality. Economists say this may be because Australia targets its programs more squarely at low-income families.

A third potential reason is the way earnings are divided. Michael Forster of the OECD suggests inequality in English-speaking countries may be higher because Anglophone corporate executives have more options of places to work than do, say, German speakers, and so they can demand higher pay.

Attitudes toward the poor may make a difference, some researchers say. A 2008 OECD study found that respondents in the United States and Korea were far more likely to say poor people were poor because they are lazy than did respondents in Nordic and Continental European countries.

That speaks to a common belief among Americans that anyone who works hard enough can become rich. As John Steinbeck once wrote, in America, "the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires."

Recent studies, however, have shown that Americans are now less likely to move into a class above their parents than are people in other rich countries.

(Reporting by Kristina Cooke; Edited by Michael Williams)

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Comments (33)
Dragos111 wrote:
Income inequality may exist, but it is not for a lack of our government trying social programs. In the last 40 years we have thrown trillions of dollars at welfare, housing for the poor, job quotas, etc. The more money you throw at it, the more poor you get.

It is time to reward excellence, not medocrity. Throw the money at the people who are trying to get ahead. Make getting ahead pay. Don’t just pay people to be poor.

Dec 20, 2012 8:32am EST  --  Report as abuse
EthicsIntl wrote:
We’ve all known this for some time and it doesn’t seem to bother anyone.

What’s next ? Who is going to do something about it ?
The fox is in the coop already.

Surely nothing is going to be achieved through our iPhone, iPad, iMe, iYou, iTunes, iSu_k, iFacebook, iTweeter, iNBA, iNFL, iHollywood, or iOpraWinfrey.

Everyone is isolated into their own fantasy world while we are all imperceptibly sinking into oblivion.

We are getting awfully close in becoming a third world country, and we deserve it.

Dec 20, 2012 9:33am EST  --  Report as abuse
lawgone wrote:
So basically the article is saying that other countries dump more money in national social programs that cater to lower income earners. They tax more, and, in turn, shift the money to programs for lower income people. This sounds more like redistribution of wealth. It just gives the illusion that people are better off in these other countries. What it amounts to is giving other peoples money to these programs so they can say there is a smaller gap in income. In reality this is called a false positive.

Dec 20, 2012 9:52am EST  --  Report as abuse
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