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Countries with the widest gap between the rich and the poor

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Among all countries studied, Mexico has the lowest amount of public social expenditure as a percentage of GDP.

By Michael B. Sauter and Charles B. Stockdale, 24/7 Wall St.

The widening gap between the rich and poor is not just an American problem. According to a new study by the Organization for Economic Co-operation and Development, income inequality in most economically developed countries is the worst it has been in nearly 25 years. 24/7 Wall St. reviewed the OECD’s report and identified the 10 countries with the worst income inequality.

“In OECD countries today, the average income of the richest ten percent of the population is about nine times that of the poorest 10 percent,” the study reports. And in many of these countries, income inequality is increasing as more and more wealth is concentrated in the hands of the rich.

In some countries the gap is even more pronounced. The income of the bottom 10 percent of earners has actually declined while the income of the top 10 percent has increased. In Israel, Turkey and the United States, the average income of the top 10 percent is 14 to one compared to the bottom 10 percent. In Mexico and Chile, it is an astounding 27-to-one.

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In many of the countries with the greatest levels of income inequality, there is also very limited public social expenditure. Seven of the 10 countries on this list spend below the OECD average — as a percentage of GDPon social benefits.  For example, the share of unemployed who receive benefits in both Chile and Turkey are less than half the OECD average. Mexico has no unemployment insurance at all.

The 10 countries on this list are ranked by their levels of income inequality using the Gini coefficient, where zero represents perfectly equal distribution and one represents maximum inequality. Also included are the change in income inequality from the mid-1980s, employment rates and the change in income for the rich and poor. While inequality has worsened in most countries, the situation has improved in some. Even in these countries, however, inequality remains at historically high levels.

1. Chile

  •  Gini coefficient: 0.494
  •  Change in income inequality: n/a
  •  Employment rate: 59.3 percent (4th lowest)
  •  Change in income of the rich: +1.2 percent per year
  •  Change in income of the poor: +2.4 percent per year

Chile is one of the few countries where the income of the poor increased at a higher annual rate than the income of the wealthy, 2.4 percent to 1.2 percent. Nevertheless, the South American nation has the worst income inequality among the 27 OECD nations examined. Chile has a particularly high rate of self-employed individuals, primarily because of its large farming class. The income ratio of the top 10 percent to the bottom 10 percent is 27-to-one.

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2. Mexico

  •  Gini coefficient: 0.476
  •  Change in income inequality: +5.1 percent
  •  Employment rate: 60.4 percent (8th lowest)
  •  Change in income of the rich: +1.7 percent per year
  •  Change in income of the poor: +0.8 percent per year

Mexico has one of the highest rates of income inequality. Among all OECD countries, Mexico has the lowest amount of public social expenditure as a percentage of GDP. It also has the lowest unemployment benefit recipient rates. Finally, the country has the lowest minimum wages as a percentage of average wages.

3. Turkey

  •  Gini coefficient: 0.409
  •  Change in income inequality: -5.8 percent
  •  Employment rate: 46.3 percent (the lowest)
  •  Change in income of the rich: +0.1 percent per year
  •  Change in income of the poor: +0.8 percent per year

Turkey was one of the few OECD countries to experience a narrowing of the gap between rich and poor, with income inequality improving 5.8 percent between 1985 and 2008. However, it still has the third-highest income inequality among the countries in this study. Part of Turkey’s problem is a relatively low number of government programs to aid the poorest citizens. The average government social expenditure among OECD nations is close to twenty percent of GDP, while it spends just above ten percent the third-lowest percentage. The wealthiest ten percent of Turkey’s residents make 14 times more, on average, than the poorest ten percent.

Read the complete list of 24/7 Wall St.'s Countries with the widest gap between rich and poor, including where the U.S. ranks.