Income Distribution and Poverty in the OECD Area: Trends and Driving Forces

Abstract

This article uses internationally-comparable data on the distribution of income across households to identify some well-founded facts to replace the conjecture and supposition which too often dominate discussions on inequality and poverty. There has been a general trend in nearly all OECD countries towards increased market income (earnings and income from capital) inequality between the mid-1970s and the mid-1990s. However, in a significant minority of countries this has not resulted in higher levels of inequality because either the amounts distributed through the tax and transfer system have increased, or because it has become more progressive. Changes in income distribution in the past ten years generally favoured the prime-age and elderly age groups, particularly those around retirement age. Relative income levels of single parents are very low and have worsened in a number of countries. Trends in earned income, and in particular trends in employment, are found to be crucial in explaining these changes.