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Earnings inequality increases significantly in India: OECD

business Updated: Dec 05, 2011 21:44 IST

India has become "less equal over time" and earnings inequality in the country has increased significantly since the early 1990s, Paris-based think tank Organisation for Economic Cooperation and Development (OECD) said on Monday.

The observations are a part of OECD's report focusing on inequality patterns and related policy challenges in the emerging economies of India, China, Argentina, Brazil, Indonesia, Russia and South Africa.

The Organisation for Economic Cooperation and Development (OECD) is a 34-member grouping of mostly advanced nations, that together account for over 60% of global output.

"Brazil, Indonesia and, on some indicators, Argentina have recorded significant progress in reducing inequality over the past 20 years. By contrast, China, India, the Russian Federation and South Africa have all become less equal over time...," OECD said.

India is one country that has experienced "significant" increase inequality over time, where the ratio between the top and the bottom deciles of the wage distribution has doubled since the early 1990s.

"The main driver has been an increase in wage inequality between regular wage earners –- i.e. contractual employees hired over a period of time," the think tank pointed out.

However, OECD noted that inequality in the casual wage sector –- workers employed on a day-to-day basis –- has remained more stable.

Going by the report, India has the highest headcount poverty rate of the seven countries – with about 42% of its population still living on less than USD 1.25 per day.

"During the two decades to 2008, the fall in the extent of absolute poverty was particularly dramatic for Brazil, China and Indonesia, while India and South Africa recorded more modest reductions," the report said.

Further, OECD noted that bringing down inequality as well as promoting better jobs in these nations would require a multi-pronged approach including better incentives for more formal employment and preparation to finance higher social spending in the future.

In the OECD region, the report said the gap between rich and poor in member nations has reached its highest level for over 30 years.

"... the average income of the richest 10 per cent is now about nine times that of the poorest 10% across the OECD," it added.

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