Rising Income Inequality and Living Standards in OECD Countries: How Does the Middle Fare?

This paper uses data from the key comparative sources available for the rich countries to examine how both real median incomes and income inequality have evolved from around 1980 through the Great Recession. There are striking differences across OECD countries in average real median income growth. Some increase in overall inequality has been common, but with wide variation in extent and timing. Top (pretax) income shares have generally been rising, but not always consistently with overall inequality from household surveys. A significant negative association between changes in Gini and median income is found across countries over time, and a significant negative relationship with changes in top shares only when controlling for economic growth. Economic growth and inequality trends together leave much of the variation in median incomes unaccounted for, so direct measures of how these incomes are evolving need to be central to monitoring progress towards inclusive growth.