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Symposium 2014

Proposal - Complex solution for a complex challenge: education - employment - taxation

The Challenge

Inequality is rising in most parts of the world, irrespective of whether one looks at it in terms of annual income, in terms of wealth (i.e. of accumulated capital and other assets) or in terms of o ...

Inequality is rising in most parts of the world, irrespective of whether one looks at it in terms of annual income, in terms of wealth (i.e. of accumulated capital and other assets) or in terms of opportunity. In most high-income countries, the share of national income earned by households at the top of the income distribution has soared since the past decades (from the 1980s onward). As the World Top Incomes Database shows, the income share of the richest households continued to climb during and after the crisis of the past few years. In 2012, the income of the top 1% of households accounted for 22.5% of total income; the highest figure since 1928. One explanation is that globalization expands the market for a small group of people with sought-after talent, but competes away the income of ordinary employees. In turn, the competition among countries for skilled individuals constrains the ability of governments to maintain high tax rates on the wealthy.

Rising inequality is a hugely complex phenomenon. Technological revolutions play an important role, but so do also globalization and international tax competition. So, there is no easy fix. But there are remedies at hand which can make a difference: Improving educational systems and efficiency of labour markets to drastically reduce the number of (especially young) people with no or just precarious employment. Rising the number of high quality jobs in a knowledge based economy in which services and manufacturing are well balanced. And finally: avoiding tax regimes, not at least by means of more international coordination, that encourage or even enforce inequalities.