Oxfam didn’t pluck these 10 and 40 percent numbers out of thin air. In nation after nation, researchers have shown over recent years, substantial shifts in income seem to be largely taking place only within the ranks of society’s most affluent 10 and poorest 40 percents.
The income share of people who make less than the most affluent 10 and more than the poorest 40 percent, analysts have found, tends to remain stable.
Gabriel Palma, a Chilean economist now at Cambridge, has led the way on this research. Out of his work has come a tool — the “Palma ratio” — for tracking and comparing inequality rates at the national level. This simple-to-understand Palma ratio expresses a nation’s inequality as the relationship between its top 10 and bottom 40.
In a society with a Palma ratio of 3, the top 10 percent would be grabbing three times the income share of the bottom 40 percent.
Norway, one of the world’s most equal nations, currently sports a Palma ratio of 0.9, the UN Human Development Report calculates. Norway’s most affluent 10 percent is taking a smaller share of Norwegian income than Norway’s poorest 40 percent. In Japan, another relatively equal nation, the Palma ratio runs 1.2.
In the United States, by contrast, the top 10 percent is collecting twice as large a share of national income as the bottom 40 percent. In South Africa, the top decile of the population is taking an astonishing seven times the income share of the bottom 40.
Economists like Nobel laureate Joseph Stiglitz want to see the United Nations set a goal that encourages all nations to reach — by the year 2030 — a Palma ratio of just 1. The new Oxfam inequality report just may help bring that needed goal more than a little bit closer.
Sam Pizzigati co-edits Inequality.org. Among his books on maldistributed income and wealth: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. His latest book, The Case for a Maximum Wage, will appear this spring. Follow him at @Too_Much_Online.