The means for overcoming income inequality are well known - these are fiscal instruments

6 may 2016 | Rossiyskaya Gazeta

In Russia it has become a norm for top managers to get paid six times as much as the rank and file employee. Rossiyskaya Gazeta correspondents have looked into the causes of this newly emerged income inequality and asked experts about what the state can do to change the situation.

Vladimir Trubin
Vladimir Trubin
Department for Social Policy

"Income inequality stems for the most part from the simple fact that people doing different jobs get very different pay and it is a fundamental problem in a broad variety of countries around the world. One of the measures of income inequality is the so-called R/P 10 ratio," explained Vladimir Trubin, an expert with the Department for Social Policy of the Analytical Center The ratio shows the amount by which the average income of the richest 10% of the population exceeds the income of the poorest 10% of the population. In OECD states, mostly developed countries, this ratio is 9 while in Russia it is 16 or almost twice as large, the expert pointed out in an interview with the Rossiyskaya Gazeta correspondent.

"The optimal ratio is a political rather than philosophical or economic question," Mr. Trubin believes, "countries that prioritize social justice try to minimize income inequality while other countries do not really care about it. As a result countries such as Denmark, Belgium, the Scandinavian countries, Germany, the Czech Republic, Slovakia and Slovenia have an R/P 10 index in the range of between 6 and 7 while the US’s R/P 10 index is 17.9, which is even higher than in Russia."

The means for reducing income inequality are well known, and I am not talking about direct government regulation here but fiscal instruments: personal income tax, corporate income tax, tax on property and inheritance, tax exemptions and the like, the expert believes.