THE OECD in a recent survey has said that countries should fight rising inequality with policies that simultaneously curb the income gap between rich and poor while boosting economic growth.A recent OECD research suggests how labor market reforms, tax and transfer systems and high-quality education can yield a double dividend: boosting GDP while reducing income inequality. As the economic crisis is forcing cash-strapped governments to re-think tax and benefit systems, the OECD says that the reform process should be seen as an opportunity to address inequality and growth issues simultaneously.

A priority should be the reduction or elimination of tax breaks that primarily benefit the well-off, which would create space for growth-friendly reductions in marginal tax rates for all taxpayers according to the OECD.Reducing the existing gap in employment protection between temporary workers and those on permanent contracts would reduce the average 25% wage differential between these two types of employees while boosting employment and growth, the OECD said. Provision of more affordable child care will similarly improve labour force participation rates and incomes for women.Improving educational outcomes, particularly for immigrants and socio-economically disadvantaged populations, will have long-term impacts on their employment opportunities, incomes and inequality.