AS per a new UN Report, Governments should use fiscal and labour market policies to reduce income inequality. It has noted that this not only leads to social benefits but will spur economic growth and development.

Produced by the UN Conference on Trade and Development (UNCTAD), the 'Trade and Development Report 2012' says that recent experience, especially in Latin America and other developing countries, suggests that progressive taxation and rising public spending can strongly contribute to the process of inclusive growth.

The report adds that this approach would reduce income inequality while also providing the prospect of expanding demand that is needed for firms to increase investment.

Trends over the last 30 years show income inequality increasing both within countries and between them, UNCTAD says in a news release. The share of wages in total income has fallen in most developed and in many developing countries, including by five percentage points or more in Australia, the United Kingdom and the United States, and by 10 percentage points or more in France, Germany and Ireland.

In several countries, the richest one per cent of the population now accounts for 10 to 20 per cent of national wealth. The report notes, however, that governments can use fiscal and labour market policies to reduce income inequality.

More even income distribution also pays off over the long term, it contends, because high inequality deprives many people of access to education and credit, and prevents the expansion of domestic markets. Over years and decades, that amounts to an enormous waste of a country’s economic potential..