Rising tide not lifting all ships, OECD warns in report on cost of growing income inequality

Vendors browse their smartphones as they wait for customer at their store selling Chinese made souvenirs at the Wangfujing shopping district in Beijing, China Thursday, May 21, 2015. Manufacturing in China shrank for the third straight month in May as demand remained soft, raising the chances of more stimulus to prop up growth in the world's No. 2 economy. (AP Photo/Andy Wong) (The Associated Press)

PARIS – The widening gap between haves and have-nots in much of the developed world not only raises concerns about the fraying social fabric — it's also dramatically holding back economic growth, according to a study by the Organization for Economic Cooperation and Development.

Far from a rising tide lifting all ships, the report released Thursday finds that income inequality rises in good economic times as well as bad. The OECD says that raises social and political questions in addition to economic ones.

The report, "In It Together, Why Less Inequality Benefits All", says the rise in income inequality between 1985 and 2005 knocked 4.7 percentage points off cumulative growth between 1990 and 2010 on average across a range of its 34 member countries.