Fiscal austerity measures worsen income inequality, hitting low-income workers hardest.
The study looked at how government budget cuts after the 2007-09 recession affected income inequality. They found that cutting spending can make inequality worse, especially by increasing unemployment. However, using progressive taxes and targeted social benefits can help offset these negative effects. By investing in education and training for lower- and middle-income workers, fiscal policy can also improve long-term trends in both inequality and economic growth.