Poverty and Income Inequality

Posted: January 5th, 2023

Poverty and Income Inequality

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Poverty and Income Inequality

Introduction

            The rise in inequality within developing nations as well as the emerging markets has become a global and widespread concern. In most cases, unequal wealth distribution and the respective lack of opportunities for all in advanced education among people leads to income inequality and poverty. Oxfam, in its 2019 report, states that only 0.8% of the world’s population have in their possession close to $1 million in excess of net worth. The above translates to 1% of the entire world’s population seizing control of 44.8% of the global wealth (Matthews, 2019). Contrary to popular belief, both poverty and income inequality have indeed reduced over the years. However, the concerns regarding concentration of wealth among a select few in income distribution is an ever-present issue. Whenever the wealthiest of a given population achieve more, the income gaps and poverty levels keep increasing at significant levels. According to the United Nation’s Sustainable Development Goals, only ten years have been left to meet the targets. The goals have been identified as drafts that can help nations build solid foundations for improvement of the world apart from dealing with the issue of income inequality and poverty. For countries to achieve the same there needs to be a clinical elimination of poverty through introduction of minimum wage. The respective governments have to create employment opportunities as well as educational chances for all. In instances where the private sector cannot produce adequate job opportunities or educational provisions, the governments need to take up the roles. Another means of dealing with the issue is through introduction of income tax. Poverty and income inequality are the scourges of modern world that require adequate and strategic solutions aimed at improving the life of every human.           

Discussion

Background

            Despite the existence of equality being an important value for all people across the world, a long history raising concerns on economic inequality has been to the fore. Poverty alleviation faces the greatest obstacle through income inequality. A United Nations (2020) report has delivered an intriguing finding that shows poverty and income inequality having significantly increased all over the world especially since 1990. Africa, Latin America, and the Caribbean have all witnessed major drops in income levels as per the Gini coefficient. Data collected between 1990 and the year 2015 has indicated that 46 out of 57 countries have registered increased levels of global wealth among the one percent individuals (United Nations, 2020). On the other hand, the bottom forty percent of individuals in 92 countries has also registered increases of earning less than 25% of the income. Such indicators paint a grim picture of the disparity and issues facing the world.

            The growth of income inequality in several countries is at an alarming rate as the economic inequality registers a less than relative decline. The reduction in most cases deals with the identification of issues as occurring through the effects of rapid economic growth of China as well as other emergent economies in Asia. However, despite such growth, there is an uneven distribution and glaring difference between the countries in the region. For example, in the US, the North Americans achieve an income level that is almost sixteen times greater than that of individuals living in Sub-Saharan Africa (Plecher, 2020). In contrast, the disparity witnessed among the one percent populations between the two regions increases at an exponential rate despite the wealth availability and distribution measures. Ideally, more and urgent action is required to settle the problems faced especially with growing populations and strain on available resources.

            Not everybody can get equivalent profit by Globalization. Imbalance is one of the serious issues of Globalization and as a rule level of society, which gets profits by Globalization, is relatively more modest as some part of populace is expands their pay quickly while others just will appreciate little upgrades or no improvement at all in their monetary condition. The above instance makes disparity in the public arena more profound. The gap between rich who get more extravagant and helpless who get more unfortunate achieves more traction. Imbalance is a reality and deteriorating. During the 1980s, the most extravagant 10% of the populations in OECD nations acquired multiple times more than the least fortunate 10% (Gindling, 2014). They presently procure almost multiple times more. At the point when you incorporate property and different types of abundance, the circumstance is much more dreadful: in the recent past, the most extravagant 10% controlled portion of all out family unit riches and the best off 1% held 18%, contrasted with just 3% for the least fortunate 40%.

            A substantial part of the crucial point of the disparity banter has been on the increasing salaries of the 1%. However, there is equally developing fear about the monetary circumstance of a massive wrap of low-workers – perhaps as much as the base 40% in particular nations – who have been falling behind. Not simply affluent nations are seeing developing gaps among rich and poor. While non-industrial nations have taken noteworthy steps in lessening neediness as of late, many have likewise seen an ascent in pay disparity. In Asia, pay imbalance has filled in some of the locale’s financial forces to be reckoned with, including China, Indonesia, and even India. In China, it rose by about 1.6% every year in the twenty years following 1990 (Gindling, 2014). It rose, as well, in sub-Saharan Africa however declined in numerous South American nations, despite the fact that it stays high by worldwide levels.

            Some may now inquire as to why rising pay disparity matters – has not there consistently been a gap among rich and poor? The facts demonstrate that, except for some roaming and agrarian gatherings, disparity evidences a compounded identifier as an apparatus of human social orders. For sure, some degree of imbalance exists as fundamental to make motivations for business visionaries to face challenges. Yet, there is developing worry over what happens when the gap among rich and poor becomes excessively wide and when financial development conveys benefits just to the well off. Proof progressively recommends that high disparity eases back monetary development and lessens social portability (Duncan & Peter, 2012). Numerous additionally dread that enlarging divisions undermine the soundness of our social orders and could keep down the advancement of agreement on gathering normal difficulties. In the years since the monetary emergency, these worries have entered the political and financial standard.

            The reasons for rising imbalance are unpredictable, yet remember the developing job of innovation for our economies and the effect of globalization. These elements additionally help to clarify a move in which gatherings advantage most from the economy, with the equilibrium moving from work to capital (Goldberg, 2013). Disparity in most cases occurs by friendly factors, for example, changes in marriage examples, and movements in the working environment – more individuals are presently working low maintenance and on transitory agreements and less are in associations. The state’s job has developed, as well, with an overall inclination towards less reallocation. Every one of these elements can clarify a large part of the general ascent in pay imbalance, however not really why the livelihoods of the top 1% have risen so pointedly. To get that, some extraordinary variables require addressing at the earliest chance.

            Financial experts have since quite a while ago guessed over the connection between development and imbalance, and the other way around. Today, there have all the earmarks of being expanding proof that unnecessary disparity is terrible for financial development. High disparity has different negatives as well, like bringing down friendly portability and, in training, lessening individuals’ chances to learn. Furthermore, there is much discussion over other social ills that have a linkage to imbalance, like higher paces of wrongdoing and weakness.

Solutions

            Despite the notable issues surrounding the growth of income inequality and poverty at a global scale, potential solutions are available and require usage to stem the tide. One of the readily available solutions that show identification is through a worldwide increase of the minimum wage. Such a step can ensure that even the low-wage employees benefit from any form of economic growth. Evidence that exists in most research and findings from developing nations backs the trend as employees become equipped with higher earnings as compared to before and it translates to their spending power (Holmes et al., 2013). Due to the differences between the rich and poor, income inequality becomes a major concern as a subsequent measure. Despite the United States having almost doubled the minimum wage within the last 50 years, the increases could have hit up to $20 as per the standard labor productivity growth from the year 1968. Therefore, the change is a possibility that require implementation elsewhere.

            Bridging the gap between the rich and poor is an integral step in dealing with the issues at hand. From identifying, that increase in minimum wage can improve the situation, alleviation of the sub-standard living conditions is achievable. All the low-income workers can change their conditions with the improved wages especially due to the availability of funds to do so. Once they are able to change their circumstances, the overall effect changes to improved economic standing for majority of the people (Duncan & Peter, 2012). The shift then accentuates a reduction in the gap between the high-income earners and those from the lower spectrum. Overdependence and inequality can then be reduced and mitigated forthwith given the economic growth and changes realized.

            In the event that the evil influences of pay disparity undertake handling, ways existing to advance comprehensive development. Doing that implies looking at strategy objectives – should governments be seeking after development or prosperity, or a superior equilibrium of both? In utilizing strategy to address pay disparity, various zones stick out. Instruction and abilities are vital – strategy should guarantee that however many individuals as could be expected under the circumstances appreciate admittance to great freedoms to learn, particularly from the get-go throughout everyday life, and that individuals can continue learning for the duration of their lives (Gindling, 2014). Occupations are additionally fundamental, and key to handling destitution. The job of assessments and moves in reallocating pay and abundance need addressing with urgency.

            Creating employment opportunities in a nation facilitates better and easier alleviation of poverty while reducing income inequality. The global unemployment rate as provided by Statista (2020) is at 54.2%. The simple indicator from the statistic is that majority of the world’s population is unemployed and has no source of income. A report by the bureau of labor statistics indicates that the United States has had an unemployment rate of 6.3%. With the COVID-19 effects of the pandemic, the number has grown to 14.7% as at April last year. The problem is even higher when comparing the developing nations to other first world countries. The fragility of such scenarios orchestrates reduction if there are employment opportunities for people to take up (Gindling, 2014). Respective governments should take up the role especially where the private sector fails to provide the opportunities. The concerns of poverty depletion notwithstanding, the overall effect of more people being employed guarantees that incomes will be available for the marginalized populations.

            Education shows importance as an entry and key to effective realization of opportunities. It is responsible for equipping individuals with the required skills and knowledge levels that can propel them to take up employment availabilities. However, achieving quality and higher education levels has become a precedent for the rich individuals. The disparity translates into limited high-end graduates who take up the limited slots for prestigious job availabilities. In turn, the same individuals form part of the few individuals with higher incomes and capabilities to afford more than the basics of human living (Action Aid, 2018). Governments should strive to make education available and compulsory for all its citizens as means of beating the income inequality gap and poverty levels. The opportunities will be available for all and ensure there is general representation for all the people.  

            Introduction of a progressive form of income tax presents a workable solution at the current setting. The taxation distinguishes measures s affecting the higher rise of income levels as compared to the lower end of the margins. The common reasoning is that the progressive sustainable income tax provides a positive outcome on dealing with poverty and income inequality (Green, 1984). Equitable taxation from the super wealthy and rich individuals merits a positive return from the lower income earners as affordability and retention being dealt with. Checks and balances on the procedure are vital, as the rich should refrain from falsifying their earnings to avoid higher taxation or even affect their working abilities in order to earn less. The implications from the above strategies lead to important decision-making process of ways to deal with income inequality and poverty.      

Implications and Conclusion

            Solutions towards eradicating income inequality and poverty raise issues regarding ethical considerations and implications. Issues such as progressive income tax are met by the need to address fairness and equity. Equality on the other hand is questioned based on increasing minimum wages given the issues surrounding costs of operations and productivity to the business owners. In addition, achieving the levels of availability of education and employment opportunities for all is subject to questioning on the practicality and intent use of resources. Despite the challenges on addressing the right solutions to global income inequality and poverty, urgent implementation is fundamental. Drastic measures that can improve the general living conditions, income earning, and quality of life for all people should be a national priority for any government that is concerned on its people’s welfare. 

References

ActionAid. (2018, October). Progressive Taxation. Retrieved from https://actionaid.org/sites/default/files/progressive_taxation_introduction.pdf

Duncan, D., & Peter, K. (2012). Unequal Inequalities: Do Progressive Taxes Reduce Income Inequality? Retrieved from http://repec.iza.org/dp6910.pdf

Gindling, T. H. (2014, May). Does increasing the minimum wage reduce poverty in developing countries? Retrieved from https://wol.iza.org/uploads/articles/30/pdfs/does-increasing-the-minimum-wage-reduce-poverty-in-developing-countries.pdf

Green, Y. (1984). Ethics and Taxation: A Theoretical Framework. The Journal of Religious Ethics, 12(2), 146- 161.

Goldberg, D. S. (2013). Progressive Income Tax. The Death of the Income Tax, 139-146. doi:10.1093/acprof:oso/9780199948802.003.0009

Holmes, R., McCord, A., & Hagen-Zanker, J. (2011, June 17). What is the evidence on the impact of employment creation on stability and poverty reduction in fragile states. Retrieved from https://www.odi.org/publications/7447-what-evidence-impact-employment-creation-stability-and-poverty-reduction-fragile-states

Matthews, D. (2019, January 22). Are 26 billionaires worth more than half the planet? The debate, explained (Vox). Retrieved from https://www.cgdev.org/article/are-26-billionaires-worth-more-half-planet-debate-explained-vox

Plecher, H. (2020). South Africa – unemployment rate 2019 | Statista. Retrieved from https://www.statista.com/statistics/370516/unemployment-rate-in-south-africa/