Everything else.. Statistics show growth in GDP and GDP per capita but do we...

Statistics show growth in GDP and GDP per capita but do we all gain equally?

2016 Aug 14

By Azraa Killru


Limited to discussions among economists and the random tuk uncle who loves to demonstrate his knowledge regarding the current economic climate, the topic of income inequality is not of importance to the everyday Lankan folk, who has surrendered to how things are and have always been.

Income inequality – a term coined to express the gap between the income levels within an economy is a woeful concept due to its trend. Sri Lanka does not fail to follow the global trend. The gap between the rich and the poor is widening despite the growing income levels. Yes, people are earning better than ever before, but the question remains whether everyone is equally benefited via this spur in income levels?

The answer is a bitter NO.

However, an important statement that has to be acknowledged is that income inequality is required anywhere for the functioning of the society, whether it is a developed nation like the United Kingdom, a poorer nation like Ethiopia or even somewhere like our beautiful little Island, which sits between the two extremes with its medium income levels. But why is it necessary? Let’s just say you have an office but without the labourers how can you conduct your operations? From security guards to drivers to toilet cleaners. Without the fulfillment of such job roles, how can a single office function, let alone the gigantic network of companies and organisations existing within a country? Similarly, withoutentrepreneurs and multi-millionaires jobs will not be created to create and distribute wealth. So, yes, differences in income levels are vital for the health of the economy.

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Yet, the underlying problem is that as income rises, so does the inequality. The ideal situation should be the whole society progressing together. For instance, a Billionaire CEO buys a second holiday home in Switzerland but at the same time, his maid and cleaner should also be able to afford dancing classes for their kids. This is the idea behind the society progressing together, despite the existence of hierarchy and different income levels.  This will ensure everyone is benefited and can only be created by the desire “to see my neighbour happy when I become happy” ideology.

So who can create this change? Who has the authority, the knowledge and the resources to reduce the rift between the rich and the poor? Definitely, it is the government. You and I do not have the capability to implement policies. The government does. The creation of policies which are “inclusive”, so that the one earning a higher income and the ones lower down the ladder equally benefit as incomes rise should be the objective.

Why is income inequality such a big deal? Don’t we have bigger and more pressuring crises to deal with?

We do. But income inequality is a curse on its own because it hampers sustainable progression of an economy due to the following reasons:

  1. The enhancement of the human capital is negatively impacted. Access to education, skills, talent creation, health and credit is denied to the poor. In the medium to long term, the country will suffer due to a lack of improvement in the human capital, which is critical for the development of any economy and to attract foreign investments. The significance of knowledge based jobs cannot be understated. Without the citizens having the ability to prosper in knowledge, economic growth is unlikely to be long lasting.

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  1. Alleviating poverty becomes an immense challenge because the poor stands very thin chances of improving their current status. Gender based inequality along with racial discrimination denies the disadvantaged communities from attaining basic human rights such as education and health. Thus they will forever live trapped in their current situations. Since this forms a majority of our population, economic growth is vastly threatened.
  1. Social and political instability is created because of the animosity between the rich and the poor. This leads to social issues and crimes.

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It can be stated that the rich remain unaffected due to the rising income inequality whereas the extreme poor were hit with the worst possible outcome – They became even poorer. The middle class has gained rather enormously in this income shuffle. This can be attributed to the post independence policies adopted by the government.

Seeing a Porsche on our roads is not surprising anymore, but how many people can actually afford better standards of living? The numbers are pretty low because the ever rising expenditure and cost of living fail to keep pace with the income levels of the significant proportion of the population.

There is always a positive note to every issue and in this instance it is the lesson learnt. Income inequality evokes a sense of reverence towards all types of employment. People learn to value jobs because it has coerced them with a sense of purpose to strive harder for better living. For example, University students drive cabs as part time revenue generator. Ten years later when you are a successful white collar worker or an entrepreneur, whether you drove a cab, tutored or did a little bit of baby-sitting to earn some extra bucks during your University days, your appreciation for the workers at the bottom levels will be high. Not being pampered, not living life as a bed of roses but struggling to rise to new heights can not only create motivated individuals but also people who know the value of all the lower level jobs. As a nation, we can be more empathetic citizens.

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