Inequality and related issues | Timeline

(8) Fall in Global Incomes: The report flags a drop in global income during 2020, with about half the dip in rich countries, and half in low-income and emerging countries;

(9) The rise in private wealth has also been unequal within countries and at world levels. The poorest half of the global population owns just 2% of the total wealth and the richest 10% own 76% of all wealth;

(10) The Middle East and North Africa (MENA) are the most unequal regions in the world, whereas Europe has the lowest inequality levels;

(11) Global Carbon Emissions: The top 10% of emitters are responsible for close to 50% of all emissions, while the bottom 50% contributes 12%

‘Oxfam report: In 2021, income of 84% households fell, but number of billionaires grew’ – Indian Express – 18th Jan

Oxfam has released a report titled “Inequality Kills’’.

The report has been released ahead of the World Economic Forum’s Davos Agenda.

Findings of Oxfam Report

Inequality worsened by the Covid pandemic: The income of 84% of households in the country declined in 2021. But at the same time, the number of Indian billionaires grew from 102 to 142.

India has the third-highest number of billionaires in the world, just behind China and the United States. There is a 39% increase in the number of billionaires in India in 2021.

In 2021, the share of the bottom 50% of the population in national wealth was a mere 6%.

More than 4.6 crore Indians are estimated to have fallen into extreme poverty in 2020.

Decrease in Social Expenditure: The healthcare budget saw a 10% decline from RE (revised estimates) of 2020-21. There was a 6% cut in allocation for education.

Moreover, the budgetary allocation for social security schemes declined from 1.5% of the total Union budget to 0.6%.

Dependence on Indirect taxes: There was an increase in indirect taxes as a share of the Union government revenue in the last four years. On the other hand, the proportion of corporate tax in the same was declining.

The additional tax imposed on fuel has risen 33% in the first six months of 2020-21 as compared to the last year and 79 percent more than pre-Covid levels.

At the same time, lowering corporate taxes from 30% to 22% to attract investment last year resulted in a loss of Rs 1.5 lakh crore, which contributed to the increase in India’s fiscal deficit.

Out-of-Pocket Expenditure (OOPE): The data from the National Sample Survey (NSS) (2017-18) shows that Out-of-Pocket Expenditure (OOPE) in private hospitals is almost six times of that in public hospitals for inpatient care and two or three times higher for outpatient care. The average OOPE in India is at 62.67%, while the global average is at 18.12%.

What are the issues with the Oxfam report?

Problem with the measure of inequality-Oxfam has used wealth, not income, as the parameter.

The problem with this approach is that it is heavily dependent on the market value of financial assets, which fluctuate almost every minute.

Issues linked to some of its suggestion-Although its suggestion for the need for good quality statistics is appropriate, it’s another suggestion on wealth tax is problematic.

The report suggests a temporary 1% surcharge on the richest 10%.

India used to levy a wealth tax, but it was abolished in the 2015 Union Budget. It had no or very little impact, for example, in 2015, GoI could raise only Rs 1,079 crore as wealth tax.

That is, just Rs 1.4 for every Rs 1,000 that accrued through direct taxes. Also, there are practical difficulties in taxing wealth.

Epic Magazine – January Month
(1) Economic growth can help reduce poverty. GDP growth has been rather slow since the Global Financial Crisis of 2008 and has completely lost its momentum since the start of 2017. For a relatively poor country such as India, the most durable and dependable way to reduce inequality is to increase the size of GDP;

(2) Lack of digital access: Poor households are not able to afford devices to ensure digital access for their children. According to the Azim Premji Foundation, ASER and Oxfam report, between 27% to 60% children could not access online classes, due to lack of devices, shared devices, inability to buy “data packs”, etc;

(3) Increased penetration of technology and industrialization: Modern technologies require skill for efficient use. Productivity and wage increase has been limited to skilled workforce; while the unskilled workforce lack the resources to enhance their skills. The increase in productivity leads to the spread of technology, which, in turn, creates a higher demand for skilled workers. This self-reinforcing cycle increases wealth and income inequality;

(4) Large numbers of the labour force work in sectors with low productivity e.g., agriculture. It provides 53% jobs, while contributing only 17% to the GDP;

(5) COVID pandemic has also increased the economic inequality further.

Epic Magazine – January Month
(1) Research by Professor Pickett and Wilkinson found that inequality causes a wide range of health and social problems like reduced life expectancy, higher infant and maternal mortality, poor educational attainment, lower social mobility and increased levels of violence and mental illness. This is a vicious circle as poor health and educational levels hinders upward mobility leading to poverty trap;

(2) High levels of income inequality are associated with economic instability and crisis, whereas more equal societies tend to have longer periods of sustained growth;

(3) Inequality limits access to new technologies and skilling opportunities. As technology adoption increases and demand for skilled jobs rises, those lacking access fail to benefit;

(4) Income inequality strongly influences people’s health and wellbeing. It further leads to a societal breakdown in trust, solidarity and social cohesion, reducing people’s willingness to act for the common good e.g., conflict among the social groups in India and the movements for greater reservation and affirmative action;

(5) Increase in wage inequality decreases productivity;

(6) Digital gap leads to failure of digital initiatives providing basic services (health/education) further perpetuating inequality;

(7) Greater inequality can lead to more rapid environmental degradation because low incomes lead to low investment in physical capital and education

Can inequality be solved or is it a natural human state? – Live Mint – 24th Jan 22

Is inequality a natural consequence of human nature?

There are different arguments given for the reason behind inequality:

First, some experts argue that social inequality began with the invention of mass production i.e. rise of capitalism.

Second, others argue that social inequality is not caused by capitalism, and it is fundamental to human nature, it existed even before the Industrial Revolution, in many other forms like status.

What should be the criterion to measure poverty and inequality?

Some experts argue that the poor of today have much better living standards, compared to the Mughal era. But it is not a correct perception of poverty. Deprivation today must be measured by the availability of wealth and facilities to rich people of the present.

Thus, the Indian policy makers’ notion of ‘basic necessities’ is false. The fact is that people don’t live to just eat starch and sugar. Humans invented so many things for fun and comfort and whenever something improves lives, its denial to the majority becomes one of the new meanings of poverty.

For the finance Minister to note – On World Inequality Report 2022 – The Hindu – 31st Jan 22

The World Inequality Report suggested a minimum global tax on MNCs at 25%.

Implications of Global Minimum Tax Source 1 | Source 2

MNCs and their shareholders have been the main winners from globalisation. Their profits have boomed due to the ever-closer integration of world markets. Therefore, there is a need for socially conscious policymaking that supports equity.

India needs a new social contract – Indian Express – 29^th Jan

State should assume responsibility to provide quality healthcare, education, food, pension, clean water, and housing in affordable ways for all citizens

The resources for all of this can be managed by expanding the taxation on the super-rich. Government can introduce wealth tax and inheritance tax.

Can inequality be solved or is it a natural human state? – Live Mint – 24^th Jan 22

First, we need to stop using money as a measure. We also need to persuade people to see the truth that money is just one of the many things that matter. For example, happiness indices.

Fiscal policy must take center-stage for a broad revival – Live Mint – 28th Jan 22

Second, since inflation reduces purchasing power, hence, budget needs to ensure that real incomes increase.

Third, there is a need to ensure a leakage-proof delivery of benefits provided to the country’s poor and vulnerable. For example, rural employment guarantee schemes, National Food Security Act provisions, and various income-transfer initiatives.

Fourth, the fiscal health of the economy is expected to improve. That is why public expenditure needs to be expanded to ensure social protection and basic infrastructure.