02 September 2022 – The Hindu

What is Income Inequality

Meaning:

• It is the unequal distribution of wealth and opportunities among various social groupings.

Economic Inequality Types:

Three basic categories of economic disparity exist:

Income Disparity:

• The degree to which income is distributed unequally among a group of people is known as income inequality.
• Income includes any money obtained from employment (wages, salaries, bonuses, etc.), investments (such as income on savings accounts and profits on stock shares), savings, state benefits, pensions (state, personal, company), and rent. Income is not merely the money received through salary.
• Gross income is defined as household income before taxes, which includes funds received from the social security system. Net income refers to household income after all taxes and perks.

Pay Disparity:

• The pay of an individual differs from their income. Pay simply relates to money received from employment. This can be paid weekly, monthly, annually, or on an hourly, monthly, or annual basis. It may also include bonuses. Thus, wage inequality refers to the variation in salaries among individuals.

Wealth Disparity:

• The total value of a person’s or a household’s assets is referred to as wealth. This could include real estate, private pension rights, and financial assets like bonds and equities. Therefore, the term “wealth disparity” refers to the uneven distribution of assets among a group of people.

Indian inequality situation:

The 2022 World Inequality Report:

• According to the most recent World Inequality Report 2022, India stands out as a “poor and severely unequal country, with a wealthy elite,” where the top 10% retains 57% of the total national income and the bottom 50%’s share is just 13% in 2021.
• In 2021, the adult population of India will have an average yearly national income of Rs 2,04,200. According to the research, the top 10% earned over 20 times more than the lowest 50%, or Rs 11,66,520, while the bottom 50% made Rs 53,610.

Periodic Survey of the Labor Force:

• According to India’s Periodic Labour Force Survey for the years 2017–18, 2018–19, and 2019–20, the top 10 percent of earners have wages that are about equivalent to those of the poorest 64 percent. One-third of all revenue is made up of the top 10.
• When resources become inaccessible, basic needs deteriorate into luxuries.
• The huge wage disparity between men and women has been brought to light by the income profiles, drawing attention to gender-based workplace injustices that further marginalise women and lower their labour force participation rate.
• The Periodic Labour Force Survey conducted by NSO in 2017–18 showed that unemployment had increased to a 45-year high (PLFS).

Report from Oxfam International:

• Inequality has been sharply increasing during the past thirty years. The money generated by crony capitalism and inheritance has mostly been captured by the wealthiest people.
• They are accumulating wealth at a much faster rate while the underprivileged continue to struggle to access decent healthcare and education due to chronic underinvestment and earn a minimal wage.

Reasons for India’s inequality:

• India’s labor-intensive manufacturing industry fails.
• Indian Jobless Growth.
• Disparities between states and regions.
• a lack of development of skills.
• rigid social structures, such as caste.
• Unfair income concentration in a small number of hands is tax evasion.
• Indirect taxes that are progressive provide the government with the most money.
• Underemployment, unemployment, and reduced labour productivity as a result.
• failure to create industries focused on exports.
• Corruption
• Administrative bottleneck: Some government policies give preference to one industry over another. Additionally, there are problems with the rule of law and the application of laws like the Minimum Wages Act.
• Job types: The agricultural industry employs over 56 percent of the total working population. which is characterised by inadequate landholding, low production, and unemployment that is not apparent.
• Inadequate public infrastructure: The rise and maintenance of inequality in India are both facilitated by the absence of access to primary health care facilities, high-quality public schools, research institutes, highways, waterways, rural markets, etc.

How can India lessen income inequality?

• By rejecting market fundamentalism, fighting against the special interests of wealthy elites, and altering the laws and structures that have brought us to where we are now, governments may begin to reduce inequality. Reforms that equalise the playing field and redistribute wealth and power must be put into place.
• Taxation and social spending are the two key areas where policy changes could increase economic equality.
• The key to distributing resources more fairly throughout society is progressive taxation, in which large firms and the wealthiest citizens pay more to the government. In both OECD and developing nations, the contribution of taxation to the reduction of inequality has been amply proven. Depending on the government’s policy choices, taxes may have a progressive or regressive effect.
• Spending on social programmes, including social safety, health care, and other public services, is crucial. Overall, research spanning more than 30 years and more than 150 rich and poor nations demonstrates that social security and public sector spending help combat inequality. For many years, Oxfam has advocated for public services that are accessible to all.
• By cutting down on the millions of unpaid hours that women spend each day taking care of their families and homes, they can free up more time.
• Spend money on public amenities like electricity, water, and daycare that will cut down on the amount of time spent performing this unpaid activity. Design all government programmes to be convenient for those with busy schedules.
• Expand the nation’s job opportunities.
• Free high school education and more operational health care facilities
• Universal Income Support is required. According to the Economic Survey 2016–17, universal basic income should be used in place of all current cash handouts. According to the survey, existing social assistance and anti-poverty programmes like MGNREGA, PMJSY, etc. should be replaced with UBI rather than their addition.
• Private-sector productivity is significantly boosted by investments in human capital and public amenities, with estimated rates of return ranging from 15% to up to 45%. The increased productivity of people or human capital makes a significant contribution to raising labour productivity as well as innovation and the capacity to adopt new technology.
• There should be action taken to close the enormous wealth gap that still exists between the various societal levels. The wealth increases of the ten richest persons in Covid19 alone would yield $ 812 billion from a 99 percent one-time windfall tax.
• 6% of worldwide income can be generated through taxes ranging from 1% of wealth possessed over $1 million to 3% for global billionaires.
• Inequalities in wealth taxes
• Caste prejudice must end.
• Policymakers should prioritise lowering the cost of technology and increasing its uptake.

According to IMF:

• If women’s employment participation matched that of men, Japan’s annual growth rate might reach 9%, while India’s could reach 27%. Stop placing blame: We engage in a blame game rather than addressing the real causes of inequality.
• Reducing wealth disparity can be accomplished by inheritance taxes, redistributive land reforms, prohibiting monopolies over water, forestry, and mineral resources, and limiting financial concentration.
• Investing in agriculture: According to the World Bank, agriculture can help 80 percent of the world’s poor, who live in rural regions and work mostly in farming, reduce their levels of poverty.
• Give young people and underserved areas opportunities.
• Promote the use of domestic resources and the growth of the public and private sectors.
• Support earn-while-you-learn initiatives, apprenticeships, and sectoral training.
• Increase the minimum wage and make it inflation-indexed.

Mains Question:

Inequality has risen substantially from the 1980s onwards, due to profound transformations in the economy such as deregulation and the reforms of 1990s. Comment.