Full Summary: 3 Types of Inequality FULL PPT SUMMARY: 3 Types of Inequality

Types of Inequality

  • Three types of inequality:
    • Within a country (e.g., rich and poor in South Africa).
    • Between countries (e.g., UK vs. Niger).
    • Global inequality (comparing all individuals).

Measuring Inequality

  • Gini Coefficient:
    • Measures income/wealth distribution (0 = perfect equality, 100 = total inequality).
    • The World Bank describes a Gini of more than 0.4 as representing severe inequality.
    • Upper middle-income countries are often more unequal than low-income countries.
    • High-income Nordic countries are the least unequal.
    • Latin America is the most unequal region.
    • The USA is the most unequal among developed high-income countries.
    • Most Western European countries lie between the Nordic countries and the USA; the UK is closer to the USA.
  • Palma Ratio:
    • Compares income of the top 10% to the bottom 40% (mostly used nationally).
    • Higher ratio indicates more inequality.
  • GDP per capita (PPP):
    • Used to measure inequality between countries, adjusting for cost of living.
    • Rich countries (e.g., UK, Sweden) have high GDP per capita; poorer countries (e.g., Afghanistan) have low GDP.

Global Inequality

  • The richest 85 people have the same wealth as 3.5 billion people (2014).
  • National boundaries are disregarded; the planet is treated as a single unit.
  • The Global Gini Coefficient is estimated at a very high 65.
  • Despite increased inequality in developed countries since around 1980, global inequality has declined over recent decades.
  • This is mainly due to the rapid growth of developing countries like India, Vietnam, Brazil, and especially China.
  • Inequality has increased within China, but China’s economic growth has reduced global inequality.
  • The top 10% earn over 50% of global income, while the bottom 50% earn only 8%.

Location Premium

  • Milanovic's research: Place of birth determines over 60% of the variability in world income.
  • An additional 20% is determined by the income level of one's parents (social class).
  • The remaining 20% is due to factors like age, gender, ethnicity, luck, effort, ability.
  • Inequalities are largely heritable; birth is often destiny.
  • Being born in a rich country provides an economic advantage due to better wages, infrastructure, schools, safety, minimum wage, and health benefits.

Intergenerational Inequality

  • Milanovic estimates that 20% of global income inequality is caused by family background.
  • Wealth or poverty is inherited; parents' status affects education, health, and job opportunities.

Poverty

  • Distinction between absolute and relative poverty.

Relative Poverty

  • Defined by reference to the normal expectations of a particular society.
  • In the UK, poverty is defined as below 60% of the median net household income (which was £29,000 for April 2019-March 2020).
  • A poverty level of below £17,400 (or $23,044) is higher than the per capita GDP of most countries.
  • Criticisms:
    • Linked to inequality; the number of people in relative poverty can increase even when their income rises if the median income increases more.
    • Conversely, if mean average incomes fall, the poverty line also falls.
  • Arguments against criticisms:
    • Relative poverty is real; a basic standard of living is necessary to lead a life with dignity.
    • The inability to enjoy a standard of living available to most others can be considered a measure of poverty.
  • Poverty involves social exclusion, lower educational attainment, poorer diet, lower life expectancy, and reduced participation in democratic elections.

Absolute Poverty

  • Refers to the absence of basic requirements for a healthy life (sufficient food and shelter).
  • Estimated that an adult requires 2000-2500 calories a day to maintain body weight.
  • Extreme poverty is defined as an income of $1.90 a day or less (by the World Bank and United Nations).

Poverty Trends

  • From 1990, the number of people living in extreme poverty fell from 36.2% to 9.2% in 2017.
  • This was mainly due to economic growth in China, which lifted 500 million people out of extreme poverty.
  • Dani Rodrik has described China’s economic growth as “the most astounding development success the world has known.”
  • Growth in China prevented global inequality from rising and accounted for over 95 percent of the reduction in absolute poverty (Chen and Ravallion, 2007).
  • India also contributes significantly to the decline in global income inequality and poverty.
  • $1.90 a day is a low threshold, given that most of the world’s population lives in lower-middle income (41%) or upper-middle income (35%) countries.
  • The World Bank supplements the $1.90 measure with additional measures.

Multidimensional Poverty

  • A broader measure than monetary poverty.
  • Includes indicators such as nutrition, child mortality, years of schooling, school attendance, cooking fuel, sanitation, drinking water, electricity, housing, and assets.
  • A World Bank study of 109 countries showed 21.7% in multidimensional poverty, half of them children.
  • Nearly two-thirds of the multidimensional poor live in households where no female has completed 6 years of schooling.
  • Nearly 85% live in either Sub-Saharan Africa or South Asia.
  • In sub-Saharan Africa, 38.5% are in extreme poverty, and 53.8% are in multidimensional poverty.
  • Nearly 67% live in middle-income countries.
  • About 25% of the global population live below the $3.20 threshold, and 50% below the $5.50 threshold.
  • About 10.4% of the global population live below the $1.90 extreme poverty line (in 2017); 15.5% live in multidimensional poverty.
  • Extreme poverty is concentrated in sub-Saharan Africa, while poverty at higher levels is mostly in South Asia.
  • More than 40% of the world's poor live in conflict-affected countries; 80% live in rural areas.

Reversal of Fortune

  • The long-term decline in absolute poverty has been reversed in recent years because:
    • Conflict (e.g., wars in Syria and Yemen).
    • The impact of climate change.
    • The effects of the Covid epidemic.
  • The cumulative impact includes increased inequality, with hundreds of millions falling back into extreme poverty (estimated 100 million due to Covid alone).
  • There are fewer people living in extreme poverty than a generation ago, but many remain trapped below higher absolute poverty lines and are multidimensionally poor.
  • The World Bank believes the Millennium Goals are unlikely to be achieved.

Resolving Global Inequality

  • Factors that might decrease inequality:
    • Taxation: Redistributes wealth; progressive taxes where rich pay more.
    • Welfare: Provides services or money to unemployed or disabled individuals, and supports public services.
  • Neoliberalism pursued by governments in the UK and USA has widened inequality, with the Gini Coefficient in the UK rising from 28.4 in 1979 to 35.1 in 2017.
  • Inequality tends to be higher in middle-income countries.

Global Efforts

  • Efforts by the UN and INGOs like Oxfam aim at reducing poverty rather than inequality.
  • Reducing poverty is UN Sustainable Development Goal No.1.
  • Various UN agencies and INGOs are involved in efforts to reduce poverty.
  • The main factor reducing global poverty has been economic growth (e.g., in China).
  • However, this growth has increased inequality in China.
  • It is possible that the Chinese economy has reached a point where inequality will reduce somewhat.

Millennium Development Goals (MDGs)

  • Introduced in 2000 by the UN General Assembly with 189 countries signing the Millennium Declaration.
  • Aimed to reduce global poverty and improve well-being by 2015.
  • Key goals included:
    • Eradicating extreme poverty and hunger ($1.90/day).
    • Achieving universal primary education.
    • Promoting gender equality and empowering women.
    • Reducing child mortality.
    • Improving maternal health.
    • Combating HIV/AIDS, malaria, and other diseases.
    • Ensuring environmental sustainability.
    • Developing a global partnership for development.
  • In 2015, MDGs were replaced by Sustainable Development Goals (SDGs).
    • SDGs have 17 goals with a broader focus, applying to all countries with stronger environmental emphasis.
  • Rich countries agreed to give 0.7% of their national income to help poor countries (ODA).
    • Most countries didn't meet this target.
  • Extreme poverty dropped from 36% in 1990 to 10% by 2015, but COVID-19 reversed some progress.

Multidimensional Inequality and Poverty

  • Key Dimensions of Inequality:
    • Health, Education, Gender.
  • Global Health Inequality:
    • Life expectancy gaps: Japan (84 years) vs Central African Republic (52 years).
    • Infant mortality: Africa (52/1,000) vs Europe (7/1,000).
    • COVID vaccine inequality: 8.6% in low-income countries vs 76.2% in high-income countries had one dose by 2022.
  • Health Inequality in the UK:
    • SE England (80.6 years life expectancy) vs NW England (77.9 years).
    • Men in poorest areas live 9.4 years less; women 7.4 years less.
    • Healthy life expectancy gap = 19 years between richest and poorest.
  • Education Inequality:
    • 72 million children out of school globally.
    • In Yemen, over 80% of girls do not attend school.
    • 53% of 10-year-olds in low/middle-income countries couldn't read pre-COVID; expected to rise to 63%.
    • UK: 6% of students attend private schools, but they make up 55% of top university admissions.
  • The Social Gradient:
    • Health gets worse at every step down the income scale.
    • The poorer you are, the worse your health, education, and life chances.
  • Causes of the Social Gradient:
    • Poor education, unhealthy lifestyle, chronic stress, poor diets, unsafe environments.
    • In India: richer people smoke less.
    • In Mexico: poor people consume more Coca-Cola due to lack of access to healthy options.
  • Gender Inequality:
    • Globally, women earn 24% less than men.
    • At current rates, it will take 136 years to close the gender pay gap.
    • 75% of women in developing countries work in informal jobs.
    • 1 in 4 girls aged 15-19 are not in school or work; only 1 in 10 boys.
    • Girls face higher risks of child marriage, violence, and exclusion.

Conclusion

  • No large state or international organization is focused on reducing inequality. There is recognition that excessive inequality is a problem, but there is no action.
  • There are INGOs and UN agencies addressing global poverty which have an impact and help many people.
  • In low-income and lower-middle-income countries, the way to reduce poverty is through economic growth, which, for a time, is likely to increase inequality.