Why inequality is rising

The economy, employment and incomes are growing with all their attendant problems of inadequate, uncertain and insecure prospects from the point of view of the poor and systemically disadvantaged. The general decline in poverty, though welcome, has not addressed these problems.

According to the international rights group Oxfam, the top 1% of India’s rich garnered 73% of national income during 2017; and 67 crore people, comprising the poorer half, gained hardly 1% in their wealth during the year. The World Inequality Report (2014) said: 10% of Indians garnered 56% of national income. The Oxfam said in 2017, billionaire wealth increased by an average of 13% a year since 2010 — six times faster than the wages of ordinary workers which have risen just by an average 2% a year.

This highly unequal sharing of income and the consequent acquisition of wealth is not only a serious threat to fairness and justice but also undermines social and economic opportunities and progress of the large majority. Understanding these political economy public opinion issues in perspective is the first necessary step towards devising and implementing solutions.

A preponderant feature of the decline in poverty is that the non-poor are getting an increasing proportion of their incomes from investments, rents, interest and capital gains, famously called unearned incomes: this implies that the poor are toiling ever harder and losing out and are being constantly exploited by the investing rich. Richer the individual, more and faster is the accrual of unearned income.

Even the labour class is becoming schooled, diversified and often specialist, though large sections are systemically languishing without the needed level and type of skills and remain ill-paid, fitfully employed and ever insecure, denied of social dignity and economic wellbeing. Quite a number from the labour classes, although manifestly small, are getting high incomes propelled by family inheritance endowments, chancing on rare skills and the eagerness of capitalists to retain these employees in the organisation/company –for considerations of monopoly and competition.

Coupled with the constant receipt of diversified, unearned, often inherited, incomes, there is the phenomenon of high wage islands in the workforce. There is a growing intertwining of high and rare skills among a few members of the labour classes, on the one hand, and the stock-owning managerial ownership class, significantly contributing to high concentration of wealth and incomes; perhaps a welcome, nevertheless rarer and slower, aspect of increasing social economic integration.

An obvious obverse of this income and wealth skewness is the growing lack of access to skill education among the poor in villages and disadvantaged urban social pockets or localities and to infrastructure and capital.

Inequalities in income and wealth, along with government policy indifference/inertia, have encouraged profiteering and privatisation of education, and donation-based management, engineering and medical colleges. This privatisation has failed to improve the quality of manpower and thus productivity in the economy and international competitiveness. But surely, it has enabled only the rich to access higher education. Distributive justice in education is in serious policy default jeopardy.

Another aspect of insecurity of tenure and stability of employment and wages of the poor are the fast changes in technology use in all aspects of production, including agriculture. New methods of production supplant the old ones, causing unemployment among the lowly skilled — also called ‘creative destruction’.

Type writers, mud pots and bullock carts are gone, replaced by computers, plastic pitchers, power tillers and cargo autorickshaws. No doubt new kinds of jobs have emerged for the skilled and highly skilled and higher incomes and possible irreplaceability advantage, too; but the poor are priced out from the job market and they possibly cannot cope with the need to educate their wards in higher skills and incur the higher expenditure and bear the opportunity costs of higher technical education.

Technological changes in all aspects of production have meant unprecedented ways and amounts of capital use and intensity. Naturally, this has given rise to ever greater share accruing to investors than to labour, particularly those at the lower rungs of education and skills.

Adding to this woeful phenomenon is the international division of labour and migration, seeking lucrative pastures. Mechanisation and outsourcing of segments of production have put labour in further uncertainty. Outsourcing has systemically forestalled unionisation and political demand for higher and secure wages and tenure, keeping the labour relatively poor and unendowed.

Policy and administration eagerness to encourage capital investments, the famous ‘ease of doing business’, have virtually ignored pro-poor and pro-labour practices, adherence to minimum wage legislation and the need to further economic, health and old-age security measures. It’s easier to make slogans than to really adhere to policies of justice and fair play.

(The writer is a former professor, Maharaja’s College, University of Mysore)

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Why inequality is rising

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