Income Inequality And Poverty Essay Thesis - Essay for you

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Income Inequality And Poverty Essay Thesis

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Discuss the impact of globalization on global poverty and inequality

Discuss the impact of globalization on global poverty and inequality 1. Introduction

The period from the end of the World War II to the mid-1970s saw world-wide sustained and high economic growth. Within a generation Western European society was transformed from predominantly agrarian to post-industrial. Latin America, Asia and Africa also were heading towards higher growth rates. [1] During the 1980s, a new period of integration of national economies led to the intensification of international economic interconnectedness and developing economies were expected to overcome the between-country income gap through openness-growth link. This was seen as the manifestation of neoliberalism as new forms of international economic relations emerged such as industrialisation and the new international division of labour. However, as recent studies point towards increasing world poverty and inequality, scholars have re-examined the validity of the neoliberal argument. After years of implementing prescribed reforms, some developing countries and regions, such as Sub-Saharan Africa, have not experienced the expected growth. Chapter 2 summarizes the implications of the policy-paradigm inspired by the Washington Consensus. Chapter 3 identifies current trends in global poverty and inequality with attention to the different measures used to interpret world economic well-being. The next chapter analyses the openness-growth-inequality-poverty nexus. The final chapter seeks to recognize causes of poverty and inequality transmitted by the globalization process. The factors of poverty and inequality path dependence are grouped in four categories: economic openness and technological progress; macroeconomic policies; financialisation of the economy; and international financial institutions.

2. The Policy-Paradigm Inspired by the Washington Consensus

The prevailing view in critical international political economy (IPE) of globalization as more of a neoliberal political project initiated by the Washington Consensus in the late 1980s than ‘the global release of an immanent desire of individuals and businesses to truck, barter and exchange’ [2] led to a strong critique of the ineffectiveness of the promoted instruments for reducing international poverty and inequality and the inefficiency of global actors and institutions. The neoliberal argument derives from the postulates of neoclassical economic theories such as the Ricardian comparative advantage theory, the Heckscher-Ohlin-Samuelson model for predicting patterns of commerce and production based on the factor endowments of a trading region, and the Stolper-Samuelson theorem of international trade. The centrality of the neoliberal argument stems in the link between openness and growth. It presumes that after implementing a set of liberalization policies, such as privatization and removing protectionist measures, countries will attract new sources of capital and enhance specialization (comparative advantage) and this will ultimately lead to economic growth and income convergence. In parallel, the delegitimation of the scope of state functions in the economy, promoted by neoliberalism, essentially ‘freeing up’ the market, will allow the ‘invisible hand’ to adjust the domestic economy to the international economy. Thus, Leys underlines this trend stating that ‘by the end of the 1980s, the only development policy that was officially approved was not having one’. [3] Wade argues that this anti-state bias is further reinforced by the implicit assumption that ‘developing country governments are all of a type - a ‘neo-patrimonial’ type in Weberian theory’. [4] The manifestation of the neoliberal paradigm led to the consolidation of the practices of international institutions and global actors under the formula aid-liberalisation conditionality, which in some cases resulted negatively to pro-poor growth. After implementing ‘quite bold [liberalization] activities’, [5] some developing countries failed to receive an enhanced influx of foreign direct investment (FDI), which led to doubts about the feasibility of the neoliberal path.

3. Recent Trends in World Poverty and Inequality

Poverty, understood as lack of economic well-being, in many parts of the world represents a major threat for overcoming global problems. There are two definitions of poverty, namely the absolute and the relative concept. The absolute concept is a defined poverty line of purchasing power which is used as a standard international extreme poverty line fixed at PPP $1. The relative poverty is determined as a fixed proportion of the main income of the population. [6] Current indicators of poverty rates show that the proportion of the absolute poor is falling, but the absolute number is likely to be rising. [7] This claim is in controversy with official data from the World Bank, [8] which indicates both falling rate and absolute number. However, a large margin of error is observed. Wade explains this by identifying three possible factors: the reliability of household surveys, which vary in quality and in choice of measures; China and India poverty lines are measured by econometric regressions rather than real observations due to their refusal to participate in the International Comparison Project; and the estimation of poverty headcount is sensible to the precise level of poverty rates. [9]

There are also disagreements about the current inequality trends, which stems mainly from the variety of methods for estimation. Recent studies point out that after 1980s, income inequality has undergone a steep rise. Inequality between countries is estimated to be considerably greater than inequality within countries. [10] However, other surveys confirm the reverse trend. Wade argues that these contradicting results are due to the different choice of measures, as well as due to China and India: ‘First, take out China and the falling disappears; take out India as well and the trend is clearly increasing. Hence falling inequality is not a generalised feature of the world economy in the third (post-1980) wave of globalisation.’ [11] By analysing intercountry population-unweighted inequality from 1950 to 2000, Milanovic estimates that between 1965 and 1982 the Gini coefficient is almost unchanged at 47, but after 1982 there is an inexorable tendency for inequality to increase and a growing divergence in economic performance between rich and poor countries is observed with Gini amounting at 54.5. [12] The increase of overall world inequality after the early 1980s is due to a ‘locomotive’ effect, caused first by the GDP per capita stagnation and decline in Latin America during the ‘lost decade’ of 1980s; then by the same, but more dramatic phenomenon occurred in the transition economies of Eastern Europe and the former Soviet Union. Also in 2000 twenty-four African countries had a GDP per capita smaller than twenty years ago. [13] This decline of growth rate in Africa, Latin America, and Eastern Europe and the former USSR contrasted with the ‘club of rich countries’ and led to the rising overall world inequality. Cornia et al. estimate that inequality in the 1990s has increased in fifty-three of the seventy-two counties analysed in comparison with 1960s. [14]

Measuring income distribution and inequality can lead to disagreements on trends due to the different usage of methodology and technical problems incorporated into measurements. Commonly used roadblocks for measuring inequality are: (1) the choice of currency: incomes measured at market exchange rates or in terms of Purchasing Power Parity (PPP); (2) should the population be included in the equation: population-weighting; (3) between-country or within-country inequality; (4) inequality measured as an average (the Gini coefficient) or as a ratio of top to bottom (such as top decile to bottom decile). Measuring distribution of the world’s population by the average income can be useful for determining regional trends in income inequality. Milanovic points out to the trend of ‘missing middle’ as the population is dispersed at low or high income levels. Two consequences conflicting with the neoliberal argument are observed by Milanovic. The first consequence is that ‘the missing middle’ reinforces the already strong domination of Western countries and second it reduces the number of possible contenders for positions in the top income distribution. [15]

Another useful measure for determining world economic convergence is country mobility. Country mobility is a measure of how countries move in the income hierarchy. Milanovic distinguishes four income categories: rich, contenders, ‘Third World’ and ‘Fourth World’ and compares the mobility of the countries comparing two periods for 1960-78 and 1978-2000. [16] His findings indicate that the majority of states remained in the same income category, especially in the case of the extremes virtually no states rose in a higher category. This also confirms the immobility of developing counties towards economic well-being and a ‘stickiness’ at one of the above-mentioned income categories.

4. The Openness-Growth-Inequality-Poverty Nexus

The interrelationship of openness, growth, inequality and poverty is useful for analysing how economic liberalization affects inequality and poverty and how the two notions are related. The first link between openness and growth is the main argument of classic theories of international trade as growth is expected to be achieved through resource allocation and specialization of national economies and through exports, imports and capital inflows. However, it has been debated whether economic openness is the necessarily condition for growth. China and India have been pointed out as examples of countries under substantial trade protection and capital controls, which have experienced economic growth in the last decade.

The second link of the openness-poverty nexus is the interrelation between growth and inequality. There are two contradictory stances. The classical view argues that a higher marginal propensity to save among the rich implies that a high rate of initial inequality will yield higher aggregate savings, capital accumulation and growth. [17] The other view suggests that the inequality-growth relation is concave, thus too low or too high inequality is detrimental to growth and remains invariant in the intermediate range. [18] When inequality is too low, such as where artificial compression of earnings exist (for example former USSR), income is not optimally distributed and problems such as rent-seeking and free-riding contribute to the negative effect on growth. Reversely, when inequality rises from a given threshold, it has a negative effect on growth.

The third interrelation is between inequality and poverty. Nissanke and Thorbecke argue that inequality serves as a filter between growth and poverty. Increase in inequality is considered detrimental to the objective of poverty reduction, because at any given GDP growth rate, poverty falls less rapidly when income distribution is unequal. However, it is more important how this growth is distributed among the population or in other words if it leads to pro-poor growth. The concept of pro-poor growth has recently received a growing attention. Pro-poor growth implies that the pattern of economic growth rather than the growth per se may have a significant impact on a country’s income distribution and poverty profile. The absolute definition of pro-poor growth is determined as any increase of GDP that reduces poverty, [19] while the relative definition emphasizes on the change of inequality whereas the distributional effects of GDP would favour the poor more than the non-poor. [20]

5. Causes of Inequality and Poverty

Cornia et al. raises the question whether the recent rises of inequality can be explained by intensification of the ‘traditional’ causes of high inequality, responsible for inequality in the early 1970s, such as high land concentration, unequal access to education, countries endowed with abundant natural resources, and urban bias of public policy. While these structural factors remain important for cross-country differences in inequality, Cornia argues that the recent increase in global inequality is more attributable to contemporary globalization effects such as the nature of technological change and policy reform measures. A further outdated perception of the causes of global income imbalances is the view of inequality as ‘a normal side-effect of the unwinding of socialism’s artificial compression of earnings’ [21]. While this factor has been important to explain the increase of income inequality in the 1990s, the ‘unwinding of socialism’ per se cannot explain recent trends in income disproportions. Recent studies identify the causes of rising poverty and inequality to more contemporary transmission mechanisms of globalization such as: trade liberalization and technological progress; the rise of financial rents following financial liberalization and privatization; the rising importance of finance on a global scale; erosion of the redistributive role of the state; macroeconomic policies aiming stabilization; volatility and vulnerability of markets; the ineffectiveness of the IFIs. In this chapter, the above-mentioned factors are grouped in four sections: economic openness and technological progress; macroeconomic policies; financialisation of the economy; and international financial institutions.

[1] Wade (2008), p. 375

[2] Harrison (2004), p.157

[3] Leys, (1996), p. 42.

[4] Wade (2008), p.404

[5] Harrison (2004), p.157

[6] Nissanke and Thorbecke (2007), p. 22

[7] Harrison (2004), p.158

[8] World Bank (2007)

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Income Inequality Essay Research Paper Income InequalityIncome

Income Inequality Essay, Research Paper

Income inequality in the United States remained relatively stable for a period of nearly forty years. Beginning in the 1970?s, however, this period of stability ended, as the first signs of widening income inequality became apparent. Over the course of the 1970?s and 1980?s, an increasingly clear trend toward greater income inequality emerged. By the end of the 1980?s, the top 20 percent of workers were receiving the largest share of income ever recorded by government figures, and the bottom three fifths were receiving the lowest shares ever recorded. This trend has continued into the 1990?s and currently shows no signs of decline.

When the indicators of growing inequality were first observed in the 1970?s, some researchers argued that the effects were merely temporary artifacts of short-term labor market disturbances. By the end of the 1980?s, however, a long-term trend towards increasing inequality had clearly emerged, pointing instead to inflexible changes in the occupational structure itself.

The new occupational structure appeared to be one with an increase of well-paid technical, scientific, and professional jobs at the top, a ?sliding? middle class, and a growing poorly-paid service and retail jobs at the bottom. Several important labor-force changes appeared to be contributing to the shifting occupational structure. As occupational reconstructing and growing income inequality became increasingly evident, a heated debated as to the causes and magnitude of these changes arose.

Two dominant bodies of thought emerged around the issue: the ?job-skill mismatch? thesis and the ?polarization? thesis.

Mismatch theorists argue that there is an increasing distance between the high skill requirements of post-industrial jobs and the inadequate training and mediocre qualifications of workers. They see the post-industrial economy leaving behind unskilled workers, especially women and minorities. For the mismatch theorist, the trend toward greater inequality is temporary and will dissipate once the supply of workers acquires the skills demanded by a post-industrial economy. And they predict that the overall distribution of workers will experience and upgrading in their wages over the long run.

Polarization theorists, on the other hand, believe that the rise in inequality is permanent, a result of the shift to a service-based economy. This vision of the post-industrial economy is characteristically polarized. The problem according to these theorists, is the type of jobs being generated in the new economy, not worker attributes. Because they believe the causes are structural and permanent, polarization theorists would deny the efficacy of public policies designed to educate and train unskilled workers. They predict a long-term continuation of the trend towards increasing income inequality.

Studies show that the long run increase in income inequality is also related to changes in the Nation?s labor market and its household composition. The wage distribution has become considerable more unequal with more highly skilled, trained, and educated workers at the top experiencing real wage gains and those at the bottom real wage losses. One factor is the shift in employment from those goods-producing industries that have disproportionately provided high-wage opportunities for low-skilled workers, towards services that disproportionately employ college graduates, and towards low-wage sectors such as retail trade. But within industry shifts in labor demand away from less-educated workers are perhaps a more important explanation of eroding wages than the shift out of manufacturing. Also cited as putting downward pressure on the wages of less-educated workers are intensifying global competition and immigration, the decline of the proportion of workers belonging to unions, the decline in the real value of the minimum wage, the increasing need for computer skills, and the increasing use of temporary workers.

At the same time, long-run changes in living arrangements have taken place that tends to provoke differences in household incomes. For example, divorces and separations, births out of wedlock, and the increasing age at first marriage have led to a shift away from married-couple households and toward single-parent and non-family households, which typically have lower incomes. Also, the increasing tendency over the period for men with higher-than-average earnings to marry women with higher-than-average earnings has contributed to widening gap between high-income and low-income households.

Free essay - Social Inequality Essay by

Social Inequality

Poverty may be defined as a state of living characterized by the inability to suffice the basic necessities of life such as diet. health and shelter. It is also a state of living below the poverty threshold /line defined by the government

In ascertaining the root cause of poverty. some claims that it is the cause of the poor people themselves while some believes that it is due to the unequal distribution of wealth. Poverty as an individual cause could be due to the differences in education. skill. intellectual capacity. age. health

disposition in life and others. While all of these are true. it is not sufficient to say that poverty is caused by the inability of the person in this state to better-off his living After all. there is no one in this world who does not want to at least achieve state of sufficiency if not wealth

I believe that the greater cause of poverty is due to the unequal distribution of wealth. According to ADDIN EN .CITE BeneriaL Beneria S Bisnath Gender and Poverty " an Analysis for Action1996http /www .sdnp .undp .org /gender /resources /mono2 .htmlBeneriaFebr uary L Beneria S Bisnath Gender and Poverty " an Analysis for ActionFebruary 1996http /www .sdnp .undp .org /gen der /resources /mono2 .htmlBeneriaFebruary L Beneria S Bisnath Gender and Poverty " an Analysis for ActionFebruary 1996http /www .sdnp .undp .org /gen der /resources /mono2 .html (Beneria Bisnath. 1996 ) poverty is linked to the unequal access and distribution of resources. In the book Poverty of America similar assertion is also made ADDIN EN .CITE Iceland2003336J Iceland Poverty in America 2003http /www .amazon .com /Poverty-America-Handbook-John-Icelan d /dp (Iceland. 2003 ) and ADDIN EN .CITE Hurst20045 56C HurstSocial Inequality .2004BostonAllyn and Bacon (Hurst. 2004 said that the disparity with the distribution of wealth significantly rises each year

Hurst (2004 ) also said that in the U .S. Census of year 2000 12 .6 of the population has income below the poverty threshold. Significant differences also occur in the different categories of poor in which whites with 8 .1 have the lowest while that of Asians. Native Hawaiians. African-Americans and American Indians and Alaska Natives have 12 .6. 17 .7. 24 .9. and 25 .7 respectively. Also. it was said that the percentage of poverty of families headed by female increased dramatically to 38 in 2002 which originally was 18 back in 1959

More importantly these figures convey that there are factors that could affect the distribution of wealth. which in turn cause poverty. The paradigm of all factors is social inequality brought about by social stratification. gender and race. Social inequality arises from the cultural differences in perceiving gender. race and social classes of people

Racism is a form of marginalizing some groups of people and this can significantly affect poverty ADDIN EN .CITE Jackson A JacksonPoverty and Racism Perception Perception2442001http /www .ccsd .ca /perception /244 /r acism .html (Jackson. 2001. Black Americans along with the immigrants are the usual victims of racism thus this could result into these people being offered with jobs of lower importance or with lower salary rate According to Iceland (2003 ) throughout the nineteenth century African Americans persisted to be severely constrained by the labor market in which they are forded to the rural areas. Also they were not offered with full-time jobs as dictated by either law or practice hence they were left with agricultural jobs as sole option

Wealth has always been men 's domain especially in developing countries as they are favored by social structures and practices and even exacerbated in patriarchal societies. Beneria and Bisnath (1996 ) noted that differential entitlements. capabilities and rights bestowed on women and men. Women are much restricted to land ownership and other propriety ownerships. Also illiteracy and low educational levels proved to be more in limiting the capabilities of women as influenced by social and cultural norms. Hence through the gendered social constraints women 's entitlements and capabilities are decreased which in some way restricts them from some rights

Presence of different social classes based on the control with basic resources results into formation of stratification. Thus. this creates social inequality on the basis of ownership. control of resources and type of work ADDIN EN .CITE KendallD KendallSocial Problems in a Diverse Society1998Bo stonAllyn and Baconhttp /www .delmar .edu /socsci /r long /problems /chap-07 .htm (Kendall. 1998

All of these factors hamper the attainment of equal wealth distribution and it is a reality that these are proliferating and that they exacerbate poverty. No one would ever be willing to be pinned down by poverty thus anyone would naturally work towards counteracting these factors. However. toiling against these does not come as an easy task to everyone. hence there would always be some who will left as victims of the unequal distribution of wealth and those of course are the people of poverty

ADDIN EN .REFLIST Beneria. L Bisnath. S (1996. Gender and Poverty " an Analysis for Action [Electronic Version] from HYPERLINK "http /www .sdnp .undp .org /gender /resources /mono2 .html http /www .sdnp .undp .org /gender /resources /mono2 .html

Beneria. L Bisnath. S (February 1996. Gender and Poverty " an Analysis for Action [Electronic Version] from HYPERLINK "http /www .sdnp .undp .org /gender /resources /mono2 .html http /www .sdnp .undp .org /gender /resources /mono2 .html

Hurst. C (2004. Social Inequality. Boston. Allyn and Bacon

Iceland. J (2003. Poverty in America Jackson. A (2001. Poverty and Racism [Electronic Version]. Perception 24 from HYPERLINK "http /www .ccsd .ca /perception /244 /racism .html http /www .ccsd .ca /perception /244 /racism .html

Kendall. D (1998. Social Problems in a Diverse Society. from HYPERLINK "http /www .delmar .edu /socsci /rlong /problems /chap-07 .htm http /www .delmar .edu /socsci /rlong /problems /chap-07 .htm.

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Income Inequality and Poverty Essay - 1116 Words

Income Inequality and Poverty

20: Income Inequality and Poverty
1) Income Inequality and Poverty
A person’s earnings depend on the supply and demand for that person’s labor, which in turn depend on natural ability, human capital, compensating differentials, discrimination, and so on. 2) THE MEASUREMENT OF INEQUALITY

How much inequality is there in our society?
How many people live in poverty?
What problems arise in measuring the amount of inequality?
How often do people move among income classes?
3) Table 1 The Distribution of Income
in the United States: 2000

5) Poor Employed

7) U.S. Income Inequality
Imagine that you.
lined up all of the families in the economy according to their annual income. divided the families into five equal groups (bottom fifth, second fifth, etc.) computed the share of total income that each group of families received. 8) Table 2 Income Inequality in the United States

9) U.S. Income Inequality
Reasons for Recent Increase in Income Inequality
The following have tended to reduce the demand for unskilled labor and raise the demand for skilled labor: Increases in international trade with low-wage countries
Changes in technology
Therefore, the wages of unskilled workers have fallen relative to the wages of skilled workers. This has resulted in increased inequality in family incomes. 10) CASE STUDY: Income Equality around the World

11) The Poverty Rate
The poverty rate is the percentage of the population whose family income falls below an absolute level called the poverty line. 12) Problems in Measuring Inequality
The Poverty Line
The poverty line is an absolute level of income set by the federal government for each family size below which a family is deemed to be in poverty.

13) Figure 1 The Poverty Rate
14) Problems in Measuring Inequality
The Poverty Line and Income Inequality
As economic growth pushes the entire income distribution upward, more families are pushed above the poverty line because the poverty line is an absolute rather than a relative standard. Despite continued economic growth in average income, the poverty rate has not declined. Although economic growth has raised the income of the typical family, the increase in inequality has prevented the poorest families from sharing in this greater economic prosperity. 15) Table 4 Who Is Poor?

16) Problems in Measuring Inequality
Three Facts About Poverty
Poverty is correlated with race.
Poverty is correlated with age.
Poverty is correlated with family composition.
17) Problems in Measuring Inequality
Data on income distribution and the poverty rate give an incomplete picture of inequality in living standards because of the following: In-kind transfers
Life cycle
Transitory versus permanent income
18) Problems in Measuring Inequality
In-Kind Transfers
Transfers to the poor given in the form of goods and services rather than cash are called in-kind transfers. Measurements of the distribution of income and the poverty rate are based on families’ money income. The failure to include in-kind transfers as part of income greatly affects the measured poverty rate. 19) Problems in Measuring Inequality

The Economic Life Cycle
The regular pattern of income variation over a person’s life is called the life cycle. A young worker has a low income at the beginning of his or her career. Income rises as the worker gains maturity and experience.

Income peaks at about age 50.
Income falls sharply at retirement, around age 65.
20) Problems in Measuring Inequality
Transitory versus Permanent Income
Incomes vary because of random and transitory forces.
Acts of nature
Temporary layoffs due to illness or economic conditions, etc. A family’s ability to buy goods and services depends largely on its permanent income, which is its normal, or average, income. Permanent income excludes transitory changes in income.

21) Economic Mobility
The movement of people among income classes is called economic.

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healthcare, incomeinequality and poverty . Time to time changes in policies have been made, perhaps to improve these issues, however, the gap between rich and poor keeps increasing and there is very little improvement in healthcare and the economy. In fact, healthcare keeps on becoming costly. Major issues like incomeinequality and poverty are not being taken care of by the government. According to Dr. Raphael (2002) poverty is caused by several reasons such as inequality in people’s income . weak social services and lack of other social supports (p.VI). He states, “Poverty directly harms the health of those with low incomes while incomeinequality affects the health of all Canadians through the weakening of social infrastructure and the destruction of social cohesion.”(Raphael, 2002, p. VI) Incomeinequality and poverty are interrelated with the way government structures policy decisions in its social and economic sphere (Raphael, 2002, p. VI). Dr. Raphael (2002) also claims that the health effects of poverty is strongly related to incomeinequality and poverty because societies that has high levels of poverty is bound to be economically unequal (p. 4). Canada’s government policies.

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Americans. When we look at the gap of incomes between White and African Americans, we can see the inequality between these two groups. In general, whites have more annual earnings than their black counterparts in America. Lori Ann Campbell and Robert L. Kaufman emphasized that the wealth determinants, which are the indicators of socio-economic status, have effected more on Whites than Blacks. And even when society is organized, there is still some disparities on account of race and ethnicity. (Campbell and Kaufman, 2006). And income disparities between African and White Americans have definitely effected the peace of the social life. According to Campell and Kaufman to understand the inequality of wealth between African Americans and other citizens, we need to consider first how that income comes from, how it is accumulated and sended out through society. (Campbell and Kaufman, 2006). By analysing the income . education and occupation, we can reach much more dependable outcomes of the disparity in wealth. Because these three factors are the key elements of this disparity and these elements lead to the source of the inequality of wealth. Lori Ann Campbell and Robert L. Kaufman pointed out that the outcomes of wealth inequality between Blacks and Whites is much more acute than any other economical outcomes in the society that can not be explained by the.

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