Economic equality can be of two types - Either some people are paid less, or some people have lesser wealth to begin with. It doesn’t matter which of the two is more prevalent as both can be destructive for the economy. Although it varies in degree between countries, a majority of countries today have a big income disparity. Why is it so? And what are its implications? Let’s figure it out!
Poverty is believed to be unnecessary in the present world where we have enough resources for people all over the world. One of the ways to understand it is in relative terms. This way it can be interpreted as the number of things a person can own and comparing that with other people. Income being the source of owning goods, plays an important role. Hence, the society has been divided into three social groups – the lower, middle and upper class based on income.
Within these three classes middle class plays a very vital role. It is almost like a mediator. They have higher aspiration than the other two classes as the poor lack opportunities such as education and the rich are stable and comfortable. This results in middle class providing services to rich and spurring their own entrepreneurial activity. Further they receive services form the lower strata as well thus engaging them in market activity as well. This way they maintain an important link. Without the middle class the economic inequality would increase tenfold.
The middle-class section plays a very important role in the economy. Let’s look at some of the ways how-
- The middle class is biggest source of demand for goods which is beneficial for the economy. The wealthy do not consume enough to drive the whole economy.
- The lower income class engage in lower level of market activity and have access to lesser number of goods. Thus, their demand for goods is less.
- Due to lack of opportunities, the lower income section of society has less incentive to innovate and take part in entrepreneurial activity as compared to the middle class.
- The high-income class have stability in their earnings thus are less likely to innovate and disrupt the current business landscape as well.
- The middle class is decreasing not only because more people are poor, but also because more people are rich. This is one of the reasons for income inequality today.
- Other benefits of middle class apart from stable demand also include trust between communities. Further, this unity ensures good governance by increasing voting numbers and political discussions
Economic Inequality and crime
Empirical evidence also suggests that there is a direct relation between income inequality and crime. In Venezuela, for example, kidnappings and extortion are a common occurrence. Its income distribution is the 19th-most unequal in the study. In contrast, fully 95% of people in Norway said they feel safe walking home alone. It is 12th most equal country of the 142.
The most common reason is that inequality raises social tensions. When the lower income class of people do not get sufficient opportunities and access, it is frustrating. Education also has huge role to play in this as it is seen as a basic way to seek opportunities. The lack of it thereof, adds to the problem. The income from criminal activity gradually becomes larger than can be obtained otherwise and it can act as an incentive. This causal nature between inequality and crime can be extremely harmful.
Half of the world today struggles with poverty and the richest 1% keep taking more money for themselves. The economic inequality has been burgeoning right under our noses. A couple of blocks away from the high-rise building where I live with my family, I can see a large slum inhabited by a number of underprivileged families. It’s funny how we have gotten used to the situation so easily and learned to live side by side!
Empirical evidence also suggests that there is a direct relation between income inequality and crime. In Venezuela, for example, kidnappings and extortion are a common occurrence. Its income distribution is the 19th-most unequal in the study. In contrast, fully 95% of people in Norway said they feel safe walking home alone. It is 12th most equal country of the 142.
The most common reason is that inequality raises social tensions. When the lower income class of people do not get sufficient opportunities and access, it is frustrating. Education also has huge role to play in this as it is seen as a basic way to seek opportunities. The lack of it thereof, adds to the problem. The income from criminal activity gradually becomes larger than can be obtained otherwise and it can act as an incentive. This causal nature between inequality and crime can be extremely harmful.
Half of the world today struggles with poverty and the richest 1% keep taking more money for themselves. The economic inequality has been burgeoning right under our noses. A couple of blocks away from the high-rise building where I live with my family, I can see a large slum inhabited by a number of underprivileged families. It’s funny how we have gotten used to the situation so easily and learned to live side by side!
- Kartik Kukreja
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Want to get published on EMN and join the community? Here is an opportunity to join the Board of Young Leaders Program by Eat My News. Click here to know more: bit.ly/boardofyoungleaders
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