Inconvenience of Income Inequality

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A little degree of inequality acts as a positive influence on economic growth in the short term. Some econo­mists have found empirical evidence of a negative correlation between long-term growth rates and sustained economic inequality. Thus, higher rates of inequalities stifle growth rate.

Growth gets suppressed in eco­nomically unequal societies, after a phase of increased growth, by the de­creasing availability of investments for human capital. Physical capital becomes increasingly scarce, as fewer individuals have funds to invest in training and education.

Many studies have showed a posi­tive relationship between income inequality and crime. A wide gap between rich and poor tends to in­crease crime by reducing law enforce­ment spending in low-income areas. Wealthy members of a society tend to concentrate in secluded communities, especially as the disparity between the rich and poor increases.

When wealth comes in a small number of hands, political power tends to become skewed in favor of that small wealthy group. High-in­come groups are able to manipulate government in their favor through both legal processes and through cor­rupt practices. Hence, income inequal­ity promotes political inequality and disparity as well.

India is one of the most unequal in­come distribution countries. It would take 941 years for a minimum wage worker in rural India to earn what the top paid executive at a leading Indian garment company earns in a year.

A few ways out seem to be by in­vesting in agriculture and increasing the tax rate of high income popula­tions. As per the World Bank, agricul­ture can help reduce poverty for 80 per cent of the world’s poor who live in rural areas and work mainly in farm­ing. Investing in women’s education can also be of great help. Controlling Monopolies and implementing restric­tive trade practices and minimum wage policies will also facilitate the decrease in income inequalities.

Fahid Fayaz Darangay

fe19fahid@mse.ac.in

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