Income inequality Essay

It is the report which is talking about income inequality. It is global income inequality is increasing. Besides that that’s is more information about measurement for the income inequality The relationship between the income inequality and economic growth Technological change and globalisation partly on income inequality, Way to reduce the income inequality, Causes of income inequality, and High income inequality gap-Latin America. Mostly it is all about the income inequality in this assignment is telling about the income inequality. Income inequality Income inequality is about the measurement of people’s household or individual based on their income across the various participants in an economy. It is also known as the gap between the rich and poor, wealth and poverty, the different of income between populations or individual (Ram, R. (1988)). Measurement To measure the income inequality have to use the Gini coefficient which developed by Italian statistician in 1912. The Gini coefficient is measuring the income inequality based on the value of a frequency distribution (for example levels of income). The value of the Gini coefficient is between the range 0 to 1. Therefore, 0 that means â€Å"perfect equality ’’ which every person is getting the same income and 1 that means â€Å"perfect inequality’’ which is all income change to the share of the population with the highest income. The Gini coefficient is also to be used for to measure wealth inequality. This use of Gini coefficient requires that no one has a negative net wealth. Besides that, the Gini index often used which is the Gini coefficient expressed as a percentage, but it is equal to the Gini coefficient multiplied by 100. (Most of the time people are using the Gini index for calculating the income inequality. ) Graph1(source:http://people. stfx. ca) The graph above shows that the Gini coefficient is equal to the area which is shaded to the yellow colour. The relationship between the income inequality and economic growth Graph 2(source : author’s calculation) The graph above is showing the relationship between the income inequality and economic growth. Besides that, the graph above is showing the improvement in the Gini of 0. 01 costs 1. 6 per cent per year in per capita economic growth which mean economic growth improves may affect the income inequality. The relationships between the income inequality and economic growth have a very strong gap sometimes. That means change of economic growth would affect the income inequality. Therefore, the economic growth will reduce the income inequality when the salary of the lowest paid rise faster than the average wage. Besides that, the economic growth can increase the job opportunity for people to reduce the level of unemployment in the social. Economic growth often creates the job opportunity for those people who are high skilled and educated. After job opportunity increased can make the level of poverty decreased and reduce the income inequality. Enhancing the growth of economic may raise the income inequality such as increasing the flexibility of wage determination. The growth of economic is showing the extension for flexibility of wage determination. To increase the wage of employee may reduce the income inequality but it also made the labour cost increased for the employer. Increasing the wage agreement to firms may make some employers have to pay the highly salary of employee. This action may increase the unemployment and affected productivity of the company decreasing because labour cost too high makes the employer hard to endure (Murtin et al. , 2012). graph 3 The graph above is showing the global income inequality is increasing from the year 1820 to the year 2008. The Gini coefficient is increasing that mean income inequality is increasing at the same time. But, sometime the economic growth may not reduce the income inequality. It is because the Economic Growth will not necessarily solve unemployment. For example, growth cannot solve structural and frictional unemployment it is because unemployment (structural and frictional) which caused by lack of skills and geographical immobility. Technological change and globalisation partly on income inequality The current technology with globalisation might rise in the market equipment and create the boosting top incomes. (Rosen, 1981; Gordon and Dew-Becker, 2008). These days, the the change of technology is affecting too fast, however it can also influence the income inequality. It is due to inclined the job opportunity for people who high skilled, but also increasing the unemployment. For instance, those who have not high-skilled workers might drop their work due to the same repetitive happens that may be running on the technologies, technological for achieving the target. Thus the desires for those workers can decline due to the change of technological. Likewise, to estimate for both highly-skilled and low-skilled workers need to focus respective work even the technology change, both of them might difficult to replace by machines or lose their job. If the demand shift is not offset by the equal shift related to the labour supply, change in technology can lead to reduction in salary. (e. g. Autor et al. , 2006, Goos et al. , 2009). At the same time, the globalisation may also increase the income inequality. 1) The offshoring (change the national). It is talking about people from richer countries move to poorer countries or poorer country move to richer country. The offshoring happen because skill intensive in their country. For example, some people from the perspective of the skill-poor country may move to rich country for searching the job opportunity. For the conclusion, offshoring makes labour demand more skill intensive in both poorer and richer countries, thus it is increasing the income inequality in both groups of countries (Feenstra and Hanson, 1996). 2) Sometime, the firms are making a different in their profitability which can make the low-income workers work in satisfaction and create low-productivity firms. That would make the firm lose their competitor compare to the other company. At the same time, it may increase labour income inequality by lowering or reducing the employment (e. g. Egger and Kreickemeier,2009; Helpman et al. , 2010). Improvement of the Globalisation and technological change may further raise the income inequality. Besides that, technology may go to the globalisation but it is also increasing the competition between companies to the company in the world, that mean globalisation for technology may force firms to Innovate. Therefore, the Innovation is increasing the labour income inequality both temporarily – since R&D is skill intensive (Dinopoulos and Segerstrom, 1999; Neary, 2003) and it provided the R&D results in skill-biased on technological change as discussed above (Acemoglu, 2002). Caused of income inequality -Different religion, region, language and gender In Indian have many different of culture, race, religion and language. This situation is making the Indian citizen get a different education or maybe some of don’t even have the opportunity to study. It is because different of culture, race, religion language and sex in Indian might made some of them didn’t get the chance to study or educated. At the same, this kind of diversity is making a trouble to access to education and chance of employment might decrease also at the same time. This is calling the kind of discrimination. The different is making the people in suffer from significant of inequality in employment, education and income. This kind of situation is increasing because different family background might made the living standard become harder and difficult, caused the income increasing in India (Desai & Kulkarni, 2008). -Technology The technology is improving all the time, but it also is decreasing the opportunity of job for people who are unskilled and limited educated. The company have to increase productivity to satisfy the demand from market. A lot of companies are investing to the technology to increase their productivity and growth in their business. Therefore, the number of automatic machine increasing is decreasing the job for those people who are working in manual, handy, limited educated and unskilled. In the same time, the service job could increasing because the technology improvement and factory job such as manual and handy is reducing. The service increased but it is just a low pay job. Technology is increasing the income inequality and it is replaced many worker in factory in U. S (WSJ, Technology, Not Globalization,Feeds Income Inequality, July 24, 2008). -Education The raising of education level is the most efficient way to reduce the income inequality. It is because the education has the great relation to the income distribution. The investment in education can made the income inequality decreased and lowers the level of poverty. People who is educated can get a higher opportunity to get a job compared to those are limited educated. It is important to send the child to the school and educated for increasing their intelligence and knowledge for achieving their ambition. In Brazil have a high inequality of income because average of citizen of Brazil attends fewer year to school compared to other. Number of Brazilian is increasing compared to the other country compared to the Latin America (Carlos Aguiar de Medeiros of International Development Economics Associates, 2001) -Price Stability The price stability is also known as inflation problem. In Brazil, inflation happens is making the poor getting poorer but the rich getting richer. It is because when facing the inflation problem or price instability, the company (rich) is following the same contract of wage or income to pay the salary to their employee (poor). Therefore, the poor have to reduce their living standard with their unchanged pay or real lower wages. At the same time, the investor (rich) can move their financial to other country for more opportunity to protect their money during the inflation. But, the poorer citizens have to work in a harder situation so it is difficult for them to escape poverty. (Carlos Aguiar de Medeiros of International Development Economics Associates, 2001) -Impact of Social Benefits In China, government have to provide a lot of benefit to their citizen. For example of social benefit, it is more like social insurance income or pension benefit. Caused of population increased and economic reforms need a greater financial to stimulate the economic growth. Therefore, have to reduce the social benefit such as pension benefit. It is big impact those are affected and increasing the income inequality. At the same time, not only the pension benefits government of China have to reduce the other social benefits such house benefit, health benefits, food assistance and other when have to improve the economic growth but increase income inequality (Gao 2006). http://www. networkideas. org/ideasact/jun07/beijing_conference_07/carl_riskin. pdf Way to reduce income inequality -Immigration Immigration policy would make United States reduce the income inequality. To let in more immigrants who is highly educated and skill will making more job to the America workers. More immigrants don’t mean reduce the opportunity of job to the America workers because it is creating more jobs to those people who are limited educated and limited skill at the same time. While immigrants are highly educated came to America such as: doctor, engineers, lawyer, entrepreneurs and other may increasing the job opportunity to the citizen of America who is limited educated. The job for United State people could increase caused by the immigrants system. Therefore, reducing the number of workers (immigrants) who is limited education might reducing the income inequality to the America because created more opportunity for those people who is limited education and unskilled. (Enrico Moretti is the Michael Peevey and Donald Vial Chair in Labor Economics at the University of California, Berkeley. He is the author of â€Å"The New Geography of Jobs† (2012). ) -Education In the France that strategy been used make sure every citizen in the country might get the chance to study or educated. It is the one of way to reduce the income inequality which has to be start on education. The education is very important because it can the people in the country to improve their living standards; reduce the income inequality at the same time. New analysis is showing that an increasing for the job opportunity for people with education is associated which is making a decline in labour Earnings inequality in France (Fournier and Koske, 2012). An education is giving to every citizen for get a higher chance to get the job opportunity might reduce the income inequality. -Protecting Our Poor, Elderly and Women to Reduce Income Inequality In Singapore is making the new job for those women, elder worker, and poor people to find and obtain a new job. It is helping them to avoid poverty but have to reduce their salary in their new job. This kind of policy is enabling those workers such as migrants, women, and elder worker to get an income and escape poverty. In the labour market, giving the new job for those people might increase the productivity in Singapore and reduces the income inequality at the same time. But a new job in low pay is providing for that unemployment or can’t find the job; women have been terminated in their job because of pregnancy, and unconscionably obtuse of the elder employee. Have to pay in low wage because their productivity in work also reducing but it still can helped them to continue their live or living (SINGAPORE POPULATION WHITE PAPER, 2013) -Heavy-industry-oriented development strategy In China is starting the strategy of heavy-industry-oriented development to increase the speed of pace of industrialization. To focus of heavy-industry-oriented development strategy, China is increasing the amount of resource from the agriculture. At the same time, it is increasing the opportunity of job. It is because it is some kind of investment to increase the productivity of China by heavy-industry-oriented development which is providing by China government. To run the strategy, the government of China is moving the industry to the less developed rural regions for increasing the job opportunity for those people over there and reducing the income inequality. To reduce the region income inequality, the strategy of heavy-industry-oriented development might carry on rural region to increase their job opportunity. To increasing the growth of economic in China, have to increase the job opportunity for those are employment and increasing the productivity in China. This may decrease the income inequality gap in China (Yang 2002). Conclusion The information above is showing the income inequality is increasing in the world. The income inequality is making people become poorer for those are poor and make the people become richer for those are rich. Therefore it is the economic issue including the outcome, earning and economic growth. It is why income inequality is the one of target or problem for macroeconomic to solve. Reference -Ram, R. (1988) http://www. collinsdictionary. com/dictionary/english/income-inequality -Graph1 http://people. stfx. ca -Graph 2 (source : author’s calculation) -Murtin et al. , 2012 http://www. oecd. org/eco/labour/49421421. pdf