By Gibson Masumbu
Income inequality has attracted growing attention on the economic development platforms in recent years. From the many conversations on the topic, it is evident that many countries have recognized growing inequality as one of the biggest social, economic and political challenges of our time.
Economists are spending sleepless nights building databases and devising better methods of measuring it.
There is a debate on whether countries should set themselves goals for not only achieving absolute poverty reduction, but also lower inequality.
In Zambia, income inequality has not so much been explicitly a subject of economic development conversations. The focus has mainly been on reducing headcount poverty in line with the Millennium Development Goals (MDGs). This aspect is also the focus of the revised Sixth National Development Plan (SNDP). Interestingly, reducing inequality is one of the development objectives enshrined in the Vision 2030.
Inequality is the state of affairs in which assets, wealth or income is distributed unequally among people. Sometimes this is referred to as the gap between the rich and the poor or wealth disparity. The most common way of measuring inequality is the Gini coefficient which aggregates the gaps between people’s incomes into a single measure. If everyone in a group has the same income, the Gini coefficient is 0; if all income goes to one person, it is 1.
On the good side, inequality can boost growth, when richer people accumulate savings and invest more. However, in many economies, there is worry that widening income disparities may have dire consequences. Research by the International Monetary Fund (IMF) suggests that income inequality slows growth, causes financial crises and weakens demand. There is also evidence that in countries that are registering high economic growth, poverty reduction is minimal if inequality levels are high.
In many countries, the worry is that whereas poverty could be reducing in absolute terms, relative poverty could still be high and persistent. This is a situation whereby even those above an absolute poverty line have incomes insufficient to afford essential items such as food, good healthcare and education. At the same time a few elites in their society are seen to be progressing; accessing better schools and healthcare, et cetera. This situation threatens social cohesion and perhaps it is the one issue that is making many developing countries have sleepless nights.
In Zambia, the Central Statistical Office (CSO) computes the Gini coefficient statistic. The most recent calculation is based on the 2010 Living Conditions and Monitoring Survey (LCMS). The Gini coefficient in Zambia stood at 0.65 in 2010. This was an increase of 0.05 from the 2006 estimates of 0.60. The estimates show that income inequality is not only high in Zambia, but increasing as well. The CSO further indicated that 52% of total income was accounted for by the richest 10% of the Zambian population.
Clearly, these findings do not show a good picture for Zambia. The numbers are an important signal that there is a potential problem and an indication that income inequality deserves much more attention than it is currently receiving.
What would be more important, perhaps, would be to extend the conversations to inequality of opportunities rather than limiting it to inequality of outcomes as given by the Gini. Inequality of opportunities has to do with the potential of every individual to fulfil his or her capabilities. Equal access to public services – including education, healthcare and the potential for decent work – are fundamental parts of equality of opportunities.
If people are totally free, the most talented, innovative, hardworking and perhaps luckiest will advance; become richer than those who are not. So, inequality will still exist in a fair society. The cardinal factor is to ensure that conditions that enable people to move up the social ladder exist.
Therefore, as we begin to gather ideas for the Seventh National Development Plan as well as the post-2015 agenda, it is important to bring inequality at the heart of the conversations. Even as we recognize the tenacity of the situation and the potential consequences it imposes in the future, we need to critically evaluate our society in terms of the extent to which it provides an opportunity for people to move out of poverty. There are issues that confront us every day, issues of fairness in relation to quality education, healthcare, decent job and business opportunities, land and the ability of people to effectively and fairly participate in the political process. These may not give us sleepless nights today but they will be big issues in future.
The author is a researcher at the Zambia Institute for Policy Analysis and Research (ZIPAR).
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