Introduction
Currently, the society is experiencing a widening gap of inequality. One of the most crucial indicators of this global inequality is the gap existing between the rich and the have-nots. It is imperative to note that this gap is widening especially in the advanced economies. In addition to the above, global inequality is demonstrated in the emerging markets and the developing countries. Milanovic proposes that the primary forms in which such differences is illustrated in the variation in the level of access to finance, education, and healthcare (3). As a response to this increased inequality, researchers and scholars have engaged in heated debates aimed at finding amicable solutions.
Macroeconomic Concerns
Outcomes and Opportunities
Ortiz and Cummins’s findings indicate that it is imperative to note that global inequality creates variations in outcomes and opportunities for the affected nations (7). The inequality in outcome is measured regarding income and wealth. This is the primary reason nations who are poor have low income and minimal wealth. In such a case, nations that are developed have these riches and income. On the other hand, opportunities can be measured regarding the jobs available in various industries. In essence, it is worth mentioning that developed countries have a high level of employment as compared to the developing nations.
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Is Inequality A Necessary Evil?
Milanovic reveals that some degree of inequality is acceptable (6). This is mainly because it sets the stage for nations to compete and excel. For instance, the difference in education allows people to move from one place to another whereby facilities are considered as better. In such situations, the movement allows people interact leading to cultural diversity. As sell, this plays a crucial role in the enhancement of economic growth. In addition to the above, competition due to inequality can provide nations with the incentive to innovate. This is mainly to ensure that they overcome the competitors. In the long run, such innovative solutions play a crucial role in the enhancement of economic growth.
Why Is Rising Global Inequality a Concern
Pickett and Wilkinson maintain that there are several reasons the increased global inequality has raised concern (320). One of the major issues is that lack of outcomes has contributed to the lack of jobs. In such a situation, people can end up being jobless despite their qualifications and competence. As a result, this will promote dubious activities with the principal aim of securing employment. In the long run, inequalities have contributed to increased cases of nepotism, corruption, and mismanagement of government resources.
Income Distribution Matters for Economic Growth
It is profound to note that income inequality has contributed heavily to the collapse of the economy of the affected regions. As such, to ensure economic growth and development it is imperative that global inequality is solved.
Factors Driving Higher Income Inequality
Technological Change
Dabla-Norris et al., present arguments to emphasize that one of the most significant leaders contributing to higher income inequality is technological change (5). There are several benefits that have been brought about by technological advancement. The most common advantage is that technology enhances performance and productivity. This is the primary reason companies in highly developed countries are using technology. As well, it is worth mentioning that technology drives the skill premium in the countries that apply them. As a result of the same, this has contributed to increased labor income inequality. The main reason for this effect is that technology raises the demand for skilled labor. On the contrary, it lowers the need for low-skilled labor leading to the inequality. Technology has created this kind of inequality since it mainly automates the jobs as well as upgrading the required skills. As such, several employees are replaced while others are trained.
Trade Globalization
According to Milanovic trade globalization is the other factor that has substantially contributed to high-income inequality (199). Technological advances have played a crucial role in the process of promoting globalization. This is mainly because it allows countries to conduct business over the internet through the strategies such as the E-Commerce and E-Business. The main challenge of globalization is that it has negatively impacted on the income of low-skilled labors. This is mainly because highly skilled employees are required to control the globalized transactions. In the case of developing countries whereby low-skilled labor is abundant, the demand can as well increase leading to lower income inequality.
Financial Globalization
Thirdly, financial globalization is the other factor that has contributed to higher income inequality. The advantage of financial globalization is that it promotes financial risk sharing. As well, it has been noted that increased financial flows facilitate income inequality, especially for the emerging markets.
Education
On the other hand, Pickett and Wilkinson establish that education can be elemental in the reduction of income inequality (317). Firstly, education determines the occupational choice. In essence, the educated people determine the employment choices based on their careers. In addition to the above, education increases access to employment opportunities mainly because it equips the learner will the necessary skills to perform the required tasks.
Conclusion
In conclusion, several strategies can be implemented to overcome global inequality. One of the most crucial strategies is to promote education. Education policies need to be reformed to ensure that access to education is enhanced. Secondly, global inequality can be reduced through safe financial inclusion. Greater inclusion, especially in the developing countries, will be vital. Finally, fiscal policy can be a significant tool in reducing global inequality. This is mainly because such policy ensures micro financial stability leading to the protection of the disadvantaged population.
- Dabla-Norris, Ms Era, et al. Causes and consequences of income inequality: a global perspective. International Monetary Fund, 2015.
- Milanovic, Branko. Worlds apart: Measuring international and global inequality. Princeton University Press, 2011.
- Milanovic, Branko. The Haves and the Have-Nots: A brief and idiosyncratic history of global inequality. ReadHowYouWant. com, 2010.
- Milanovic, Branko. “Global income inequality in numbers: In history and now.” Global policy 4.2 (2013): 198-208.
- Pickett, Kate E., and Richard G. Wilkinson. “Income inequality and health: a causal review.” Social Science & Medicine 128 (2015): 316-326.
- Ortiz, Isabel, and Matthew Cummins. “Global Inequality: Beyond the bottom billion–A rapid review of income distribution in 141 countries.” Available at SSRN 1805046 (2011).
