Growing levels of inequality hurting both growth and the poor
Mayling Chan says four in five Asians have seen income disparities rise
This year, the World Economic Forum welcomed about 2,500 leaders from across the globe to Davos, Switzerland, to talk about some of the most pressing issues the world will face in the coming year. Among the attendees was Oxfam, and we used the forum as an opportunity to present the stark facts of inequality to the richest and most powerful: inequality harms not only the poor, but also economic growth.
International Monetary Fund economists have clearly shown that inequality sets back poverty reduction efforts and reduces growth. A high level of inequality hinders investment, renders an economy less productive and thus unable to realise its consumptive capacity, all the while undermining institutions necessary for fair societies. Greater equality, on the other hand, extends periods of growth.
Just before the start of the forum, Oxfam also published a global report that found that the combined wealth of the richest 1 per cent will overtake that of the other 99 per cent next year unless the current trend of inequality is checked. Inequality is clearly reaching an extreme level and hindering the fight against global poverty.
There is no denying that a substantial number of people have been lifted out of poverty in some parts of the world over the past decade. Recently, the UN reviewed its Millennium Development Goals and stated that 700 million fewer people lived in extreme poverty in 2010 than in 1990. However, at the global level, 1.2 billion people are still in extreme poverty, living on less than US$1.25 a day and lacking sufficient access to basic human needs, including food, safe drinking water, sanitation, health, shelter and education.
For three years, the World Economic Forum's Global Risks survey has found "severe income disparity" to be one of the major global risks for the coming decade. This is in line with the estimate by the Asian Development Bank that an additional 240 million people in Asia - 6.5 per cent of the population - would have escaped extreme poverty had growth been more equitably distributed over the past two decades.
The World Bank has similar concerns, and is setting goals to end extreme poverty by 2030 and boost shared prosperity so that the bottom 40 per cent of income earners can share in economic growth. Without doubt, the unprecedented inequality worries the World Bank, the UN and NGOs alike. The difference is that NGOs also see its effects first hand in areas where they carry out poverty reduction projects.
Our report "Asia at a Crossroads" pointed out that despite growth seen in the region, the gap between rich and poor has grown: four out of five Asians have seen an increase in economic inequality. It has also manifested itself through unfair wage systems, wage disparity between men and women, and low spending on social protection, which reduces both resources and opportunities to assist the poor in breaking poverty's vicious cycle.
Some progressive-minded business leaders tweeted from Davos that if we had more women in leadership, we would have better governance. This would, in turn, lift many more out of poverty. The yawning gender divide and associated pay gap deserve critical attention as women constitute 70 per cent of the poorest population.
In countries such as India and Pakistan, only one in three women are in paid employment. And four out of five of these women are in low-end, insecure jobs. In Bangladesh, it is estimated that women earn 21 per cent less per hour than men. The justification is that women start work an hour later each morning as they need to complete their household chores. The burden of unpaid care work alongside discriminatory attitudes affect women's economic status.
Clearly, inequalities and injustices such as these must be addressed if we are to eradicate poverty, boost economic growth and find a sustainable way forward. The world is in need of mindful leaders in governments and business to find concrete solutions to achieve this sustainable future.
Mayling Chan is the international programme director at Oxfam Hong Kong